Archive for March 19, 2014

19 Mar 2014
A Contrarian View

Sinister Tax and Wealth Re-distribution Strategy.

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Killing two birds with one stone.

Now the target is the auto industry, not penguins, but almost as vulnerable.

The US regulators have discovered a new, almost bottomless pit of tax revenue and a sinister method of wealth distribution that is under the radar of most observers.

Even more cunning is that the very organisations that are being used to harvest this revenue are the worst placed to complain about it.

The tax is so cleverly designed, applied and publicised, that it is guaranteed to meet the approval of the liberal left, anti business crusaders and assorted bunny and tree-huggers.

It is wildly attractive to the less or un-productive members of the economy. Guaranteed to excite those who continually whine about the natural condition of “income inequality” as if it were a cardinal sin.

It is a tax that does not need the approval of voters.

Another bonus for the US regulators is that this tax can be applied to organisations anywhere in the world without needing bi-lateral agreement or even any form of government to government approval.

The system is so cleverly designed that governments of the countries where the affected parties are based are reluctant to protest or even comment on the policy.

Any response they give is likely to damage the interests of their domestic manufacturers and exporters to the USA.

The new tax / redistribution policy first got major attention during the aftermath of the explosion of the BP oil rig Deep Horizon, in the Gulf of Mexico in 2010.

I am not making light of the deaths of workers, the effect on the environment nor the livelihoods of business owners in the region.

Fair compensation for loss and the costs of the clean up should be paid. In the case of this disaster there is some indication that in many cases, grossly unfair compensation was extracted from BP.

There is an argument for some form of punishment when businesses make mistakes and fail to make corrections. That punishment can be financial penalties or fines, lost opportunities, cancellation of leases, contracts, permits or a combination of these.

In the case of the BP disaster, the fines were huge.  Billions of dollars.

Billions more have been collected from banks, and other financial service providers since the recession started in 2008.

Including 16 more banks, some British and Canadian, this week, in connection with the alleged manipulation of the LIBOR. A rate that is set in London UK and not Wall street.

Recently, the regulators, perhaps fearing that further forays into the bank’s reserves might kill the golden goose, have set their sights on the auto industry.

General Motors is starting to squeal under the pressure. They may well have been slow to acknowledge and report problems in some of their vehicles.

Now today, Toyota has been fined $1.2 Billion for failing to adequately respond to reports that some of their vehicles were accelerating spontaneously.

It appears that Toyota will meekly pay up, thereby subsidising the US treasury and diverting profits in the form of dividends from international shareholders to, amongst others, welfare recipients in the USA.

Why will Toyota meekly pay up as the banks have done in the past? Because the long-term cost of the adverse publicity could be higher than the penalty.

This penalty and portrayal of Toyota as another example of evil big business could open the floodgates of compensation-seeking litigation against the company.

Added to the massive fine, the total costs could seriously impact profits and could arguably add to the cost of Toyota vehicles for years.

All public companies are ultimately owned by the share holders. Some of those are institutions with their own shareholders, some are wealthy. Many are not.

Many are relying on dividends from corporations like Toyota, either directly or through pension funds, for their retirement income.

It is ironic that greedy and vindictive prosecutors and revenue agents in the USA can deprive pensioners from Japan to Britain of their incomes and jeopardise their livelihoods.

The authorities claim that this is to protect consumers, that claim has as much validity as local municipalities’ claim that speeding fines are only to prevent speeding not raise revenue.

If laws are broken, punishment is deserved, but it should be relevant and reasonable. Leave the raiding of corporate reserves to the real victims, there are more than enough avaricious lawyers itching to help. They don’t need US regulators to do it for them.

This and similar acts of piracy against foreign investors increases the cost of doing business in the USA. When that cost becomes too high, those investors will look elsewhere.

It also invites retaliation from the, as yet, restrained financial watchdogs in other major economies.

 

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12 Mar 2014
A Contrarian View

What’s Important, Investigate Drone Strikes or Feed Refugees?

RAF Reaper MQ-9 Remotely Piloted Air System – Drone

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BBC International news showed an interview with an anguished gentleman from the UN earlier this week.

Why was the poor guy anguished?

Because he was horrified at the effects of drone strikes in Afghanistan and Pakistan.

He had computer simulations, fancy graphics and tons of data showing how terrible it is to use drones.

The investigation must have taken hundreds or even thousands of man-hours. Knowing how organisations like the UN operate, you can bet that those man-hours were not spent by people on minimum wage.

Far from it, calculate the cost of the highly paid specialists required, considerable travelling to the affected countries, local travel in air-conditioned, gas-guzzling luxury SUVs, accommodation in top hotels, squads of security guards and local “advisers”.

That little exercise must have cost the equivalent of many day’s food bill for all the Syrian refugees living in neighbouring countries.

Collateral damage, the injury, death and displacement of innocent civilians and damage to their property is an unfortunate consequence of armed conflict, whatever the scale.

Cases of blatant disregard for the safety of civilians should be investigated and where negligence or worse is established, action against those responsible, taken.

However, speaking from personal experience of conflict and being on the receiving end of blatant government instigated violence, it is easy for professional do-gooders and critics of the West to pontificate and point fingers after the event.

It can be argued that drones cause less collateral damage and fewer unintended casualties than older or less technologically advanced weapons.

They are cheaper than larger aircraft, no crew members are risking their lives which means that they can be maneuvered closer to their intended targets.

That in turn means that less powerful weapons can be used, less risk of widespread damage.

Altogether a more precise weapon than large bombs or artillery barrages.

If the UN really wanted to end the conflict and minimise casualties, it should be using its resources to expose the atrocities of the Taliban and other extremist groups. Especially those that shoot schoolgirls, teachers and medical workers protecting children by vaccinating them against polio.

But that just does not generate the same publicity as attacking the USA in particular and the West in general. It doesn’t appeal to the liberal left, rabid environmentalists, and other wearers of rose-tinted glasses.

It is unbelievable t organisations like the UN can spend vast amounts of money, time and energy attacking countries and people who are trying to do a difficult job. Often for a largely ungrateful and unhelpful, population.

While ignoring, excusing, condoning or making excuses for the perpetrators.

Then, the ultimate irony, asking those it is attacking and villifying, for more funds to help the victims of conflict and refugees, in other parts of the region.

But of course, if we look at the history of the UN’s actions from the days when it became hijacked by the newly independent third world states in the 1960’s, it is entirely believable.

It’s time for the Western Nations that finance this circus to hold it accountable, or make it fold its tent and disappear in the night.

 

 

 

 

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05 Mar 2014
A Contrarian View

Dangerous moves on the Ukrainian chess board

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Back in September 2013, in this post, I suggested that Russia’s President Putin had acted like a Chess Master to out manoeuvre the Western powers in Syria.

Seems he learned from that success and has again played the more decisive opening moves. This time in the Ukraine, a bigger chessboard and a game with much higher stakes.

As offensive as his action in moving thousands of troops into the Crimea overnight is to our Western Democratic sensibilities, he has an element of legality on his side.

The government under President Yanukovich as bad as it appeared, was the elected government. It was overthrown by a violent revolution, police and protesters were killed, property damaged, buildings occupied and public officials prevented from doing their jobs.

Our Western leaders loudly condemn, and sometimes take action against, coup leaders in other countries – when we do not approve of them. It seems we have a selective morality when it comes to approving of, or condemning revolutions.

How then can we complain when Russia chooses to side with what to them is a beleaguered minority, deprived of their elected government by an uprising and fearful for their safety?

Not that I am supporting Russia’s invasion of the Crimea. Far from it, I am just suggesting that the situation is a little more complicated than most people believe.

Will Putin put troops into the rest of the Ukraine? That may well depend on his assessment of the “consequences” that British Foreign Minister William Hague threatens.

While I suspect that Russia will not be aggressive enough to launch a takeover of the whole country, it would not be surprising if they did attempt to annexe those parts of Eastern Ukraine with majority Russian speaking populations.

It looks like the Crimean peninsula is lost, a result that may eventually prevent further problems for the new government in Kiev. A Russian move into Eastern Ukraine would create more serious problems both for the country itself and other countries in Europe.

Depending on their assessment of the West’s likely reaction, Putin could well put troops around the Russian speaking cities in Eastern Ukraine temporarily to extract concessions from both the new Ukrainian government and the West.

Those concessions could include higher prices for Russian natural gas supplied to the Ukraine and beyond, removal of the threat of sanctions proposed by the USA and even more favourable consideration of Russian interests in unrelated sources of disagreement like Syria.

For now the Russian Chess Master has the West in check, will it be checkmate when more Ukrainian cities have been lost like pawns? Or will the West be bold enough to protect the Queen of Kiev and the rest of the pieces not yet lost?

My bet is that right now it’s too close to call. My gut instinct tells me that this game would have played out differently if Presidents John Kennedy or Ronald Reagan and Prime Minister Margaret Thatcher had still been leaders of their countries.

More recently, if either President Bush had been in power, Russia’s opening moves may have been less provocative.

I do not believe that the West will, or should, get into a war with Russia, the potential cost is too high, the outcome unlikely to improve the situation for the people of Ukraine.

However the Russian action is a clear indication that the USA is no longer seen as the only world superpower, the balance of power is steadily shifting Eastwards and Russia desperately wants to improve its standing in the ranks of nations that carry weight.

Interesting times ahead.

 

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