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Posts tagged ‘Financial Times’

Apple tax loophole in Ireland

From  MarketWatch

Ireland’s finance minister, Michael Noonan,




Let’s talk about tax.

By David Mc Williams

On Friday, both the Financial Times and the New York Times carried banner pieces criticising how Ireland is being used and, more to the point, is allowing itself to be used as part of a large tax avoidance scheme. Opinion is shifting against Ireland’s corporate tax system. And we are talking about the Financial Times and the New York Times – hardly the Worker’s Hammer or Militant.

Added to this, we have reports that the Irish corporate tax system might be a sticking point in the on-going German coalition talks as the left-leaning Social Democrats is demanding tax harmonisation in return for access to future EU bank bailout funds. Right across the political spectrum – left to right – momentum is moving against the way in which Ireland taxes its foreign corporations.

Not that long ago, at the G20 in Enniskillen, the world’s head honchos said that they would act together to level the playing field for corporation tax to prevent companies abusing tax shelters…………………

full article at source: http://www.davidmcwilliams.ie/2013/10/14/lets-talk-about-tax


By Thomás Aengus O Cléirigh


The  Irish government’s attempt to re-invent the toxic banks as “Pillar community friendly banks” is just a farce. The Banks latest advertisement that floods our TV screens is insulting and an attempt to dumb down the citizens of Ireland. These toxic corrupt dens should be closed down and the directors should be doing jail time. But there is a more sinister problem here on our door step and it is in the IFSC in Dublin.

Did you know that there is approximately 1.4 trillion Euros on deposit and under Management in the various Fund management companies in the IFSC? Now I myself have two bank accounts one in Bank of Ireland and one at Allied Irish Bank and I estimate I am paying about 2.5% in costs every year (taxes) for the privilege of having these two bank accounts. I suspect that everybody else in Ireland is paying the same through the dirt tax and penal bank charges, but what taxes are the super rich paying to hide the billions in the ISFC off shore tax haven? “Nothing”. Not a single penny, No Taxes!

Remember every euro the government gives away to these billionaires they squeeze out of our health service, our educational system and our community services. Want to know why your taxes are going up in the next budget? Easy the puppet government is giving tax concessions to the likes of all these multinational corporations. Remember that when you get your water charges, your property tax etc you are paying Google’s and Apple’s taxes for them!and dont get me started on the corrupt tax avoidance scams down at Europe’s largest hot money centre the IFSC

What a great bunch of suckers we really are!  Time to get these leaches to pay their proper taxes!

Going for Gold

By David Mc Williams

Last Friday’s Financial Times contained an article which suggested that the Republican Party is seriously thinking of returning the US to the gold standard, and that it will discuss this idea at the annual party convention in Tampa this week.
Many people will react to this radical idea by asking if the Republicans have learned anything at all from history. But do they actually have a point?
Surely anyone with a grasp of economic history knows that strict adherence to the gold standard, with the balanced budget mantra, at a time of asset price deflation in the early 1930s exacerbated the recession, which morphed into the Great Depression. But is the case as open and shut as that?
While the lessons of that era are reasonably well accepted, there are also those who will rightly point out that, whatever about the 1930s, anyone with a grasp of recent economic history can see that the massive quantitative easing of the past five years has had little or no effect, other than facilitating a massive increase in the US’s national debt.

full article at source: http://www.davidmcwilliams.ie/2012/08/27/going-for-gold

Euro-zone Credit Implosion Secret, ECB Cannot Stop Collateral Contagion Collapse!

By Gordon_T_Long

How long can the European media keep the EU credit implosion a secret? The   disgraced former IMF Director, Demonic Strauss Kahn said on Tuesday December   12th, 2011 that No ‘Firewall’ Exists and Europe Has ‘Only Weeks’. Of course within minutes of this   Financial Times news release which detailed his vent on EU leadership and the   perilous situation in Europe, the article disappeared.

The details of the European liquidity crisis are generally reported, but for   some reason no media source wants to pull the pieces together so everyone can   see the magnitude and futility of the crisis. A growing Collateral Contagion is   being shrouded in the apparent belief that the solution to the European   Financial and Banking crisis is a grand change in Treaty governance. Obviously   the European Central Bank (ECB) was well aware of the reality, when it was   forced to deploy a historic and unprecedented LTRO (Long Term Purchase   Operations) on Wednesday December 21, 2011. 560 banks desperately and   immediately grabbed what they could, to the tune of €489B.

The LTRO bought the EU private banks some time. It did nothing to solve the   EU Sovereign Debt Crisis. After less than one week, the cash held at the ECB surged €133B   to a new record €347B. Since the net LTRO was   only €210B, it tells you that the EU banks not only have a cash problem, but   more specifically, as ECB President Mario Draghi says: “hoarding at the ECB signals that the   problem afflicting the Eurozone is not so much about the amount of liquidity but   that this liquidity is not circulating around the region’s banks”.

full article at source: http://www.marketoracle.co.uk/Article32327.html

Financial Times Changes Article Headline on EU Three Times!

Can someone at your illustrious newspaper explain why the headline  changed from “EU fails to reach an agreement” to “Eurozone signs up to  closer ties” in the space of 10 minutes? Presumably because senior FT  management regarded the former as a nationalist distortion of the truth.  There was an agreement and a good one….it just did not include the  UK. No doubt various eminent commentators on the FT will now rant on  about how the agreement is incomplete, because, just like your failed  writer of headlines, they would rather see a glass half empty than half  full….especially when it comes to decisions which undermine the  economic theories of the nation state. With all the respect that I  believe the UK coalition government is due, what has happened here is  entirely due to the continuing rift in the Conservative Party, which,  logically, should be resolved by its break up….not the break up of the  Eurozone! – Financial Times feedback/Danny Barrs

see article at source:http://www.thedailybell.com/3334/Financial-Times-Changes-Article-Headline-on-EU-Three-Times

EU stance shifts on Greece default

By Donal Buckley
Freelance journalist/writer.
This is an extract from the Financial Times.

What works for Greece will apply to Ireland with one condition.
Such rationalisation of debt to affordable levels is conditional on Ireland having political leadership to achieve debt reduction and bond holder participation in debt forgiveness.

July 10, 2011 8:33 pm

EU stance shifts on Greece default

By Peter Spiegel in Brussels and Patrick Jenkins in London

European leaders are for the first time prepared to accept that Athens should default on some of its bonds as part of a new bail-out plan…

The full article can be found at:http://www.ft.com/cms/s/0/5ffeabf0-ab09-11e0-b4d8-00144feabdc0.html


Donal Buckley

saw this on the FT Blog “The A-List”, and thought you would be interested.


A default by the Greek government is inevitable.  With a debt to gross domestic product ratio of more than 150 per cent, large annual deficits and interest rates more than 25 per cent, the only question is when the default will occur. The current negotiations are really about postponing the inevitable default.

But Greece is not alone in its insolvency and a default by Athens could trigger defaults by Portugal, Ireland and possibly Spain.  The resulting losses would destroy large amounts of the capital of banks and other creditors in Germany, France and other countries. There would be a drying up of credit available to businesses throughout Europe and there could be a collapse of major European banks.


The following personal message was included:

“Here is a clear, concise analysis of our economic situation.

We sit tight and wait for the ECB to inform us of the timing for a concerted default.

There is hope in this perspective, miracles may happen if we wait for the ECB command.”


“FT” and “Financial Times” are trademarks of the Financial Times.
Copyright The Financial Times Ltd 2011


Average house prices could still be overvalued by up to 30%

Average house prices could still be overvalued by up to 30%

 ( I say 47%see below comment)


ANALYSIS: Price to income ratios suggest there is a way to go yet before property prices stabilise

WHEN BUBBLES burst it takes time for society to recover its financial nerve. Before this can start, there must be some degree of certainty that all losses have been accounted for.

There are persuasive arguments for believing that this point has not yet been reached in Ireland. A key priority for the State must be to get house prices back in line with their long-term value, and consequently with incomes, and keep them there in order to underpin competitiveness.

There are other issues to be dealt with such as the parallels in the commercial and retail property sectors.

As last week’s report by Finnish banker Peter Nyberg showed, Ireland got carried away with the availability of easy money. The result was we blew much of the gains made earlier in the Celtic Tiger period. Irish house prices increased between 1996 to 2007 by around 330 per cent – a bubble extreme in scale and duration but a classic nonetheless, matching the criteria in the extensive literature on bubbles.

Yet we continue to hear cries of: “nobody saw it coming”. Plenty of people saw it coming – it was obvious to those who took the trouble to read what was being written here and abroad about house prices. There were reports and comments from international observers including the European Central Bank (ECB), Organisation for Economic Co-operation and Development (OECD), the Financial Times and the Economist, and in particular, the International Monetary Fund (IMF)

The third Bacon report in June 2000, when discussing changes in the model used for indentifying drivers of house prices, noted: “. . . the very dramatic change in the effect that the previous period’s price is having on the current period price level”. This is the essence of a bubble – a cycle of buying driven by expectations of further price increases unrelated to any increase in fundamental value.

The fear of a property crash permeated the Bacon reports and the limited policy recommendations emerging from the reports reflected this. In any event, the actions taken as a result of the three Bacon reports were reversed under concerted pressure from vested interests. In retrospect, how lucky we would have been if we had experienced a property crash in 1998, when the first Bacon report was issued, rather than 10 years later.

The reality is that most did not want to recognise the bubble – as implied by Nyberg. These ranged from those who were wilfully blind to regulators who saw it and were constrained from acting decisively for reasons that ranged from perceptions of the limited scope of their authority, political pressure and organisational culture.

They also included conflicted media that benefited from spending on advertising and citizens who felt they were wealthier because the price of their home had increased. The price had increased but the intrinsic value remained the same – it was still the same house no matter how you measured the price.

Many fallacious arguments were put forward during the boom to justify high house prices such as suggestions that increased demographic demand underpinned prices. This did not make any sense. Look at the slums of major Third-World cities where real demographic demand is of an order unimaginable here. There are no bubbles.

On the other hand some countries and cities, with political restrictions on development, maintain high prices whereas others, such as Hong Kong and Singapore with a small land area, manage to house large populations. Similar illogicality was behind most of the thinking and talking.

Global low interest rates and access to large quantities of easy money were the proximate cause of the bubble here and of the global financial crisis. The tsunami of cheap and easy money hit Ireland just as the tiger economy was moving into high gear. We were preparing to adopt the euro and with it access to a large pool of low-cost European finance, while at the same time new funding techniques such as securitisation provided the technical means to access these funds.

Together these developments removed the funding constraints that a small peripheral currency had previously imposed. In addition, a short-term laissez faire, caveat emptor, philosophy took over the sale of financial products and services. If the bank boards and regulators did not know or understand what was happening, what was the non-expert expected to do?

Cheap and easy money would not have been enough on its own to facilitate the inflation of the bubble. For example, neither Germany nor Canada suffered from bubbles. In Ireland, despite many timely and well-founded warnings, an array of defects in our beliefs and governance left us vulnerable.

In the end the inevitable happened and the bubble burst. Essentially our domestic financial institutions are wiped out and European institutions and the IMF direct our financial affairs.

But this is not the end of the affair. We have arrived here slowly, bit by bit, as the extent of the losses has become clearer. The question remains have we reached the end? The recent stress tests have helped but, hard as it might be to accept further bad news, it is better to get it all out in the open now.

We need functioning lenders that are properly capitalised and in a position to lend to businesses and individuals. If, after recapitalisation, there remains doubt about any unrecognised losses, banks will be constrained from lending due to lack of resources. In addition, we await the revised memorandum of understanding following the recent EU-IMF examination of the Government’s adherence to last autumn’s bailout deal.

Aside from the need to get the bad news out and sort out the banks, it seems that there is a real dilemma at the heart of national policy. Do we prioritise competitiveness by bringing house prices back into line with incomes or keep them inflated in the hope of reducing further losses to the banks and Nama (National Asset Management Agency), as well as containing the extent of negative equity?

While higher incomes are a driver of house prices, prices themselves are a driver of demand for higher incomes. If house prices remain high relative to incomes this limits our ability to regain lost competitiveness. This pressure is not going to decrease as the vast populations of China, India and other large emerging countries play an increasing role in the global economy.

In addition, well-managed economies such as Germany have, over the last two decades, brought down their unit labour costs, and compete with us in selling on global markets. This implies that average house prices must return to levels that are in line with long-term ratios to incomes, and possibly even lower as costs realign to meet increased competition.

As is shown in the incomes, construction costs and house prices chart, despite the bubble in house prices, construction costs did not increase any faster than incomes over the last 30 years. This implies that all the overvaluation has been in site prices, as well as builders’ profits in the case of new houses.

It also implies that there is a greater speculative element in site prices and unfinished estates. When house prices fall back to their true value, there may be a higher proportional reduction in the value of some of the collateral supporting loans held by Nama and the banks.

This possibility may not, as yet, be fully reflected in considerations of the level of new capital required by the banks or the likely final recoveries that will be achieved by Nama.

Hopefully the recently completed stress tests and increased capital adequacy requirements will adequately deal with a realignment of both residential and development property values. In fact it seems the State may be hoping for some stabilisation of prices at close to current levels, and that time will take care of the problem.

A significant factor behind the Irish bubble was the implicit belief that low short-term interest rates would continue indefinitely. This belief influenced buyers’ understanding of affordability and value and was one of the fallacious arguments used as a selling point for houses and mortgages.

Despite the fact that we in Ireland (as in the UK) have a tradition of variable rate mortgages, it is long-term interest rates that matter over time for determining the true value of assets. While market traders in stocks and bonds in liquid markets can react to short-term rate movements, home buyers and banks that provided long-term mortgages cannot do so.

From 1953 to 1996, (ie before the bubble), the average ratio of the price of new houses in Dublin to average industrial earnings was 5.3. That is also where it was in 1996. In 2006, it reached 13.7 and by 2010 it had fallen back to 7.4.

Based on a return to the pre-bubble level of the ratio, average house prices in 2010 should have been approximately €180,000 instead of approximately €250,000. Here we are talking about average house prices and average incomes. Of course there are exceptional houses and special buyers but for the country and economy overall it is the averages that matter.

Why does the price to income ratio revert to a stable average in all economies over long periods and roughly what value might we expect the ratio to have?

Excluding capital gains or losses, the economic value of a property is the capitalised value of the rent, less expenses (day to day and repairs and renewals), that could be earned if the property were let. This is the same as saying the rent must at least recover the cost of interest paid. The economic value is: value = net rent ÷ real interest rate.

If expenses are 10 per cent of the annual rent and the real interest rate is 5 per cent, then the value is 18 times the rent. If rents are limited to a proportion of average incomes, say one-third, the value would be about six times the average income. If interest rates are 6 per cent the ratio would be 5. For simplicity, excluding expenses: value = income ÷ 3 ÷ real interest rate.

Over long periods, long-term real (inflation adjusted) interest rates are quite stable. Although interest rates fluctuate and have been low in recent years, real rates revert to a narrow range.

UK long-term real risk-free real interest rates, (ie the rate adjusted for inflation with the State as borrower), have averaged about 3 per cent over the last three centuries and the same applies in other major economies. If we add 2 per cent for wholesale and retail banking margins, we arrive at a real cost of funds of 5 per cent. Incidentally this is the minimum rate permitted under German mortgage bond law for the valuation of properties.

It is instructive to see what the value of an average Irish house would be if the German capitalisation of net income method is used. Taking the property website Daft’s 2010 average monthly rent of €830, less expenses of 10 per cent (voids, running costs and repairs), and a rate of 5 per cent, this would also give an average value of about €180,000.

Though the statistical methods take some account of changing conditions and mix of property types etc, these are approximations based on averages and are not precise measurements.

However they show a consistent pattern and point to a persisting overvaluation of houses of the order of 25 per cent to 30 per cent.

source: http://www.irishtimes.com/newspaper/opinion/2011/0425/1224295408815.html?via=mr


So if I am to get this right 5.3 times average wage is the approximate price for the average home?

Well the average industrial wage is falling .Even if we say that the average industrial wage is no 25,000:00 euro times 5.5 would bring the average house price to Euro 132,500:00.According to the latest daft.ie report average 3 bed homes in Dublin would be approximately 250,000:00 Euro. So even by these numbers we have a long way to drop yet ,another 47% to be exact .Message loud and clear if you are buying now the real price you should be paying is 47% below the asking price of today

Where is Mrs.Eman al-Obeidy now??

TRIPOLI, Libya — A Libyan woman burst into the hotel housing the foreign press in Tripoli on Saturday morning in an attempt to tell journalists that she had been raped and beaten by members of Col. Muammar el-Qaddafi’s militia. After struggling for nearly an hour to resist removal by Colonel Qaddafi’s security forces, she was dragged away from the hotel screaming “They say that we are all Libyans and we are one people,” said the woman, who gave her name as Eman al-Obeidy, barging in during breakfast at the hotel dining room. “But look at what the Qaddafi men did to me.” She displayed a broad bruise on her face, a large scar on her upper thigh, several narrow and deep scratch marks lower on her leg, and marks from binding around her hands and feet.

see link http://video.nytimes.com/video/2011/03/26/world/africa/100000000745659/libya-woman.html?ref=middleeast

She said she had been raped by 15 men. “I was tied up, and they defecated and urinated on me,” she said. “They violated my honor.”

She pleaded for friends she said were still in custody. “They are still there, they are still there,” she said. “As soon as I leave here, they are going to take me to jail.”

  For the members of the foreign news media here at the invitation of the government of Colonel Qaddafi — and largely confined to the Rixos Hotel except for official outings — the episode was a reminder of the brutality of the Libyan government and the presence of its security forces even among the hotel staff. People in hotel uniforms, who just hours before had been serving coffee and clearing plates, grabbed table knives and rushed to restrain the woman and to hold back the journalists.

Ms. Obeidy said she was a native of the rebel stronghold of Benghazi who had been stopped by Qaddafi militia on the outskirts of Tripoli. After being held for about two days, she said, she had managed to escape. Wearing a black robe, a veil and slippers, she ran into the Rixos Hotel here, asking specifically to speak to the news service Reuters and The New York Times. “There is no media coverage outside,” she yelled at one point.

“They swore at me and they filmed me. I was alone. There was whiskey. I was tied up,” she told Michael Georgy of Reuters, who was able to speak with her briefly. “I am not scared of anything. I will be locked up immediately after this.” She added: “Look at my face. Look at my back.” Her other comments were captured by television cameras.

A wild scuffle began as journalists tried to interview, photograph and protect her. Several journalists were punched, kicked and knocked down by the security forces, working in tandem with people who until then had appeared to be hotel staff members. Security officials destroyed a CNN video camera and seized a device that a Financial Times reporter had used to record her testimony. A plainclothes security officer pulled out a revolver.

Two members of the hotel staff grabbed table knives to threaten Ms. Obeidy and the journalists.

“Turn them around, turn them around,” a waiter shouted, trying to block the foreign news media from having access to Ms. Obeidy. A woman on the staff shouted: “Why are you doing this? You are a traitor!” and briefly put a coat over Ms. Obeidy’s head.

There was a prolonged standoff behind the hotel as the security officials apparently restrained themselves because of the presence of so many journalists, but Ms. Obeidy was ultimately forced into a white car and taken away.

“Leave me alone,” she shouted as one man tried to cover her mouth with his hand.

“They are taking me to jail,” she yelled, trying to resist the security guards, according to Reuters. “They are taking me to jail.”

Questioned about her treatment, Khalid Kaim, the deputy foreign minister, promised that she would be treated in accordance with the law.

After the episode, Musa Ibrahim, a government spokesman, said she appeared to be drunk and mentally ill. He said that the authorities were investigating the case, including the possibility that her reports of abuse were “fantasies.”

In a news conference later on Saturday, Mr. Ibrahim said that Ms. Obeidy was in the custody of Libyan police detectives who were treating her as a sane person with a credible criminal case of abduction and rape. “It is a criminal case, not a political case,” he said, promising that it would be investigated to the full extent of the law and that she would have a chance to meet again with journalists.

Charles Clover of The Financial Times, who had put himself in the way of the security forces trying to apprehend her, was put into a van and driven to the border shortly afterward. He said that the night before, he had been told to leave because of what Libyan government officials said were inaccuracies in his reports.

The IMF’s dismal record in evaluating and forecasting economic performance

As has been noted on CrisisJam before, failure is no barrier to success in the thin air that prevails in the offices off the topmost corridors of power. The IMF’s dismal record in evaluating and forecasting economic performance – and its tenured poistion as arbiter of same – bespeaks a very special kind of insulation from the consequences of stupidity and failure. But, writes Andy Storey, the degree of the Fund’s stupidity is less important than the political uses of its idiocy, for both supporters and opponents of its practices.

The Independent Evaluation Office (IEO) of the International Monetary Fund (IMF) has recently reviewed the Fund’s performance between 2004 and 2007 and concluded that, far from spotting the crisis coming, the IMF helped bring it on, especially through its advocacy of ‘light-touch regulation’. According to the IEO, as reported by the Bretton Woods Project, “the IMF missed key elements that underlay the developing crisis”, especially the disastrous evolution of the US financial system, of which IMF staff were “in awe”. The IEO documents how “the IMF praised the US for its light-touch regulation and supervision that permitted the rapid financial innovation that ultimately contributed to the problems in the financial system. Moreover, the IMF recommended to other advanced countries to follow the US/UK approaches to the financial sector.”

So is the IMF stupid? The IEO seems to think that, institutionally, it is indeed rather dumb, suffering as it does from an “insular culture” and “silo behaviour and mentality”. And this may be partly true. Brazilian economist Fernando Carvalho notes that ‘by both training and experience the Fund staff has always shared the view that the Anglo Saxon model of capitalism is superior to all its alternatives’ and that financial globalisation is an unambiguously good thing – despite the absence of evidence for any such claim. But apparent stupidity typically serves some interests over others.

For example, the IMF approach to Eastern Europe is to insist that governments’ fiscal policies caused the problem there, rather than the decisions of private banks. At one level, this can be read as just plain wrong. But, as Daniela Gabor has documented, this approach “legitimises policy advice that imposes ‘antisocial’ measures (wage cuts, public sector layoffs, taxes on consumption) in order to protect financial sector returns”. So, not so stupid from the point of view of the financial sector.

Something similar holds true for Egypt, where an April 2010 IMF report noted that ‘Sustained and wide-ranging reforms since 2004 had reduced fiscal, monetary and external vulnerabilities, and improved the investment climate. These bolstered the economy’s durability, and provided breathing space for appropriate policy responses.’ Commenting on this rather optimistic assessment, John Dizard of the Financial Times draws the following conclusion:

These aren’t quibbles about minor inaccuracies, or arguable ideological differences. There were imminent, overwhelming problems that either evaded the IMF’s attention, or that it chose not to report. So European leaders might want to reconsider whether they can depend on the IMF to act as a monitor, let alone arbiter, of good macroeconomic policy for member states.

As Dizard notes, even if some IMF economists had spotted the economic powder keg in Egypt, they might have chosen not to report it – mainly because the Mubarak regime was a favoured ally of the IMF’s main patron, the United States. Again, willful blindness can make perfect political sense.

It is important to emphasise that this is not a crude conspiracy theory. Certainly, senior IMF officials would be alert to US sensitivities regarding Egypt and to the priorities of Western banks in Eastern Europe, and would help ensure that those interests are served. But the rigid, if empirically destitute, worldview of IMF economists may be genuinely held – inculcated through the brainwashing that passes for an economics education in the US and UK and advanced by the promotion and in-house editing practices of the Fund (and those of other institutions, such as the World Bank). The question is less about how many people are stupid, and exactly how stupid they are, it is more about the economic and political functions apparent stupidity serves.

But two can play at that game, and glaring examples of the IMF getting it wrong can serve a useful political function for resistance in Ireland and elsewhere. Every time a mainstream commentator says something like ‘the IMF are the experts on this’, we can say ‘that would be the guys who helped cause the crisis in the first place’, or ‘are we talking about the same people who said the Middle East and North Africa was really stable’?


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