Byron Street haberdashery, New York 1900
And get 99% of income?!
• Top 20% of US Earners Pay 84% of Income Tax (WSJ)
Who pays what in income taxes? With April 15 just around the corner, filers may be curious about where they fit into the system as a whole. The individual income tax remains the most important levy in the U.S., providing nearly half of federal revenue. This is unusual: On average, developed nations get only one-third of their revenue from income taxes. Typically they also impose national consumption taxes, such as a value-added tax, that raise as much revenue as their income tax. The pressure on the U.S. income tax has prompted lawmakers on both sides of the aisle to seriously consider a national consumption tax. But liberals worry that such a levy could unduly burden the poor, while conservatives fear it would be too easy to dial up the rate and collect more revenue.
As a result, experts say, there is little chance of tax overhaul this year. The data come from estimates by the nonpartisan Tax Policy Center, a Washington-based research group, as Internal Revenue Service data for 2014 won’t be available for at least two years. Unlike IRS data, it includes information about nonfilers—both people who didn’t need to file and people who should have filed but didn’t. The total also includes Americans living overseas and others, which is why it is greater than the U.S. Census estimate of 319 million. Another important difference: The income cited in the tables includes untaxed amounts for employer-provided health coverage, tax-exempt interest and retirement-plan contributions and growth, among other things. This can be significant.
When this bubble bursts, an awful lot of ‘money’ will be lost.
• Stocks Surge: Nikkei Tops 20,000, Europe Hits 15-Year High (Reuters)
World equity markets tested record highs on Friday on hopes of more stimulus from top central banks, while the dollar strengthened on favorable government debt yields compared to those of most other developed countries. Wall Street scored solid gains after U.S. conglomerate General Electric said it plans to sell assets and buy back up to $50 billion of its stock. This propelled GE shares to their highest since September 2008, ending up 10.8% at $28.51 in heavy volume. Earlier, Japan’s Nikkei index rose above 20,000 points for the first time in 15 years while top European shares advanced to their highest since 2000. Oil prices rose on lowered expectations of an Iran nuclear deal that would allow more Iranian oil into the market. Gold rose on the day but snapped a three-week winning streak on a stronger dollar.
“We are in a honeymoon period for risk assets, and will be for another quarter,” said Sandra Crowl, an investment committee member at Paris-based asset managers Carmignac Gestion. The Dow Jones industrial average closed up 98.92 points, or 0.55%, to 18,057.65, the S&P 500 ended up 10.88 points, or 0.52%, to 2,102.06 and the Nasdaq Composite finished 21.41 points, or 0.43%, higher at 4,995.98. Tokyo’s Nikkei closed down 0.2% after breaching the 20,000-point mark. Buoyed by gains in Asia and the renewed drop in the euro, the pan-European FTSEurofirst 300 share index reached a 15-year high of over 1,640 as its ninth week of rises in the last 10 took it to its highest since 2000. Germany’s DAX also scored a record high. The MSCI world equity index, which tracks shares in 45 nations, rose 0.4% to 435.72, a shade below its record high.
“..in particular its reluctance to talk about cutting civil servants’ pensions.” Ergo, Syriza can’t allow for Greece to remain in the eurozone.
• Eurozone Officials Shocked By Greece’s Stance, Says German Newspaper (Reuters)
Eurozone officials were shocked at Greece’s failure to outline plans for structural reforms at last week’s talks in Brussels, a German newspaper on Saturday cited participants as saying, adding the Greek representative behaved like a “taxi driver”. A meeting of deputy finance ministers on Thursday gave Athens a six working day deadline to present revised economic reform plans before eurozone finance ministers meet on April 24 to consider unlocking emergency funding to keep Greece afloat. Eurozone sources told the Frankfurter Allgemeine Sonntagszeitung that they were disappointed and shocked at Athens’ lack of movement in its plans, and in particular its reluctance to talk about cutting civil servants’ pensions.
The mood between Greece’s leftist government and its eurozone partners, especially Germany, has deteriorated in the last few weeks, with personal recriminations flying between ministers and calls from Athens for Berlin to pay war reparations. The paper said at last week’s meeting the Greek representative just asked where the money was “like a taxi driver”, according to sources, and insisted his country would soon be bankrupt. The eurozone sources told the paper that Greece’s creditors do not believe this is the case and that it would be a domestic political issue if Athens is unable to fully pay salaries and pensions. The paper also said that German Finance Minister Wolfgang Schaeuble, who has taken a tough line towards Greece in bailout talks, would have to get the Bundestag lower house of parliament to vote on any fundamental changes to the reform programme.
• Yanis Varoufakis and Joseph Stiglitz (INET)
“About 28.1% of home loans extended by Greek banks, which were worth a combined €69 billion, were non-performing or unpaid for more than 90 days, as of September 2014..”
• ECB Sees Risks In Greece’s Planned Home Foreclosure Law (Reuters)
Greece’s draft law to protect primary residences from foreclosures goes beyond protecting low-income debtors and could encourage strategic defaults, the ECB said in a legal opinion on Saturday in a potential setback to the plan. Greece’s Economy Ministry had asked for the ECB’s views on the draft legislation, which seeks to protect indebted citizens from losing their primary homes – and fulfills a pledge by the governing SYRIZA party to deal with a humanitarian crisis brought on by the country’s debt crisis. The draft law offers protection to primary homes valued up to €300,000 and requires that borrowers do not have an annual income of more than €50,000 to be eligible. It also sets an upper limit of €500,000 for borrowers’ total wealth, of which bank deposits and other liquid assets cannot exceed €30,000.
The conditions are more generous than under Greece’s previous foreclosure law, which expired last year. It provided protection for homes valued at 200,000 euros or less and required that borrowers had an annual income of 35,000 euros maximum and total wealth of 270,000 euros or less. “The very broad scope of eligible debtors, which goes beyond the protection of vulnerable and low-income debtors, may create moral hazard and could lead to strategic defaults, undermining the payment culture and future credit growth,” the ECB said. “The draft law sets out significantly broader eligibility criteria in terms of the value of the protected property, the annual household income, the value of immovable and movable assets and the amount of deposits,” the ECB said, comparing it to the previous law.
It said that broad-based prohibitions on primary home auctions was not a sustainable solution to tackle the high level of non-performing loans at Greek banks. “It is likely that the prohibitions in the draft law will incentivize debtors who are not in real need of protection to stop meeting their obligations or reduce them significantly, even if they have the means to meet them in full.” The ECB supervises Greek and other eurozone banks. Greek banks’ bad loans rose to 34.2% of their loan portfolios by the end of the third quarter of last year, from 31.9% in December 2013, according to Greek central bank data.
About 28.1% of home loans extended by Greek banks, which were worth a combined €69 billion, were non-performing or unpaid for more than 90 days, as of September 2014, according to latest Bank of Greece data. That was up from 26.1% in 2013. Home loans accounted for a third of banks’ total loans as of last September.
“..we’ve had money building up four to six years in terms of a risk pattern, I think it could end very badly.”
• Druckenmiller: This Could End ‘Very Badly’ (CNBC)
Billionaire investor Stanley Druckenmiller has once again warned that the easy money policies of recent years could end poorly. “I know it’s so tempting to go ahead and make investments and it looks good for today,” the retired founder of Duquense Capital Management said, “but when this thing ends, because we’ve had speculation, we’ve had money building up four to six years in terms of a risk pattern, I think it could end very badly.” The investor’s comments were made at an event in Palm Beach, Florida on Jan. 18, but the transcript was just circulated on Friday. Druckenmiller cited warning signs like the high number of initial public offerings of companies that are unprofitable, and high levels of debt issued to companies, often with poor credit ratings and without many lending restrictions—so called covenants.
Druckenmiller also said that comparing modern day economic policy to that of the Great Depression-era was totally inaccurate. He implied that the U.S. Federal Reserve would not cause to another recession by tightening the flow of money into the system. Druckenmiller showed slides at the event displaying how net worth per household hadn’t returned to pre-1929 levels in 1937, before rates began rising. He compared that to how wealth has risen today far beyond pre-crash levels in 2007. “We’re not even close to the kind of numbers we had in 1937,” he said.
Fooling the system.
• GE Plan Opens Escape Path From Fed Too-Big-To-Fail Label (Bloomberg)
General Electric’s plan to exit most lending operations could make its finance arm the first entity to escape the grip of the Federal Reserve’s too-big-to-fail oversight, a move that would free the company from strict capital requirements and reduce government monitoring. As part of a broad restructuring announced Friday, GE General Counsel Brackett Denniston said the finance unit will apply to lose its systemically important label sometime next year. GE has already discussed its overhaul, which includes the sale of $26 billion of real estate, with U.S. regulators who will decide whether the company can go free. “We think we’ve come a long way and you can argue we’re not systemic right now,” Denniston said an in interview.
“When the plan is further advanced, when we think the argument is even stronger and more compelling, that’s the right way to do it.” GE Capital is one of four non-banks hit with the tighter scrutiny, which applies to firms that regulators believe could threaten the U.S. economy if they failed. Companies have sought to avoid the capital, liquidity and leverage constraints that can come with being selected, with insurer Metlife Inc. suing the U.S. government to try to escape. Instead of fighting, Fairfield, Connecticut-based GE is slimming down. The company’s shares rose $2.48 to $28.21, or 9.6%, at 2:41 p.m. in New York trading. It was the biggest daily increase since March 2009, according to Bloomberg data.
Decisions on which companies are systemically important are made by the Financial Stability Oversight Council, a group of regulators set up under the 2010 Dodd-Frank Act that Treasury Secretary Jacob J. Lew leads. A designation subjects a company to supervision by the Fed, allowing the central bank to scrutinize it the same way it does large banks like Citigroup and JPMorgan. To get out, GE Capital will have to convince the FSOC that its collapse wouldn’t hurt the broader financial system. Once the restructuring is complete, GE’s ending net investment in GE Capital – a balance-sheet gauge that excludes non-interest bearing liabilities and cash – will fall to $90 billion from $363 billion, the company said. Just $40 billion of that will be in the U.S., making it “inconceivable” that the company could be considered systemic, Denniston said.
NZ exports fell 27% in 2014. What more does anyone need to know?
• New Zealand Rock Star Economy Takes Centre Stage As Currency Climbs (Guardian)
Australians are going to have to get used to New Zealanders going on about how much better their economy is. Paul Bloxham, the HSBC economist who first called New Zealand a rock star economy, says the New Zealand dollar is going to be strong for some time because the NZ economy is strong. The New Zealand dollar was at 98.27 Australian cents on Friday, up from 98.18 cents on Thursday and it is expected to reach parity. The last time the New Zealand dollar passed the Aussie dollar was on 18 October 1973 and it only managed it for a few hours, Bloxham said on TVNZ’s Q+A program on Sunday. The New Zealand economy is outperforming every other Organisation for Economic Cooperation and Development (OECD) economy. “That’s why we’ve been describing New Zealand as a rock star,” Bloxham said.
It was the fastest growing of the 34 OECD economies in the past year. “And, we think that situation’s going to continue this year as well,” Bloxham said. The Australian economy, in contrast, is at the end of a mining boom. Mining investment is falling and the rest of the economy is “so-so”. “So it makes sense that the New Zealand dollar is strong relative to the Aussie dollar, and we expect the situation to persist for some time,” Bloxham said. In New Zealand, there was an upturn in construction from the Canterbury rebuild and the housing market was booming in Auckland. Bloxham acknowledged dairy prices had fallen sharply but said dairy production was still rising and the domestic economy was doing very well.
So what does Brussels say? Nothing.
• Italy Rescues 978 Migrants Attempting to Cross the Mediterranean (Bloomberg)
The Italian navy and coast guard engaged in three different rescue operations Friday in order to bring to safety 978 migrants attempting to reach Europe by crossing the Mediterranean Sea, according to a coast guard Twitter post. The migrants were rescued off the Libyan coast following distress calls made from the boats via satellite phone, daily Corriere della Sera reported in its online edition. The government is continuing its “taxi service” to help the criminals that ferry these people over the sea, leader of the opposition Northern League party Matteo Salvini posted on social media following the rescues.
Migration to Europe across the Mediterranean Sea has increased as people flee wars and conflict in countries like Libya, Syria and Somalia. Last year, 218,000 irregular migrants tried to reach Europe, according to the Office of the United Nations High Commissioner for Refugees. The same year, Italy saved 100,250 people through its rescue operation Mare Nostrum at a cost of 114 million euros ($120 million), according to the Italian Interior Ministry. That operation was discontinued in November due to its high cost and criticism from politicians like Salvini that it was helping criminals exploit migrants. Operation Triton, a more limited effort coordinated by European Union border police agency Frontex, has replaced it.
Ha! Let’s see what Hillary thinks.
• China-Led Infrastructure Bank to Welcome U.S. ‘Anytime’ (Bloomberg)
China is keeping the door open for the U.S. to join its new development bank “anytime,” the lender’s chief said, after the Obama administration failed to persuade most allies to snub the lender. The U.S. is “welcome to the kitchen to work with us,’ Jin Liqun, secretary general of the secretariat for establishing the bank, told reporters in Singapore on Saturday. The Asian Infrastructure Investment Bank’s founding membership will probably be ‘‘short of 60,” he said. “China itself has benefited enormously from contributions by the World Bank” and Asian Development Bank, Jin said at a forum in Singapore. “Now it’s time for China to contribute more to this region, and hopefully China’s contributions will spill over to other regions.”
The U.S. suffered a diplomatic setback as allies including Australia, the U.K, and Germany opted to become founding members of the China-led bank. World Bank President Jim Yong Kim said this week he doesn’t view the development lender as heralding an end to the global economic order forged by the U.S. The AIIB will be owned by all members, not solely China, and will have a mandate to promote broad-based socio-economic development, Jin said. As it will focus exclusively on infrastructure funding, while the World Bank and Asian Development Bank address poverty reduction, there is more complementary territory than “head-on competition,” he said.
Enemies and friends?!
• Anonymous Declares Cyber War On ISIS Twitter Users (RT)
Hacktivists from the Anonymous group have attacked hundreds of pro-Islamic State websites and thousands of social networks’ accounts used by the terrorist group. ISIS has hit back though, threatening another 9/11 terror act against the US. A faction of the Anonymous group, called GhostSec, is carrying out a cyber campaign called #OpISIS against the Islamic State (IS). They are looking to target members and supporters of the terrorist organization, who want to spread propaganda over the internet. Anonymous are monitoring social media accounts as well as websites operated by the group formerly known as ISIS/ISIL to disrupt their online operations as they try to “cure the ISIS virus.”
The GhostSec division of Anonymous has been keeping itself busy. They have been compiling a list (f websites “frequently used by the Islamic State through Twitter and other social media platforms for transmission of propaganda, religion, recruitment, communications and intelligence gathering purposes,” the group said in a statement. On Wednesday, the Anonymous group reported of “casualties” among the enemy ranks, which included 233 websites, which had been attacked, 85 websites that had been “destroyed” and 25,000 “terminated” Twitter accounts. Not everyone is happy with the actions undertaken by Anonymous. Security services have criticised the group for taking matters into their own hands. These intelligence bodies say the elimination of jihadist websites and social media accounts prevents them from gathering valuable information concerning their activities.
“..a “man in the middle attack.”
• China Said to Use Powerful New Weapon to Censor Internet (NY Times)
Late last month, China began flooding American websites with a barrage of Internet traffic in an apparent effort to take out services that allow China’s Internet users to view websites otherwise blocked in the country. Initial security reports suggested that China had crippled the services by exploiting its own Internet filter — known as the Great Firewall — to redirect overwhelming amounts of traffic to its targets. Now, researchers at the University of California, Berkeley and the University of Toronto say China did not use the Great Firewall after all, but rather a powerful new weapon that they are calling the Great Cannon. The Great Cannon, the researchers said in a report published on Friday, allows China to intercept foreign web traffic as it flows to Chinese websites, inject malicious code and repurpose the traffic as Beijing sees fit.
The system was used, they said, to intercept web and advertising traffic intended for Baidu — China’s biggest search engine company — and fire it at GitHub, a popular site for programmers, and GreatFire.org, a nonprofit that runs mirror images of sites that are blocked inside China. The attacks against the services continued on Thursday, the researchers said, even though both sites appeared to be operating normally. But the researchers suggested that the system could have more powerful capabilities. With a few tweaks, the Great Cannon could be used to spy on anyone who happens to fetch content hosted on a Chinese computer, even by visiting a non-Chinese website that contains Chinese advertising content.
“The operational deployment of the Great Cannon represents a significant escalation in state-level information control,” the researchers said in their report. It is, they said, “the normalization of widespread and public use of an attack tool to enforce censorship.” The researchers, who have previously done extensive research into government surveillance tools, found that while the infrastructure and code for the attacks bear similarities to the Great Firewall, the attacks came from a separate device. The device has the ability not only to snoop on Internet traffic but also to alter the traffic and direct it — on a giant scale — to any website, in what is called a “man in the middle attack.”
Guesstimating dark matter.
• The Universe May Not Be Expanding As Fast As We Thought (NatMon)
Two papers recently published in the Astrophysical Journal suggest that the universe may not be expanding at the rate that textbooks claim that it is. That conclusion would also imply that the amount of dark energy in the universe is less than current estimates claim it is. The team reached this conclusion by studying Ia supernovae, which are thought to be uniform enough to be used as beacons to measure distances in the cosmos. The team found that the supernovae were not, in fact, uniform but fell into different populations. “ The findings are analogous to sampling a selection of 100-watt light bulbs at the hardware store and discovering that they vary in brightness,” according to a statement. If their findings are correct, it means that a great deal of the math which astronomers use to measure the universe needs to be re-done.
Among other things it would mean that many of the measured distances to objects, the rate at which the universe is expanding and the amount of dark energy involved are currently wrong. “We found that the differences are not random, but lead to separating Ia supernovae into two groups, where the group that is in the minority near us are in the majority at large distances — and thus when the universe was younger. There are different populations out there, and they have not been recognized. The big assumption has been that as you go from near to far, type Ia supernovae are the same. That doesn’t appear to be the case,” said Milne, an associate astronomer with the UA’s Department of Astronomy and Steward Observatory.
The current view of the universe is that it is continuing to expand at an ever increasing rate, pulled apart by dark energy. This view resulted in the Nobel Prize for Physics for Brian Schmidt, Saul Perlmutter and Adam Riess in 2011. The three researchers independently arrived at the conclusion that many supernovae appeared to be fainter than predicted because they had moved farther away than they should have given the accepted rate of universal expansion. “The idea behind this reasoning. is that type Ia supernovae happen to be the same brightness – they all end up pretty similar when they explode. Once people knew why, they started using them as mileposts for the far side of the universe. The faraway supernovae should be like the ones nearby because they look like them, but because they’re fainter than expected, it led people to conclude they’re farther away than expected, and this in turn has led to the conclusion that the universe is expanding faster than it did in the past,” explained Milne.