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Posts tagged ‘Timothy Geithner’

Geithner Joins the Wall Street Party

By Staff Report at the Daily Bell

Geithner is a prototypical technocrat in a tradition that stretches back, unfortunately, to Alexander Hamilton. In fact, one could characterize Geithner as a kind of Hamilton-on-steroids. There really wasn’t anything Geithner was shy about doing when it came to wielding federal power. He expected that fedgov was the market’s dominant entity and that the US Treasury, Wall Street and the Federal Reserve would all work together as one single unit. With this in mind, the catastrophe of 2008-2009 was gradually lessened and the financial industry was “stabilized.” In fact, what this basically entailed was printing trillions of dollars to buttress banks’ bottom lines. This did little or nothing for the “real” economy, but people like Geithner are taught that the real economy is merely an appendage of the financial one. And so, Geithner did as he was asked to do. He made sure of the solvency of Wall Street and of the City and having done this for four years – and no doubt seeing that the situation was deteriorating further – he decided to head for the exit. He has moved on to take the presidency of a white shoe Wall Street firm specializing in start-up investments. It is his first “private sector” job, we’re told, but one he will be good at because of his work ethic and “commitment to leadership.” Others have a somewhat different opinion, as we can see from this article at Bloomberg: Why People Are Mad at Tim Geithner for Jumping Into Private Equity … I’ll admit to being a bit surprised to learn that former Treasury Secretary Timothy Geithner has agreed to become president of the private equity firm Warburg Pincus. On the one hand, it shouldn’t come as a shock that a guy with perhaps a deeper understanding than anyone else of how markets, government, and the economy interact should decide to apply those talents to making money. On the other hand, the news did surprise a lot of people who expected Geithner to become a university president or the head of an NGO or some other eminent non-Wall Street position –

See more at: http://www.thedailybell.com/news-analysis/34761/Geithner-Joins-the-Wall-Street-Party/#sthash.1Ubb2Y76.dpuf

What the G20 can do to solve the eurozone crisis

The following article was brought to our attention .


You cannot remove the fragilities in Europe’s banking system without solving  the sovereign debt crisis… and you cannot solve the debt crisis without  stabilising the banks. This much has finally been recognised by the Group of 20 finance ministers  at their meetings in Paris over the weekend.

full article at source:http://blogs.ft.com/the-a-list/2011/10/17/how-the-g20-can-solve-the-eurozone-crisis/#axzz1b2sm6UsX

Rightly Disgusted at the Banks


A bailout, like any other government expenditure, is a tax. Someone must pay all this money. And it is unfair to tax the broad population to pay for a special interest. Instead of being a progressive tax policy, bailouts enable bad behavior by the financial elite, sticking taxpayers with the cost.

Bailouts are unpopular among Europeans who see them as a tax being paid by the population as a whole to financiers at the top of the pyramid. These bankers have lived in the short run, taking large risks of capital for short-term gains to outperform their rivals. It is a game that most individuals have not played with their own savings, and they don’t think that governments should compensate banks for taking these risks.

The bonds in question are held largely in German and French banks in Europe, and by U.S. banks. Germans are especially angry by reports that U.S. Treasury Secretary Timothy Geithner intervened in opposition to the insistence of Germany’s chancellor, Angela Merkel, that bondholders should take a loss on their irresponsible investments. News reports say that as many as half the troubled securities are held by U.S. money market funds or subject to derivatives gambles. So it is not only European banks that are being bailed out, but also risk-taking U.S. speculators.

full article here at source:http://michael-hudson.com/2011/08/german-taxpayers-willingly-subsidise-bankers/

Growing dole queues expose fragility of Irish economy

Enda Kenny

Image via Wikipedia

Sometimes you have to wonder if the rest of Europe understands the fragility of Ireland‘s economy.

Do the Germans and French not understand that there is a prospect of zero growth in the economy in the next three years and that forcing multinationals out of the country could finish Ireland off altogether?

Their constant attacks on Ireland’s low corporation tax rate have even got on the nerves of Ryanair’s Michael O’Leary, who has warned that any increase will jeopardise the country’s ability to pay off its debts.

Figures out on Tuesday showed a surprise rise in unemployment. Yet Ireland swiftly came under attack again for its low corporation tax of 12.5%, as if this was any part of a fix for the challenging times ahead.

German finance minister Wolfgang Schäuble said US treasury secretary Timothy Geithner had complained that too many American companies were investing in Ireland for tax purposes.

According to Arthur Beesley, the Irish Times’s Europe correspondent, Schäuble did not elaborate, but told reporters at an EU finance ministers’ meeting that Ireland’s 12.5% corporate tax rate “can’t stay like this”.

Solidarity was not a one-way street, he added. Referring to corporation tax, he said “if Ireland wants something additional from us, then we can raise that issue”.

But what he didn’t say was that Americans express gripes about Ireland’s tax regime for other reasons – their own regime is one of the most uncompetitive in the world.

This week the Tax Foundation found that America was soon going to have the highest corporation tax in the world, overtaking Japan with a headline rate of almost 40%.

But that too is irrelevant. Ireland is now, says one tax accountant familiar with multi-national tax structures, the “Delaware of Europe” because it enables companies to shuffle profits around a network of subsidiaries and reduce tax obligations as a result.

Ireland desperately needs the multinationals

As I said in a post earlier this week, multinationals don’t pay anything like 12.5% tax. Google, one of Ireland’s biggest employers, pays less than 3%.

Google has in effect reduced its corporate tax bill to 2.4%, saving $3.1bn (£2bn) in the past three years. It would have paid 35% in the US. The process is entirely legal and Google is far from alone in exploiting it: more than 400 multinationals are now established in Ireland.

But to lose any of them now would be a hammer blow to the Irish economy. They are responsible for about one third of the country’s corporate tax take and responsible for employing around 100,000 locals.

And Ireland desperately needs these jobs.

Any hope that the economy had stopped deteriorating was dashed on Tuesday with new figures showing unemployment in Ireland at 14.7% – the highest rate in 17 years.

The Quarterly National Household Survey figures are a dreadful reminder of the challenging times Ireland lives in – nobody expected the unemployment figures to rise beyond the 13.5% at the end of last year. If anything, the figures were expected to fall, taking into account emigration of about 1,000 people a week.

Young people are being hit hardest. The number of teenagers between 15 and 19 in work has fallen by almost 60% year-on-year while the number of employed in the 20- to 24-year-old age bracket fell by almost half.
The picture is worst for the long-term unemployed. For the first time, the number of those unemployed for more than a year was higher than the number of people who were out of work for less than a year.

Separate figures released by the Organisation for Economic Co-operation and Development (OECD) showed that unemployment rate in Ireland is now the second highest in Europe, after Spain and ahead of Slovakia, Estonia and Greece. The UK incidentally is 12th, between Sweden and Denmark.

On Tuesday night former head of the National Treasury Management Agency, Michael Somers, painted a bleak picture of Ireland’s future. “The awful thing is there are figures out there that show no growth for the next three years … the problem is what happens after that.” Given the tax rises and pay cuts in last year’s budget, “you wonder how are we going to get out of this mess … we are in a downward spiral,” he told RTE.

The next two weeks will be critical for Ireland as Europe edges closer to finalising its plan for an expanded bailout fund.

For Enda Kenny, the bleaker the picture Somers paints of Ireland the better, as it all chimes with Fine Gael’s new mantra that the bailout as currently configured is “unsustainable”.

In other words, the closer we get to default, the stronger the chance of a renegotiation.

The IMF’s Ajai Chopra, who has returned to Dublin, will certainly get a flavour of the challenges ahead today when he is briefed on the bank stress tests. These are expected to show a further black hole in AIB.

Back in Europe, Ireland got some much-needed support on Tuesday from Luxembourg’s prime minister, Jean-Claude Juncker, who said he did not think a link should be made between the corporate tax rate and more lenient bailout terms.

“As the prime minister of Luxembourg, I don’t like this link between the corporation tax issue and the so-called Irish package,” he told the Irish Independent after a meeting in Brussels.

In a swipe at France and Germany he added: “Some governments obviously find some pleasure in torturing Ireland inside and outside [EU] meetings.

Any premier of Luxembourg, which operates on the most tax-friendly regimes in Europe, would say that. But right now Ireland will take comfort from wherever it can.


“nobody expected the unemployment figures to rise beyond the 13.5% at the end of last year. If anything, the figures were expected to fall, taking into account emigration of about 1,000 people a week. “
Not me I am living with unemployement every day and I am surprised that the figure is not above 20%


G20: Look for Even More Friction in the Future
Submitted by Jeff Rubin on Wed, 17 Nov 2010
posted on www.financialsence.com  

With France and China already plotting to replace the US dollar as the world’s reserve currency at the next G20 summit in Cannes, don’t count on this international forum’s lasting too much longer.

The huge fiscal divisions that were already in evidence at the G20 summit in Toronto last June morphed into even bigger and more rancorous divisions on exchange rates at the recent Seoul summit. With the US at China’s throat about its record trade surplus, and China at the US’s throat over the Federal Reserve Board’s blatantly devaluationist policy of quantitative easing, it’s little wonder nothing was accomplished.

More importantly, this likely marks the end of the great China–US economic accord, which defined the apex of globalization. That once virtuous and self-reinforcing circle of trade and capital flows, whereby Chinese savings invested in the Treasuries market effectively funded US consumer demand for Chinese exports, is clearly in both countries’ gun sights these days.

At the summit in Seoul, gone was any pretense of a coordinated policy approach to manage the global economy. Coordinating national economic policies may once have been easy, when everybody’s economy was mired in the deepest recession of the entire post-war era. But very disparate rates of economic recovery across the G20 have spun equally disparate policy responses from member countries.

And the more anemic the recovery, the more disparate the policy responses have been. Record fiscal stimulus and printing money have become the new orthodoxies in American economic policy, even as most of the US’s trading partners are reining in their fiscal deficits and hiking interest rates.

What’s increasingly clear is that growth imbalances are going to increase, not decrease, in the future, and that the G20 is hardly going to be the forum for policy arbitration between countries. If you thought the growth gap between emerging market economies and the OECD ones was big before the recession, you can expect it to be much larger in the future, in view of the craters of debt that the recession has left behind in the American and European economies.

With no remedies in sight, look for more trade friction in the future. US Treasury Secretary Timothy Geithner’s proposal to target countries’ current account or trade balances is only the opening salvo in potential future trade wars. If the Fed’s printing presses don’t devalue the greenback enough, there are always tariff walls to be rebuilt.

If the discussions seemed strained in Seoul, listen carefully to the tone from Cannes in six months’ time. At the rate things are going at G20 summits these days, the next one’s agenda will have the Smoot–Hawley Tariff of the 1930’s on it. source  http://www.financialsense.com/contributors/jeff-rubin/g20-look-for-even-more-friction-in-the-future

Market Notes (March2010)


March 9th, marked the one-year anniversary of the elusive bottom of the most brutal bear market since the 1930’s. At the time, job losses were running in excess of 700,000 /month, and fear was rife that the US-banking system was on the verge of being nationalized. American factories and miners were using 68% of industrial capacity, the lowest level since records began in 1948. Corporate profits fell sharply for the seventh consecutive quarter, the longest losing streak since the 1930’s. The second coming of the “Great Depression” looked imminent.

In a final act of desperation to stop the carnage, the infamous “Plunge Protection Team,” (PPT) unleashed the most powerful weapons in its arsenal, resorting to accounting gimmickry, and nuclear-QE, – injecting $1.75-trillion into the coffers of the Wall Street Oligarchs, in order to turn the bearish tide. Bankers were set free of mark-to-market accounting, and instead, were allowed to value their toxic assets at “mark-to-make-believe” prices, leading to a strong recovery in the financial sector.

Over the course of the next four-weeks, the Dow Jones Industrials climbed 1,500-points to close at 8,083 on April 9th, 2009. Still, there was great skepticism about the sustainability of the so-called “green-shoots” rally, – the third such rally since the horrific crash of Sept-October 2008 that followed the default of Lehman Brothers and the bailout of American International Group (AIG).

Before hitting the ultimate bottom at 6,500, previous Dow rallies ended-up as “bear traps,” that fizzled out, before the market turned sharply lower again. There was a 1,500-point run-up during the week that culminated in the election of Barack Obama as US president, after which the Dow lost 2,000-points over the next-three weeks. The Dow Industrials staged another 1,500-point gain in December, triggered by Obama’s selection of Wall Street favorite Timothy Geithner as Treasury chief, before plunging 2,500-points during the first two-months of 2009.

However, since the Dow Industrials hit rock-bottom, US-stocks have staged a $5.3-trillion recovery, amid the biggest percentage gain since the Great Depression. Yet when viewed through the prism of Gold, measured in “hard money” terms, one can see that the performance of the Dow Jones Industrials was less than stellar. The blue-chip indicator has been locked within a narrow trading band for the past 11-months, fluctuating on both sides of 9.5-ounces of gold since April 2009.  

The “green shoots” rally is therefore, an Optical Illusion, simply reflecting the side-effects of the Fed’s hallucinogenic “quantitative easing” QE-drug. Utilizing the chart above, one could argue that the value of the Dow Industrials is artificially inflated by about 2,500-points, engineered by the Fed’s monetization scheme, and ultra-low interest rates. An ocean of liquidity is buoying the Dow Industrials above the 10,000-level, designed by the PPT to bolster household confidence, since the valuations of 401-k’s and investor portfolios can influence the propensity to spend.

Still, there are huge worries about unrelenting job losses, multi-trillion dollar budget deficits for years to come, and the “Volcker rule,” which could put the shackles on the Wall Street’s Oligarchs, and force the liquidation of widely held stocks and commodities. But for now, the market’s climb above the 10,000-level, means the possibility of a “double-dip” recession is more remote, and instead, trying to short-sell stock indexes, is like trying to push a helium balloon under water.

The S&P-500 Index has rocketed +62% higher over the past year, a gain that would normally take five-years to realize. The speed and strength of the stock market’s recovery caught many bond traders off-guard, and knocked US-Treasuries for their worst annual losses since 1978. Most notably, the yield curve, – the spread between short-term interest rates and government bond yields, rose to its widest level ever. The yield on the Treasury’s 30-year bond compared to the one-year T-bill rate hit +440-basis points in December, the widest in history.

Traders reckon that the size of the US-national debt, now exceeding $12.3-trillion, is weighing on bond prices, and a huge avalanche of debt still lies ahead. The Treasury is expected to issue $1.6-trillion in new debt in 2010, and $1.3-trillion the following year. Chinese central banker Zhu Min has warned it would become more difficult for foreigners to buy Treasuries, when the US-government has to fund its deficit by printing more dollars. China slashed its holdings of Treasury securities by $34.2-billion in December, after months of complaining about the Fed’s QE scheme.

full article link http://www.financialsense.com/fsu/editorials/dorsch/2010/0311.html

By Gary Dorsch

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