Did The U.S. Federal Reserve Chairman Ben Bernanke Send The Stock Market On A Wild Ride?

Given the 48-hour long global stock sell-off hitherto unseen since the September 2008 global credit crunch, did FED Chairman Bernanke’s announcement to ease off the US economic stimulus caused it?

By: Ringo Bones 

The only thing that’s being proved by the 48-hour over 500-point plunge in the global stock prices is that the global stock market hates uncertainty. Sure, it can handsomely make profits in either wartime or peace, but the rather uncertain announcement of U.S. Federal Reserve Chairman Ben Bernanke back in Wednesday, June 19, 2013 of “taking the foot off the gas” on the U.S. economy’s 85-billion US dollar a month stimulus package if signs show that the U.S. economy shows signs of improvement near the end of 2013 had sent the global stock marketplace in a 48-hour sell-off – a global stock market plunge if you will. Not until did Friday came that the global markets started to stabilize after a two-day freefall. Given the market being spooked by such “economic stimulus ending announcement”, one wonders if our global economy is currently heavily dependent on the Obama administration’s rather liberal economic stimulus program. But doesn’t it, really? 

Every hedge fund manager who had either profited or had drastically minimized their loses during the September 2008 global credit crunch via the use of complex derivatives in hedging their investment portfolios have been since the start of 2013 started to advise their clients to be careful on their stock market investments since it is very likely that the Dow Jones Industrial Average could return to the 10,000 point mark around the end of 2013. Though despite such “scare mongering” the DJIA did manage to cruise well a little above the 15,000 point mark for much of May 2013 before it was sent on a volatile wild ride by June. 

While the June 19 announcement of FED Chairman Bernanke caused a global bond market sell-off that made the S&P 500 the worse it had been since 2011, many experienced and institutional investors had been quite busy snapping up safe haven commodities investments like gold and other precious metals that has since become “cheaper” since the 48-hour wild ride. But given the still high unemployment rates in the United States and the recent economic data showing the recent slowing down of the Mainland Chinese manufacturing sector, may now wonder if the rather artificially high stock market prices are just probably due to the Obama administration’s rather quite liberal 85-billion US dollar a month economic stimulus package / quantitative easing program. 

Liberty Reserve: The Criminal Underworld’s Online Bank of Choice?

As probably one of this year’s biggest money laundering cases, has the online digital currency and money transfer firm Liberty Reserve now became the criminal underworld’s online bank of choice? 

By: Ringo Bones 

With the arrest of the firm’s Ukrainian born founder, Arthur Budovsky - who was en route to his digital currency and money transfer firm’s base of operation in Costa Rica, by the U.S. Department of Justice authorities, Liberty Reserve was shut down by the U.S. D.O.J., the U.S. Secret Service as the ongoing investigation by federal prosecutors in New York proceeds. With a massive 6-billion US dollar money laundering scheme that could be the biggest uncovered for this year, does Liberty Reserve made an error of corporate due diligence for the firm to be embroiled in criminal money laundering? Or is the firm actually has outright complicity in such a criminal act? 

Though the outcome of the investigation is still pending, the U.S. Department of Justice in conjunction with the US Secret Service made arrests of Liberty Reserve’s upper echelon personnel in 17 countries over the weekend of May 25, 2013 while freezing its online domain name and 45 bank accounts used by the digital currency and money transfer firm elsewhere in the world. Based on the preliminary investigation uncovered by the New York Federal Prosecutor’s office, it was found out that Liberty Reserve became during the past few months as the money laundering destination of choice for the world’s criminal groups currently engaged in identity theft, illegal arms trading and running illegal online pornography sites, and transnational narcotics smuggling  just to name a few of the criminal enterprise uncovered whose profits were allegedly laundered by Liberty Reserve.  

Even though digital currency schemes like Bitcoin had been actively used by transnational illegal arms traders and narcotics traffickers since it was introduced, police authorities around the world has had a rather Quixotic task in their hand when it comes to arresting “online enablers” of such criminal activity due to a lack of established brick and mortar institutions. Given that Liberty Reserve has a real bricks and mortar office located in a rather “infamous” tax-haven destination called Costa Rica in which authorities could conduct raids and make arrests, this could be the primary reason that over the years this is the first time that such criminal activity has finally been “tangibly” clamped down. 

Will Thatcherism Work In Solving Today’s Economic Problems?

Even though then UK Prime Minister Margaret Thatcher managed to (more or less) solve Britain’s economic problems during her tenure, can Thatcherism be used to solve today’s pressing economic problems? 

By: Ringo Bones 

Even though then UK Prime Minister Margaret Thatcher is still loathed by scores of Britons who had experienced first hand her privatization of previously nationally-owned utilities that virtually subjected most of Britain’s working middle class to abject poverty for much of the 1980s, there is a growing consensus among today’s leading economists that “Thatcherism” – also known as “Thatcherite Economics” - saved Britain’s then languishing economy by restructuring it from a virtual socialist type system to a free market system modeled after the U.S. economy. Economic rigmarole aside, can Thatcherism be used to solve today’s pressing economic problems currently plaguing the U.K. and the rest of the E.U.? 

Sadly, many leading economists these days seem to have reached a consensus that Then UK Prime Minister Thatcher’s economic policies that restructured Britain’s economy to a more free market driven one – and made scores of investors and hedge fund managers rich - during the 1980s were specifically designed to solve economic problems that the British economy incurred during the 1970s. For the benefit of everyone too young to have experienced first hand the economic landscape of the 1970s, here’s a brief “layout of the land” of what existed back then and why "Thatcherite Economics" manage to fix such intransigent economic debacle born out of the geopolitical turmoil for much of the 1970s. 

To the uninitiated, the 1970s are more than just “bad Disco music” bad clothes and high income and capital gains taxes, the 1970s were also notorious for the OPEC induced “oil price shocks”, rising wages for specialists jobs and labor unions drunk with power. Despite earning a relatively comfortable wage, Brits were paying an annual income tax 89 per cent higher compared to current rates. UK capital gains tax were also around 89 per cent higher back in the 1970s compared to current rates. Thus Thatcherism – with its “non-Keynesian” way of reducing both income and capital gains tax and drastically reducing budgets for public services – i.e. Reaganomics style “small government” – virtually allowed the UK economy to benefit from the go-go greed driven market economy of 1980s America. 

Unfortunately, Thatcherism would be woefully ineffective in solving our current global economic sluggishness because problems that caused them today are radically different in comparison that caused the economic sluggishness of the 1970s. Today, the emerging economics – i.e. BRICS nations as in Brazil, Russia, India, Mainland China and South Africa sometimes referred to as emerging economies – had been producing more highly educated college graduates during the past few years that they are the primary driving force behind the outsourcing phenomena. Why hire an American when a job can be done online by a college graduate in India for one-fifth of the cost? American jobs being outsourced to low-wage countries only started near the very tail end of both Reagan’s and Thatcher’s tenures. 

Thatcher style austerity measures would spell disaster today and even a watered-down version of it is being used currently to solve the British government’s ballooning budget deficit is causing a gradual – and eventually disastrous – economic slowdown on the British economy. Better resort to Keynesian Economics style quantitative easing at the risk of increased inflation rather than risk a disastrous double-dip recession.  

Cyprus Bailout Plan: Sacrificing Bank Depositors?

As if banks haven’t yet nickeled and dimed to death their working class depositors enough, will the controversial one-off taxation in Cyprus of its bank customers drive them away too? 

By: Ringo Bones 

The controversial scheme of Cyprus’ government to fund their economic bailout scheme via a one-off 10% tax on every bank depositor regardless of balance that had been announced back in March 18, 2013 seems like an unprecedented act of eminent domain that verge on the despotic on working class bank depositors on Cyprus by using "government mandates" to seize every depositors money via a controversial taxation, and yet it almost seem to come to pass. As the controversial proposal was announced, multitudes of bank depositors in Cyprus rushed to save their life savings from the grubby hands of their government that had suddenly seemed turned despotic, creating a panic that almost resulted in a bank run. But will such scheme collapse rather than save the national economy of Cyprus? 

Fortunately, the government of Cyprus had reached a consensus to choose instead a “State Investment Fund” scheme to secure a bailout deal from Brussels. The Cyprus state investment fund is said to be backed by state assets but unfortunately Cyprus has only a few days to raise the requisite funds to qualify for a 10-billion euro European Central Bank funded bailout. But how did a mere “bailout scheme” turned into the “Cyprus Banking Crisis” in the first place? 

First of all, the European Union had been clamping down on tax havens since they had been affected by the global credit crunch that started in the United States back in September 2008. The EU had always seen the Cypriot banking system as a tax haven oft used by “sneaky” Russian petroleum oligarchs for over a decade now. Unfortunately, their scheme to tax these “Russian petro-oligarchs” for their fair share created a collateral damage of millions of the working class Cypriot bank depositors and their hard-earned money. At the moment, ATMs on Cyprus are only allowed to give out 260 euros per person per day to avoid a run on the banks. And a bank run is probably the least of the banks in Cyprus’ problems given that the latest incarnation of the Basel Accord demand higher emergency reserve bank capital, panicking working class Cypriot bank depositors closing their bank accounts could make banks in Cyprus that much harder to meet their current Basel Accord obligations. 

Corporate Tax Avoidance: Victimless Crime?

Even though it might be the reason why Mitt Romney lost the 2012 US Presidential Election, is corporate tax avoidance truly a victimless white collar crime? 

By: Ringo Bones 

For us in the have not section of the socio-economic ladder, the idea of corporate tax avoidance – where corporations resort to legal means to avoid paying their fair share of taxes is seen as a gross disregard of a for profit firm’s corporate social responsibility. And despite corporations thinking its just business as usual, such moves are not gaining them any favors from elected officials desperate for revenue in the austere fiscal environment of our post subprime mortgage crisis world. 

Earlier this year, Google and Starbucks were cited as examples of corporate tax avoidance where they got the practice of diverting their profits generated in a high tax country into one of their parent companies located in a low tax rate region down to a science. Their practice of shifting profits to lower tax regions had been costing the U.K. millions of much needed tax revenue needed to maintain the nation’s infrastructure and other vital social services. Even the CEOs of some multinational corporations – despite earning 20 to 30 times more than a typical public school teacher on an annual basis – manage to pay income taxes at the same rate as that of a typical public school teacher. 

U.K.’s Chancellor of the Exchequer George Osborne had been currently in discussion with his French and German counterparts during this G20 Summit in Moscow over how the practice of corporate tax avoidance had been bleeding the Eurozone dry of much needed revenue. Even though the U.K.’s legislated taxation laws is relatively progressive by global standards – i.e. the richer you are, the more taxes you should pay – corporate tax avoidance skews the very idea of establishing a progressive taxation scheme. And if big multinational corporations are allowed to practice corporate tax avoidance with impunity in the Eurozone, could large scale disenfranchisement of the masses and social unrest be not so far behind?