offshore financial centre

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pages: 497 words: 123,718

A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins

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airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, Doha Development Round, energy security, European colonialism, financial deregulation, financial independence, full employment, global village, high net worth, land reform, large denomination, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, statistical model, structural adjustment programs, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War

The huge expansion of the financial services industry in the 1980s and 1990s saw the number of offshore tax havens increase from twenty-five in the early 1970s to seventy-two by the end of 2005.17 More countries are lining up to create their own offshore finance centers. In February 2006, for example, John Kufuor, president of Ghana, announced his government’s intention to proceed with legislation to allow offshore financial services to be provided in Accra in a joint venture with British banking group Barclays.18 Interestingly, thirty-five of the seventy-two havens are linked to the City of London, either through direct constitutional ties to Britain or through membership in the British Commonwealth. Almost all these tax havens have links to the major industrialized countries, with significant clusters of havens located in the Caribbean, around the European periphery, in the Middle East, and in East Asia.

World Development Movement, www.wdm.org.uk. Lobbies decision makers to change policies, and researches and promotes positive alternatives. Networks with people’s movements in the developing world. Dirty Money and Offshore Banking Baker, Raymond. Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free Market System. New York: John Wiley & Sons, 2005. Epstein, Gerald. Capital Flight and Capital Controls in Developing Countries. Northampton, Mass.: Edward Elgar, 2005. Epstein, Gerald, ed. Financialization and the World Economy. Northampton, Mass.: Edward Elgar, 2006. Hampton, Mark, and Jason Abbott. Offshore Finance Centres and Tax Havens: The Rise of Global Capital. London: Macmillan, 1999. Kochan, Nick. The Washing Machine: How Money Laundering and Terrorist Financing Soils Us. Mason, Ohio: Thomson, 2005. Mitchell, Austin, and Prem Sikka.

Slower growth makes it more difficult for these countries to service their external debts while maintaining public services and infrastructural investment programs. In short, offshore tax havens undermine economic growth and cause poverty. A few checks through the academic literature of the 1980s confirmed that there were virtually no studies of the role of tax havens or how they were interacting with the emerging globalized financial markets. Offshore finance still scarcely gets a mention in specialist texts on capital markets and world trade, let alone in the mainstream texts studied by economics undergraduates in universities around the world.4 This is an important omission, especially when you consider that one-half of world trade passes through tax havens, on paper if not in reality, and that trillions of dollars flow daily through the offshore networks. My work in the early 1980s took me across Southeast Asia and northern Africa, and wherever I traveled there was a widespread perception that wealth, especially wealth from mineral resources like oil, was being expropriated by corrupt political and business elites and exported to offshore bank accounts and trusts in tax havens like Switzerland, Monaco, the Cayman Islands, and Jersey.

 

pages: 192 words: 72,822

Freedom Without Borders by Hoyt L. Barber

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accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, banking crisis, diversification, El Camino Real, estate planning, fiat currency, financial independence, fixed income, high net worth, illegal immigration, interest rate swap, obamacare, offshore financial centre, passive income, quantitative easing, reserve currency, road to serfdom, too big to fail

I don’t recommend it, but in Italy, it’s said to be a national sport! THE T-8 TAX HAVENS AND OFFSHORE BANKING CENTERS Eight outstanding jurisdictions today have emerged from the long list of tax havens worldwide, which number approximately 40. Unfortunately, and for many reasons, only around one-quarter of them are worth consideration for North Americans. I developed my annual list of T-8 tax havens, the best tax havens and offshore banking centers in the world, to help assist with the selection of the choicest ones today. As of 2010–2011, the following tax havens rank high: Belize, Panama, Cook Islands, Nevis, St. Vincent and the Grenadines, Anguilla, Switzerland / Liechtenstein, and Hong Kong. The reasons these eight countries are best for tax haven and offshore banking purposes today vary, and each has its own special strengths.

Internal Revenue Service, the Canadian Revenue Agency, and other tax collectors, to enable them to obtain what otherwise would be confidential and hard-to-secure information from foreign financial institutions, foreign lawyers, and others regarding your offshore financial activities. For possible updates on the T-8 annual list, visit www.barberglobalfinancial.com or www. barberfinancialadvisors.com and click on the link “T-8 Tax Havens.” When a country signs a TIEA, which is in no way a tax-benefit treaty, it can singlehandedly succeed in undermining the benefits normally afforded by these tax havens to their North American customers. The risk factor skyrockets drastically for any taxpayer who utilizes a tax haven that is party to a TIEA with his home country where he holds citizenship. Therefore, the annual T-8 list has been developed as a practical reference for identifying the best tax havens and offshore banking centers for maximizing profits, privacy, and financial protection in today’s volatile world.

See Travel visas Visitante Rentista program, 114 Wall Street Journal, 38 Weather considerations, 95–96, 114 Wisdom Tree Dreyfus Emerging Currency Fund (CEW), 55 Work/job concerns, 12, 94 World Bank, 36 Worldwide income tax, 4, 6 About the Author HOYT BARBER has been an entrepreneur for most of his life and has been a recognized authority on tax havens, offshore banking and investments, and asset protection for more than two decades. Barber has published 11 books, both nonfiction and fiction, with more on the drawing board. His previous two nonfiction titles, published by John Wiley, are Secrets of Swiss Banking: An Owner’s Manual to Quietly Building a Fortune (2008) and Tax Havens Today: The Benefits and Pitfalls of Banking and Investing Offshore (2007). His first novel, an international thriller, From Hell to Havana (2007), was published by Durban House. Barber is president of Barber Global Financial Ltd. and Barber Financial Advisors in Vancouver, B.C., Canada. The company provides offshore financial services in tax-haven jurisdictions for investors and expatriates from North America and elsewhere who seek refuge from excessive bureaucracy.

 

Poisoned Wells: The Dirty Politics of African Oil by Nicholas Shaxson

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Asian financial crisis, Berlin Wall, blood diamonds, business climate, central bank independence, clean water, colonial rule, energy security, Exxon Valdez, failed state, Fall of the Berlin Wall, Hernando de Soto, income per capita, inflation targeting, Martin Wolf, mobile money, offshore financial centre, Ronald Reagan, Scramble for Africa, Yom Kippur War

U.S. anti-money-laundering laws involve a long list of prohibitions on proceeds from crimes—including the above—committed at home, but a very short list for those committed overseas. Welcoming dirty money is profitable for American companies, and it helps fill the current-account deficit. And Europeans, it seems, are hardly better behaved. Most people are dimly aware of a murky world of offshore finance. But how big is the problem? Try these for size. The OECD reckons that about half of all the world’s cross-border trade involves structures for concealing money, involving about 70 tax havens (the French poetically call them “fiscal paradises”)3, as corporations and rich individuals shuffle profits around to avoid taxes and for yet more nefarious reasons.4 Assets held offshore by rich individuals, beyond the reach of effective taxation, equal one-third of total global assets—or $11 trillion, conservatively estimated, costing governments over $250 billion a year in tax revenues.

(NNPC), 1 Ninjas, 112, 118 Nkossa oilfield, 106 Nkrumah, Kwame, 19 Noble Energy, 129, 160 Norquist, Grover, 226 Norris, Chester, 131 North Korea, 4, 35, 122, 150, 227 Norway, 5, 84, 93 Obasanjo, Olusegun, 17, 19–21, 24, 147, 158, 159, 161, 200, 201, 203, 205, 208 Occidental, Oxy, 111–113 Odi, 200 Odili, Peter, 200, 203 277 P o i s o n e d We l l s Office of the Comptroller of the Currency (OCC), 96 Offor, Emeka, 155–158 offshore finance, see taxation, tax havens, tax evasion oil and gas 1970s price boom, 3, 4, 5, 11, 15–18, 21–23, 96, 110, 115, 185, 197 1980s price crash, 4, 21–24, 51, 110, 197 companies, see individual company name contracts, contract renegotiations, 2, 14–15, 35–38, 39, 45, 46, 71, 92, 99, 104, 106, 111, 112, 116, 129, 130, 141, 146, 152, 153, 155–162, 196, 197, 216 corruption, see corruption cost base, “cost oil,” 2, 39, 46, 99 enclave syndrome, 46, 49, 185, 230 exploration, production, reserves, geology, 2, 21, 27, 35, 36, 38, 42–43, 66, 104, 105, 121, 146, 152, 155, 159, 177, 190, 194, 212 licensing, licences, 15, 43, 70, 80, 113, 152–160, 162, 165, 181, 197, 205, 220 markets, 3, 64, 189–90, 202, 205, 214 natural gas, liquefied natural gas (LNG), gas flares,17, 43, 100, 107, 122, 143, 190, 194–195 oil funds, savings, 24, 163–164, 231 oil money flowing through African politics and societies, 15–16, 21–25, 36–37, 44–47, 50–55, 76–78, 80–82, 94, 97, 99, 235 onshore activities, 57, 107, 193–208 Resource Curse, see Resource Curse revenue shares, sharing, allocation, 1, 15, 37, 38, 111, 112, 141, 142, 152–153, 156, 159, 196, 203 signature bonuses, 153, 165 Ojukwu, Emeka, 13, 34 Oloibiri, 197 Opus Dei, see Freemasons, freemasonry Organization of Petroleum Exporting Countries (OPEC), 1, 5, 15, 75, 233 Ouattara, Alassane, 215 Ovimbundu, Ovimbundus, 50 palm oil, 13, 195–197, 202 Paradox of Plenty, see Resource Curse Partnership Africa Canada, 210 Pasqua, Charles, 87, 90, 151, 175, 176 Péan, Pierre, 76, 78, 79 Pérez Alfonzo, Juan Pablo, 5 PGS (Petroleum Geo-Services), 155 Pioneer Energy, 160 Pointe Noire, 105, 114, 117 Port Harcourt, 191–193, 203, 206 Portugal, Portuguese policy and history, 28, 41, 42, 49, 58, 82, 147–150, 185 Posser da Costa, Guilherme, 149, 150 poverty, human development, 4, 5, 185, 217, 224; see also Resource Curse Francophone countries, 101, 102, 122, 142–143 Nigeria, 22, 24, 54–55, 61, 197 Ping, Jean, 75 Pinto da Costa, Manuel, 150–151, 164 private creditors, “vulture funds,” 65, 110–113, 115–116, 176–181 Publish What You Pay, 217–218 Ransome-Kuti, Kuti Beko, 20, 25 Fela, see Kuti, Fela Anikulapo Femi, 20, 26 Raymond, Lee, 216 Reagan, Ronald, 23, 48, 172 religion, see Islam, Christianity, traditional religions, Nigeria, religion Rendjambé, Joseph, 80 Resource Curse, 5–7, 34, 215, 231, 235 conflict and fragmentation, 3, 4, 6, 23, 103–104, 116, 183, 196, 197, 205, 210–212, 229–230, 233, 235 corruption and governance, see corruption debt, see foreign debt Dutch disease, 5, 17–18, 42, 66, 81, 102, 118, 122 oil price volatility, see Nigeria, 1960s etc.; Congo Republic, debt etc. pollution, global warming, 6, 65, 194–195, 197, 204, 224 poverty, see poverty “privatization of the state,” 4–5, 115–117, 184, 186 “rents,” 38–40, 98–101 Ribadu, Nuhu, 207 Rice, Condoleeza, 143 Riggs Bank, 126–131, 135, 138–140; see also Equatorial Guinea Rivers State, Nigeria, 190–192, 200, 201, 203, 205 Robert, Maurice, 70, 72, 73, 76, 86 Rolling Dollar, Fatai, 20 Roque Santeiro, see informal markets Rose-Croix, Rosicrucians, see Freemasons, freemasonry 278 Index Rough Trade, 210 Rowland, Tiny, 169 Rumsfeld, Donald, 115, 137 Russia, 2, 50–51, 59, 158, 165–181, 191; see also Gaydamak, Arcadi; Soviet Union Rwanda, genocide, genocidaires, 83, 112, 114 Salinas, Carlos, 96 São Tomé e Principe, 101, 145–164, 169, 229–230 Sarkozy, Nicolas, 176 Saro-Wiwa, Ken, 6, 25, 197–199, 204, 215 Sassou-Nguesso, Dénis, 78, 91, 105, 108, 109, 111, 113–116 Saudi Arabia, 1–3, 72, 100–101, 102, 121, 127, 140, 146, 192, 225, 226 Savimbi, Jonas, 41, 48–50, 56, 201, 212; see also UNITA “Seven Sisters,” 1, 14, 18, 71 Secret societies, 35, 68, 70, 76–78, 90, 91, 92, 102, 105, 111; see also Freemasons, freemasonry Service d’action civique (SAC), 78, 87 Shell, Royal Dutch/Shell, 1, 71, 93, 94, 194–198, 201, 204–205, 217 Shrine, Afrika Shrine, 19, 26 Simpson, Chris, 56 Silverstein, Ken, 128, 163 Sinopec, 181, 121 Sirven, Alfred, 90, 91, 93 Slaves, slavery, 19, 28, 42, 43, 106–107, 147, 196, 197, 202, 206, 224–227 Smith, Johan, 137 Smith, Stephen, 78, 91 Soares de Oliveira, Ricardo, 4, 116 Sonangol, 45, 46, 51, 52, 175–177, 179, 216–217 Soros, George, 179, 216 Soviet Union, Soviet ideology, 30, 34, 48–49, 69, 72, 105, 108, 110, 150, 169–172, 176, 178, 191, 214; see also Russia, Cold War Soyinka, Wole, 25, 207 Soyo, 57 Standard Chartered bank, 226 Stanley, Henry Morton, 107 Statoil, 36 Steinberg, Donald, 49 Stoddard, Ed, 201 Straw, Jack, 138 Suez bank, 226 Switzerland, Swiss magistrates, Swiss justice, 86, 88, 91, 96, 179–180, 182, 224, 225 Tapie, Bernard, 87 Tarallo, André, “Monsieur Afrique,” 87, 90, 91, 93, 109 Tax Justice Network, 226, 229 taxation, tax havens, tax evasion, 95–100, 126–131, 202, 213, 224–229 and Britain, city of London, see Britain, banking, money laundering, city of London bank secrecy, tax havens, general, 88, 91, 93, 95, 100–101, 109, 130, 131, 181, 227 and criminals, criminal money, terrorism, 23, 88, 96, 98, 170, 174, 221, 225, 227 Gabon, Congo, 91, 93, 95–98, 110, 115–116 Equatorial Guinea, 126–131, 136, 137 Gaydamak, 170, 174, 178–181 and globalization, 26, 170, 215–216, 220, 227, 229, 235 “no taxation without representation,” 18 Switzerland, see Switzerland, Swiss magistrates, Swiss justice taxation of the oil industry, 14, 36–38, 46, 71 U.S.

New loans were needed to pay off the old ones, and an addiction grew.19 Falling into arrears on salaries to the civil service was widely taken as a potent sign of political weakness, which in turn was a boon for Elf and other creditors: Congo’s leaders, an Elf official on trial in Paris later explained, had to “put up with” very high interest rates on Elf loans because they were so weak.20 Elf rescheduled Congo’s debts in exchange for new oil concessions,21 at bargain-basement prices, and provided new loans at exorbitant rates. Bribes flowed through Bongo’s Fiba bank and the tax havens, while politicians looted the treasury. Tax havens are like one-way filters for money, sucking African economies dry: once rulers get their cash out, they know it is safe. Under IMF-inspired privatization, French interests converted Congo’s debts into discounted shares of state firms. French businesses and networks gained footholds, building import, forestry, and gambling empires. French official credits,22 along with painful layoffs and wage freezes, produced fresh money that ensured that the private French creditors, including Elf, got paid back.

 

pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, additive manufacturing, Airbnb, algorithmic trading, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, interest rate derivative, interest rate swap, Internet of things, invisible hand, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund

Buybacks themselves aren’t tax deductible, but related practices, such as taking on debt to make such purchases, offer companies tax advantages (because the interest on this debt is tax deductible), as do stock options awarded to top executives, as laid out above. Shifting to a tax code that doesn’t give debt such preferential treatment would be a great way to shift the buyback dynamic, and this is a topic I will cover in much more depth in chapter 9. Cracking down on overseas tax havens and closing corporate loopholes is another obvious measure that’s long overdue. This is especially true given the fact that most other G8 nations are considering similar proposals, which would help offset some of the threat of a corporate race to the bottom, in which corporations offshore to the most attractive tax havens. Similarly, taxing capital gains on a sliding scale, with higher rates for shorter holding periods and lower rates for longer ones, could discourage the seekers of quick gains from distorting the markets. (Bonus pay might also be spread out over time and linked not to share prices but to real business performance, something that a number of firms are beginning to experiment with.)

The reason, rather, was that Apple’s financial masters had determined borrowing was the better, more cost-effective way to obtain the funds. Whatever a loan might normally cost, it would cost Apple far less, thanks to a low-interest bond offering available only to blue-chip companies. Even better, Apple would not actually have to touch its bank accounts, which aren’t held someplace down the street like yours or mine. Rather, they are scattered in a variety of places around the globe, including offshore financial institutions. (The company is secretive about the details.) If that money were to return to the United States, Apple would have to pay hefty tax rates on it, something it has always studiously avoided, even though there is something a little off about a quintessentially American firm dodging a huge chunk of American taxes. So Apple borrowed the $17 billion. This was never the Steve Jobs way.

Bill George put the salient question succinctly: “Is the role of leading large pharmaceutical companies to discover lifesaving drugs, or to make money for shareholders through financial engineering?”4 Sadly, we know the answer, at least when it comes to Pfizer. Although Obama has proposed rules that could make it tougher for companies to relocate abroad specifically for tax reasons, politicians haven’t made a dent in the usual offshore financial wizardry practiced by many of the country’s largest firms. These tactics are particularly common in sectors like finance, technology, and pharmaceuticals—that is, intellectual-property-driven industries in which the virtual nature of assets (ideas, formulas, patents, algorithms, and the like) makes it especially easy to shift profits to the cheapest possible tax jurisdiction, regardless of where they really came from.

 

pages: 1,590 words: 353,834

God's Bankers: A History of Money and Power at the Vatican by Gerald Posner

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Albert Einstein, anti-communist, Ayatollah Khomeini, bank run, banking crisis, Bretton Woods, central bank independence, centralized clearinghouse, credit crunch, dividend-yielding stocks, European colonialism, forensic accounting, Index librorum prohibitorum, medical malpractice, Murano, Venice glass, offshore financial centre, oil shock, operation paperclip, rent control, Ronald Reagan, Silicon Valley, WikiLeaks, Yom Kippur War

Convention on the Rights of the Child ratified by, 501 U.S. investments of, 71 U.S. relations with, 306–8, 310n, 349 Viganò’s reform efforts and, 467–68, 469 wealth of, 233–34 see also Catholic Church Vatican Asset Management, 512 Vatican Bank, 669n, 670n, 672n, 682n, 686n, 687n–88n, 696n, 700n Allen Dulles and, 131–32 Ambrosiano and, 203, 286, 288, 297, 300, 309, 312–14, 317, 318–19, 322, 323, 325, 330–31, 332, 338, 348, 357, 363 Ambrosiano collapse and, 343, 348, 352 Ambrosiano creditor banks repaid by, 346, 348, 353–54, 357, 366, 379 Ambrosiano shares owned by, 236–37, 328, 336 Ambrosiano’s indemnity letter for, 319–20, 321, 327–28 anticommunism and, 279 and Banca Cattolica deal, 207 Banca Unione investments of, 350 bank accounts for wealthy Italians in, 182n, 370, 374 Bank of Italy and, 447–48 Benedict XVI and, 511 Bertone’s attempted reform of, 442 Caloia as chairman of, 362, 365–72, 378–80, 381, 383, 392, 396–98, 413, 414, 430–31, 438 Caloia’s attempted reform of, 366, 376, 381–82, 398, 413, 438, 440 Calvi’s partnerships with, 226, 236–37, 238–40, 242, 243–44, 312, 320, 338–39, 343, 344, 345, 352, 440 cash reserves of, 416 charter of, 117, 362 Cisalpine and, 201, 296 class action lawsuit against, 391–92, 394, 445–46, 449n commission of cardinals’ monitoring of, 359, 360 confidentiality at, 376 counterfeit securities ring and, 212–13 creation of, 117–18, 128 Credit Suisse gold in exchange for cash from, 309 criminal investigation of, 338 De Bonis’s influence at, 367–68, 371, 372, 375, 439, 440 di Jorio as overseer of, 163, 167 Enimont scandal and, 373, 377, 379, 380, 381, 450 EU money-laundering standards and, 467, 468, 473, 481, 483, 484, 508 European Union and, 444, 445, 450, 451 fake Vatican Bank foundation accounts at, 366–69, 374 FATF and, 380, 450 FBI investigation of, 284–85 files routinely destroyed by, 118, 120 financial consulting firms hired by, 509 financial fraud indictments of, 414–15 Francis’s reform of, 503, 504, 505, 509–13 Franssu as president of, 511–12 Freyberg as president of, 493, 504 global financial recession and, 438 Gotti Tedeschi as head of, 442, 443, 445, 446, 448, 449–50, 455, 456, 472–73, 474–75 illegal profits made by, 208–9 as independent from Prefecture, 184 internal documents released by, 344 investment function stripped from, 512 Italian election slush fund of, 153 Italian investigation into, 286, 344–45, 374–77 Italian investments of, 157–58, 160, 171, 176, 177, 179–80, 181–82, 187–88 John Paul II and, 510–11 letters of patronage given to Calvi by, 319, 321, 323, 324, 327, 328, 330, 331, 339, 344, 348 loans made by, 325, 326, 327, 347, 350, 379–80 looted Croatian gold deposited in, 140, 387, 391 Lumen Christi account in, 379–80 Mafia and, 382, 468, 600n Marcinkus as head of, 197–201, 249–50, 257, 258, 260, 261, 286, 325, 339, 342, 347, 354–56, 369–70, 377, 440 Marcinkus’s appointment to, 194–95 Mennini as responsible for day–to–day operations of, 355–56 money laundering by, 182n–83n, 375–77, 382, 414, 442n, 468, 480, 505–7 money laundering investigation into, 449, 453 Moneyval reviews of, 450, 457, 484–85, 487, 508–9 Nazi cash and gold deposited in, 138, 139, 384, 388, 392, 423, 426, 449n, 482 as offshore bank, 339, 507 Philadelphia Diocese reimbursed by, 282–83 Pioppo as chief cleric of, 430 political bribes paid by, 440 poor image of, 397, 414 postwar economy and, 155 press and, 381, 448–49 profits of, 378 real estate holdings of, 416 Reichsbank and, 119 Revisuisse auditors of, 378 as safe haven for capital, 118 SEC and, 208–9 secrecy of, 444 as separate department, 378 Sindona and, 170, 171, 172, 177, 196, 225, 227, 228, 231–32, 233, 258, 260, 290, 298–99, 301, 351, 440 stock portfolio of, 416 internal documents stolen from, 439, 440 supervisory panel of laymen at, 362–63, 442 systemic problems of, 343–44 as tax haven, 439 in World War II, 120–29, 384 Vatican City, 33, 48, 100, 104, 108, 114, 117, 149, 152, 184, 187, 191, 192, 234, 309, 335n, 345n, 348, 363, 449, 451, 456, 458, 459, 485, 512–13, 558n, 565n, 578n, 632n, 658n, 665n, 667n budget of, 232, 234, 342–343, 353 credit card crisis in, 488–90 disrepair of, 46 expansion of, 35, 53–54, 548n Lateran Pacts and, 48 Marcinkus as chief administrator of, 310–11 Pius X’s expansion of, 35–36 Pius XI’s rebuilding of, 53–54 prison of, 548n size, 48 Vatican Connection, The (Hammer), 335, 337, 617n Vatican Empire, The (Lo Bello), 612n Vatican Exposed, The (Williams), 600n Vatican Library, 44, 58 Vatican Museum, 54, 156 Vaticano S.p.A.

In direct language, he castigated Western countries for not responding more forcefully and faster to cope with the crisis, especially since the credit crunch disproportionally hammered the world’s poorest.11 In calling for reform, Benedict urged that a “necessary first step” was closing all international tax havens, which he said had “given support to imprudent economic and financial practices and have also played a significant role in the imbalances of development, allowing a gigantic flight of capital linked to tax evasion. Offshore markets could also be linked to the recycling of profits from illegal activities.”12 The Pontiff’s statement even listed some of the worst offending “offshore centers” such as “the Channel Islands.” It was not clear if Benedict fully realized the extent to which the super rich had used the Vatican Bank as a tax haven since its inception. But that December policy statement was only a warm-up for a Papal encyclical released the following July (2009).

The man they blamed for the capitulation to Brussels and its secularist regulators was the cleric everyone considered the power behind Benedict’s throne, Secretary of State Tarcisio Bertone. As the head of the Vatican’s diplomatic corps, contended some critics, Bertone more than anyone should have been sensitive to how the motu proprio might restrict the church’s ability to operate under authoritarian governments like those in Myanmar, Iran, Cuba, and China. What might happen to the church’s “independent missions” in offshore financial havens such as the Turks and Caicos and the Cayman Islands? How could Bertone allow the church’s missionary arm to be subject to the stringent new financial oversight? Bertone’s strong support for the motu proprio reenergized an effort to force him from the Curia. Influential clerics had been trying to oust Bertone since 2009. That year a senior archbishop, Cardinal Angelo Bagnasco, representing a group of ranking prelates, met with Benedict at Castel Gandolfo.

 

pages: 207 words: 86,639

The New Economics: A Bigger Picture by David Boyle, Andrew Simms

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Asian financial crisis, back-to-the-land, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, Bretton Woods, capital controls, carbon footprint, clean water, collateralized debt obligation, colonial rule, Community Supported Agriculture, congestion charging, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, deskilling, en.wikipedia.org, energy transition, financial deregulation, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Jane Jacobs, land reform, loss aversion, microcredit, Mikhail Gorbachev, mortgage debt, neoliberal agenda, new economy, North Sea oil, Northern Rock, offshore financial centre, oil shock, peak oil, pensions crisis, profit motive, purchasing power parity, quantitative easing, Ronald Reagan, seigniorage, Simon Kuznets, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, trickle-down economics, Washington Consensus, working-age population

A recent estimate is around $11,500 billion, or around one third of all global wealth.9 Half of all global trade is now routed via offshore accounts to avoid tax. More money simply passes through the offshore centres on its way somewhere else. One American study WHY DID CHINA PAY FOR THE IRAQ WAR? 53 estimates that up to half of all global transactions are conducted electronically via the offshore financial centres. Inward investment into the UK or any EU member state has no need to route itself via tax havens, other than where it is trying to obtain an unfair tax or regulatory advantage, or where it wants to avoid disclosure of its provenance. Too much of the capital flowing through the offshore circuits is engaged in speculative activity rather than being committed to long-term investment. The impact of such vast sums moving rapidly in and out of equity markets and currencies, without effective multilateral regulation, has created a global economy that is probably beyond the control of nation states.

Proposed levels at which to set the levy range enormously, from 0.1 per cent, considered by many to be high, through to a very modest suggestion from the group Stamp Out Poverty for a 0.005 per cent levy on sterling exchanges anywhere in the world, which would be difficult to avoid and would be collected in London wherever they took place.20 It would yield an estimated £2 billion a year and could be done without international agreement. Clamp down on offshore financial centres This is a way to insist that multinationals pay their fair share of the tax burden, as their smaller competitors have to. In fact, the UK is in an excellent position to make this happen, because many – if not most – of the more respectable tax havens in the world are also British crown dependencies. Since 2001, it has been far more difficult to hide money offshore, and the time has come to prevent corporations avoiding paying their fair share of tax. Link to a global reference currency Keynes imagined one called the bancor, just as Bernard Lietaer’s terra currency is designed as a way to underpin the value of other currencies.

The logic for doing so is that allowing completely open access would bring major economic benefits – there is no evidence at all that this is what has happened, but plenty of evidence that the opposite is true. 14 Make taxation work In the new period of public resources being enormously stretched by support given to the banks, it will be vital to minimize corporate tax evasion by clamping down on tax havens and corporate financial reporting. Tax should be deducted at source (from the country from which payment is made) for all income paid to financial institutions in tax havens. International accounting rules should be changed to eliminate transfer mispricing by requiring corporations to report on a country-by-country basis. These measures will provide much-needed sources of public finance at a time when economic contraction is reducing conventional tax receipts. As an organizing principle, we should also move towards taxing more what we want less of, such as pollution and unsustainable consumption of natural resources, and taxing less what we want more of, such as those activities needed for the environmental transformation of the economy.

 

pages: 382 words: 127,510

Outposts: Journeys to the Surviving Relics of the British Empire by Simon Winchester

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borderless world, British Empire, colonial rule, Corn Laws, Edmond Halley, European colonialism, illegal immigration, Khyber Pass, laissez-faire capitalism, offshore financial centre, sensible shoes, South China Sea, special economic zone, the market place

There were some new buildings, true: a determined effort was being made to turn the islands into a tax haven, and one lawyer I knew had noticeboards outside his office showing him to be the headquarters of some 4,200 companies, mostly American. The Government charges five hundred dollars a year as a registration fee, and my friend takes another hundred or so: the Chief Minister went off to Hong Kong in 1984, looking for firms who are nervous about that colony’s reversion to China in 1997, and who might like to set up in Grand Turk. He was optimistic, though some of his colleagues wondered about their pride: the Turkmen and the Caiconians had been fishermen and salt rakers once, he said, and had liked hard work, and sweat; merely to sit back and earn fees from so dubious a business as offshore finance seemed, they said, a little ‘undignified’. There was something rather pleasant, an old fisherman said, ‘in being the least developed of the colonies.

The lonelier islands of the Caicos group, unpoliced, unsupervised, and lying temptingly midway between Florida and the Colombian marijuana and cocaine farms, have become one of the world’s great trans-shipment points for narcotics. Billions of dollars’ worth pass through each year—cocaine from Bogota to Miami, heroin from Paris (via Haiti) to New York, marijuana from Caracas to Atlanta (via Nassau). Planes fly in and out of the South Caicos aerodrome at night; some are intercepted, most are untroubled. A very few islanders make a few dollars turning on the lights, or turning blind eyes; some of the offshore banks swell their accounts a little with drug commissions. But in general the big money stays away from the Turks and Caicos, and whatever their role in the distribution of the world’s drugs, the islanders remain generally poor. Chris Turner, the Governor, who lives in a wonderful mansion named Waterloo (it was built in the same year), and who drives a London taxi as his official car (its mirrors are gnawed off by the wild horses) can do little—either to clamp down on the drugs trade, or perk up the economy.

But on looking more closely the shops turned out to be little banks—some of them very odd banks, and from countries a very long way from Anguilla. But the building of them evidently gave the Anguillians work, and the Chief Minister—the same Ronald Webster who was sitting in his bath when the Red Devils burst in—promised me that many more would be invited over the coming years. (Mr Webster was defeated in an election soon afterwards, but the policy of turning Anguilla into a tax-haven was still being pursued with great energy.) Hotels, too, were springing up. Anguilla’s coastline—seventy miles of it, almost untouched—had just been discovered by American entrepreneurs (and by a Sicilian, who had been flung out of Saint Martin and who was hoping to salt away his millions in a beach under the protection of the British Crown; he was asked to go elsewhere) and by a growing number of wealthy tourists.

 

pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, land reform, land tenure, large denomination, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

In varying degrees, these countries are re-learning the old lesson of pre-1978 China, pre-1989 Soviet Union and pre-1991 India: that if a country does not trade and interact with the world, it is all but impossible to get ahead in the development game. This book also restricts itself to the developmental challenges facing what I would call ‘proper countries’. It ignores east Asia’s two main offshore financial centres – Hong Kong and Singapore. (A more accurate description of these two is port-offshore financial centres because of their dual role as shipping hubs.) The micro oil state of Brunei and east Asia’s traditional gambling centre, Macau, are also left out. As noted, much pointless and deeply misleading debate has been promoted over the years by comparing the development of, say, Hong Kong with that of China, or that of Singapore with Indonesia’s.

The British Empire’s treasury understood the logic of offshore centres and consistently argued the case for them in preference to larger colonies, which were favoured by aggrandising politicians and entrepreneurs who wanted government to subsidise their activities by paying for infrastructure and the like. Today’s offshore financial industry is rooted in the string of little islands that were beloved of the accountants of an economically predatory empire. (Not all the small islands of the British Empire have remained as offshore financial centres. Bombay and Lagos were originally settled by the British because they were islands. In south-east Asia, Penang gave way as the original offshore centre to Singapore.) Among major studies of development economics, Ha-Joon Chang’s The East Asian Development Experience: The Miracle, the Crisis and the Future (London: Zed Books, 2007), p. 18, Alice H.

This tends to pit the state against many businessmen, and also against consumers, who have shorter strategic horizons. The policy prescription for rapid economic development was confused for a time in east Asia by the presence of other fast-growing economies that did not conform to the pattern of Japan, Korea, Taiwan and China. In the 1980s and early 1990s, the World Bank seized on the performance of the offshore financial centres of Hong Kong and Singapore, and the suddenly faster-growing south-east Asian economies of Indonesia, Malaysia and Thailand, to argue that economic development was in fact fostered by laissez-faire policies, with a minimal role for government. Despite the fact that the offshore centres, with their tiny, dense populations and absence of agricultural sectors to drag on productivity, are not really comparable to regular countries, the World Bank used Hong Kong and Singapore as two of its three ‘proving’ case studies in a highly controversial 1987 report.1 After widespread academic criticism of the report, the World Bank followed up with another one in 1993, The East Asian Miracle, which admitted the existence of industrial policy and infant industry protection in some states.

 

pages: 717 words: 150,288

Cities Under Siege: The New Military Urbanism by Stephen Graham

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airport security, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean water, congestion charging, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, edge city, energy security, European colonialism, failed state, Food sovereignty, Gini coefficient, global supply chain, Google Earth, illegal immigration, income inequality, knowledge economy, late capitalism, loose coupling, market fundamentalism, McMansion, megacity, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, pattern recognition, peak oil, planetary scale, private military company, RAND corporation, RFID, Richard Florida, Scramble for Africa, Silicon Valley, smart transportation, surplus humans, The Bell Curve by Richard Herrnstein and Charles Murray, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus, white flight

To back up their arguments, Alsayyad and Roy deploy a wide range of examples: affluent gated communities, regulated squatter settlements, a proliferating range of incarceration facilities and torture-camp cities where ‘violence is constantly deployed in the name of peace and order’.201 They also mention the insurgent urban governance which is emerging in places like Hezbollah-controlled towns in Lebanon, Hamas-controlled Gaza, and other ‘neighbourhood-level Islamic republics being declared by religious fundamentalist groups’.202 To this list one could add the proliferation of camp-like security architectures which sustain global financial cores, export-processing zones, tourist enclaves, offshore finance enclosures, logistics hubs, ports, airport cities, research complexes and ‘technopoles’, as well as the temporary urban militarizations imposed for mega sports events and political summits. All their examples, argue Alsayyad and Roy, involve ‘private systems of governance that operate as medieval fiefdoms, imposing truths and norms that are often contrary to national law’.203 As in medieval times, the result is the emergence of the modern city as what Holston and Appadurai have called a ‘honeycomb of jurisdictions’, a ‘medieval body [of] overlapping, heterogeneous, non-uniform, and increasingly private memberships’.204 Permeating all of this are the biometric technologies, mobilized to track, to identify and to control access.

Hard-edged urban enclaves, notable among the ‘spatial products’ of transnational neoliberalism, are difficult to miss nowadays. Foreign-trade and export-processing zones, established to entice corporations to use cheap, disciplined local labour for their manufacturing and logistics functions, increasingly operate as quasi-autonomous realms, bordered off from their host cities and nations.51 Offshore financial enclaves, as well as the hypergentrified cores of key global cities such as London, present themselves as utopias for the super-rich. Enclaves of ‘garrison tourism’ emerge, surrounded by the razor-wire fences more typical of military bases, especially when located in developing nations dominated by mass immiseration, such as Haiti.52 Projected giant cruise ships, such as the ‘Freedom Ship’, are marketed as veritable sea-borne cities.

 

pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

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affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income

As James Bennet, technology editor of Strategic Investment, has written: Enforcement of laws and particularly tax codes has become heavily dependent on surveillance of communications and transactions. Once the next logical steps have been taken, and offshore banking locations offer the services of communication in hard RSA-encrypted electronic mail using account numbers derived from public-key systems, financial transactions will be almost impossible to monitor at the bank or in communications. Even if the tax authorities were to plant a mole in the offshore bank, or burglarize the bank records, they would not be able to identify depositors.' 2 To a degree that has never before been possible, individuals will be able to determine where to domicile their economic activities and how much income tax they prefer to pay.

After the turn of the millennium, much of the world's commerce will migrate into the new realm of cyberspace, a region where governments will have no more dominion than they exercise over the bottom of the sea or the outer planets. In cyberspace. the threats of physical violence that have been the alpha and omega of politics since time immemorial will vanish. In cyberspace, the meek and the mighty will meet on equal terms. Cyberspace is the ultimate offshore jurisdiction. An economy with no taxes. Bermuda in the sky with diamonds. When this greatest tax haven of them all is fully open for business, all funds will essentially be offshore funds at the discretion of their owner. This will have cascading consequences. The state has grown used to treating its taxpayers as a farmer treats his cows, keeping them in a field to be milked. Soon, the cows will have wings. The Revenge of Nations 8 Like an angry farmer, the state will no doubt take desperate measures at first to tether and hobble its escaping herd.

As the split tribute implies, there have been two sources of "supervisory jurisdiction and power" rather than one in Andorra. Appeals from Andorran civil suits were traditionally lodged either with the Episcopal College of Urgel or the Court of Cassation in Paris. A consequence of Andorra's ambiguous position was that almost no laws were enacted. Andorra has enjoyed vanishingly small government and no taxes for more than seven hundred years. Today, that gives it a growing appeal as a tax haven. But until a generation ago, Andorra was famously poor. Once thickly wooded, it was deforested over the centuries by residents trying to stay warm in the bitter winters. The whole place is snowed shut from November through April each year. Even in summer, Andorra is so cold that crops grow only on the southern slopes. If our description makes it seem unappealing, you have just learned the secret of its success.

 

pages: 372 words: 109,536

The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money by Frederik Obermaier

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banking crisis, blood diamonds, credit crunch, crony capitalism, Deng Xiaoping, Edward Snowden, family office, high net worth, income inequality, liquidationism / Banker’s doctrine / the Treasury view, Mikhail Gorbachev, mortgage debt, offshore financial centre, optical character recognition, out of africa, race to the bottom, We are the 99%, WikiLeaks

The French economist Gabriel Zucman tried to make a projection about the percentage of global assets lying in tax havens. He arrived at 8 per cent, around €5,900 billion. Zucman estimates that tax isn’t paid on about three-quarters of this. Leona Helmsley, the wife of the property tycoon and billionaire Harry Helmsley, once expressed this concept more directly, with genuine pride: ‘Only the little people pay taxes.’ However, the US court saw it differently and sent her to prison for tax evasion. But taxes are actually just one of many incentives for going offshore. The British author Nicholas Shaxson, one of the best tax haven experts in the world, summarizes it in his book Treasure Islands: Tax Havens and the Men who Stole the World as follows: ‘Offshore is a project of wealthy and powerful elites to help them take the benefits from society without paying for them.’2 Nicholas Shaxson also writes that the offshore world is the ‘biggest force for shifting wealth and power from poor to rich in history’.

Iceland’s finance minister Bjarni Benediktsson – a member of one of the infamous Octopus families – was initially sceptical. He argued that ‘giving an anonymous person a suitcase of money’ for the data was ‘completely unthinkable’. But that is precisely what the head of the tax authority decided to do. The data was bought for the equivalent of around €200,000. And in a TV interview on the subject, asked whether he had held assets in tax havens or conducted transactions via tax havens at any time, the finance minister declared: ‘No, I have never held assets in a tax haven or anything like that.’ When we go through this case with Jóhannes in Reykjavik, he points to his laptop: ‘I’ve got the sentence on there, and I am going to have it scrolling right across the screen when we publish the story.’ On that night in October when Jóhannes sat drinking coffee after coffee while trawling through the cache of data that was finally fully searchable, Bjarni Benediktsson was one of the first names he entered.

Panama also features on the blacklist of tax havens published by the EU in June 2015. [ ] A few days after our colleagues left, the president of Panama, Juan Carlos Varela, announced his arrival in New York. He was set to give a big speech. We watch it online: Varela strides up to the lectern in the large hall of the United Nations, rustles his papers together and starts talking. Sixteen minutes. It’s meant to be an attempt to turn the tide. ‘Panama is committed to expanding its international cooperation in the field of fiscal transparency and advancing toward the automatic exchange of information on tax matters on a bilateral basis,’ Varela says. Varela, of all people, whose adviser is the offshore tycoon Ramón Fonseca, wants to put an end to the existence of tax havens? That’s how it seems, in any case.

 

pages: 487 words: 147,891

McMafia: A Journey Through the Global Criminal Underworld by Misha Glenny

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anti-communist, Anton Chekhov, Berlin Wall, blood diamonds, BRICs, colonial rule, crony capitalism, Deng Xiaoping, Doha Development Round, failed state, Fall of the Berlin Wall, financial deregulation, Firefox, forensic accounting, friendly fire, glass ceiling, illegal immigration, joint-stock company, market bubble, Mikhail Gorbachev, Nick Leeson, offshore financial centre, place-making, rising living standards, Ronald Reagan, Skype, special economic zone, Stephen Hawking, trade liberalization, trade route, Transnistria, unemployed young men, upwardly mobile

Only two things rule here—the dollar and Sheikh Mo. Dubai may be a huge, undemocratic money-laundering center in the Middle East, but the country embraces free trade and globalization; it is stable in a region renowned for violence; it has not relied on oil for its wealth but invented itself as a novel force in the Arab world. Furthermore, as long as the United States and Europe permit the existence of offshore banking centers, they remain guilty of hypocrisy. For organized crime, these are equally important instruments, offering a variety of additional services such as flags of convenience, shell companies to disguise illegal activities, and freedom from prying tax authorities. The only credible reason for their growth and success is the fact that many corporations in the licit economy use them for exactly the same reasons (especially tax evasion).

“You could do it quite easily,” said a senior NSC official involved in the hunt for drugs and thugs during both the Clinton and Bush administrations. “You go to Lichtenstein, which is one of these places, and you just put a gun to its head and say, ‘If you don’t put an end to these practices, we’re going pull the trigger.’ I suggested this under Clinton, but unfortunately the idea was turned down.” Without offshore banks it would not be only the mobsters finding it onerous to shuffle their money and companies around. Enron would have found it a lot harder too. The issue of money laundering will continue to haunt Dubai as it strives to represent itself as a model of transparency. But there is an even higher cost that the city has had to pay for its success—a human cost. For beyond the permanent traffic jam between Dubai and Sharjah lies Ajman, the tiniest of the UAE’s seven emirates.

BNP Parisbas was among the world’s grandest institutions to confess that they were unable to calculate exactly how many hundreds of millions of dollars they had lost in consequence. This last admission reinforces the urgent need for greater regulation in the financial markets: in a world where legitimate institutions are unable to account properly for their dealings, the ability of criminals to launder their money through this merry-go-round of speculation is greatly increased. The Caymans, British Virgin Islands, and all the other offshore banking centers are the back door through which criminal money can enter into the legitimate, if increasingly opaque, money markets. Western governments could close this anomaly overnight if they took decisive action, making money laundering a significantly trickier prospect. But they don’t. And the deeper the involvement of shadow funds with the licit money markets, the harder it becomes to follow the cash that is the key to the successful policing of international organized crime.

 

pages: 605 words: 110,673

Drugs Without the Hot Air by David Nutt

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British Empire, double helix, en.wikipedia.org, knowledge economy, meta analysis, meta-analysis, offshore financial centre, randomized controlled trial, risk tolerance, Robert Gordon, War on Poverty

The money involved – perhaps 23£300 billion a year – is about 1% of the global economy, and operates almost entirely under the radar, untaxed and unregulated. Drugs money is laundered through front companies and tax havens, and then integrated back into the mainstream banking system so that criminal organisations can have access to “legitimate funds”. A number of different techniques are used, such as small-scale electronic transfers and false invoicing: it’s been estimated that 24in Panama there is a £1 billion gap every year between money entering and goods exported, with the difference plugged with the proceeds of various sorts of crime, primarily drug trafficking. 25Banks, in turn, are complicit in this process, failing to report or record suspicious activity, because some are controlled by criminal organisations, and perhaps also because offshore banking services depend on secrecy for tax evasion and avoidance. Exposing the activities of drug traffickers would expose the activities of other clients.

But dealers are easily replaced and in any case removing a dealer removes only small quantities of drugs from the system. Disrupting retailer activity in the UK occupies a lot of police and court time, but doesn’t stop people who want drugs getting their hands on them. The final sort of supply-side interventions focus on money-laundering, but the Strategy Unit acknowledged that this is even harder to disrupt as it’s shrouded in the secrecy of the offshore banking system. The report concluded that, “despite interventions at every point in the supply chain, cocaine and heroin consumption has been rising, prices falling and drugs have continued to reach users.” The drugs trade is not being harmed in any substantial way, and the drugs trade views government interventions simply as a cost of business rather than a threat to its viability. At best, these interventions may have been marginally successful at slowing the decline in price, but they have certainly failed to restrict the availability of drugs for those who want them.

 

pages: 475 words: 155,554

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge by Faisal Islam

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Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Big bang: deregulation of the City of London, British Empire, capital controls, carbon footprint, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, crony capitalism, dark matter, deindustrialization, Deng Xiaoping, disintermediation, energy security, Eugene Fama: efficient market hypothesis, eurozone crisis, financial deregulation, financial innovation, financial repression, floating exchange rates, forensic accounting, forward guidance, full employment, ghettoisation, global rebalancing, global reserve currency, hiring and firing, inflation targeting, Irish property bubble, Just-in-time delivery, labour market flexibility, London Whale, Long Term Capital Management, margin call, market clearing, megacity, Mikhail Gorbachev, mini-job, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, North Sea oil, Northern Rock, offshore financial centre, open economy, paradox of thrift, pension reform, price mechanism, price stability, profit motive, quantitative easing, quantitative trading / quantitative finance, race to the bottom, regulatory arbitrage, reserve currency, reshoring, rising living standards, Ronald Reagan, savings glut, shareholder value, sovereign wealth fund, The Chicago School, the payments system, too big to fail, trade route, transaction costs, two tier labour market, unorthodox policies, uranium enrichment, urban planning, value at risk, working-age population

It also reflects the fact that big European banks operated their dollar trading through the City. The full reality would only be revealed if the UK published its own version of the TIC data. Although the chancellor has often told us that Britain owes a portion of its debts to China, a figure has never been published. Why? In the realms of international financial diplomacy, fingers point towards the UK’s ‘appallingly bad’ data on financial flows, more suited to a secretive offshore financial centre than the world’s capital of finance. London’s wish to protect its role as manager of Gulf oil money and as a conduit for China’s surplus dollars might explain why. A portion of China’s purchases of US government bonds were originally scored as ‘UK’ purchases. ‘More attention is needed in the USA to flows through UK banks,’ Setser told me. ‘There are important lessons to be learned, and the UK needs transparent flow of money in and out.

The Eurogroup was willing to give Greece bailout cash (partly backed by Cyprus) to support its parts of the Cypriot system. But it was not willing to bail out Cyprus itself. At best, there was a staggering inequity in the treatment of Cypriot and Greek banks. At worst, the EU specifically intervened to protect Greece, and to export part of its own dodgy loan default over the sea to Cyprus. As a by-product, Cyprus was destroyed as an offshore financial centre. Certainly at the height of fevered negotiations, the issue of the treatment of the Greek units was at the very top of the concerns being expressed from Brussels about laws being passed in Nicosia. Bank queues could be tolerated in Nicosia. But not in Athens. On the middle Monday of that nightmare Lent, there was a planned bank holiday in Cyprus, to celebrate Greek Independence Day.

For the man himself, and for his family, it was a human tragedy. But for the mortgage securitisation team at one British bank, it was a waking nightmare. They had to get his package to London before the close of business. This was how banking from the shadows actually worked on the ground. The business of this particular banking team was built on transferring mortgages that they had written off their balance sheet into offshore trusts based in tax havens. But the transfer of the mortgage, and the cash, had to be made the same day, in one go. Ordinarily this could be done electronically. The ‘pain in the arse’, as far as the team was concerned, was the insistence in Scottish law on ‘declaration of trust’. In essence this meant that physical signatures were required on the first and last pages of a printout that included all the names and addresses of those whose mortgages were to be transferred.

 

pages: 223 words: 10,010

The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

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banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

The UK boasts an unrivalled tax avoidance industry with an abundance of highly paid accountants able to devise labyrinthine ways of hiding wealth. The country is increasingly seen as one where large corporations and rich individuals can legally treat tax as a largely optional obligation. In 2007 the International Monetary Fund ranked London alongside Switzerland, Bermuda and the Cayman Islands as ‘an offshore financial centre’. While Britain has maintained only loose controls over the City, New York was forced to respond to a series of high-profile financial and business scandals, from Enron to WorldCom, by passing the controversial Sarbanes Oxley Act in 2002. This imposed much tougher corporate tests on the disclosure of information, on accountancy procedures and on the process of listing on the New York Stock Exchange, making New York less attractive to the world’s business rich and contributing to London’s eventual seizure of the global crown.

If anything, the rich were made a special case for tax. During the 1980s, the tax system had moved from being progressive to regressive. For the first time since the tax system had been restructured after the War, the tax burden fell more heavily on lower than higher income groups. Labour did nothing to reverse this trend.138 The gaping loopholes that enabled the very rich to pay proportionally less tax than low earners were mostly ignored and tax havens were left largely untouched. In return for this favoured treatment, the government believed Britain would benefit in two ways. First, the City would ensure that the increasingly finance-dependent economy would flourish under its watch. Second, as the economy boomed, the government would rake in money to spend on public services. In effect the financial sector was to become the cash cow for an improved welfare state.

Most of the money was being ferreted out by highly paid British lawyers and accountants, employed to arrange their clients’ finances in a way that made them fireproof from investigation, either by the Russian or the British authorities.162 According to Russia’s Economic Development and Trade Ministry, between $210 and $230 billion left Russia during the reforms. Other sources suggest that around $300 billion of assets in the West belong to Russian citizens. 163 Capital flight is not unique to Russia. Lured by the prospect of much higher returns, money has poured across borders, much of it coming from the world’s poorest countries. Since the 1970s, the number of offshore tax havens has more than doubled to over sixty while offshore companies are now numbered in the millions.164. The capital of the Cayman Islands, George Town, is the world’s fifth largest banking centre, with nearly 600 banks and trust companies, though only fifty have a physical presence and just thirty-one are authorised to trade with the local residents.165 The country has a population of 35,000 but it is home to some 48,000 corporations and trusts.

 

pages: 180 words: 61,340

Boomerang: Travels in the New Third World by Michael Lewis

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Berlin Wall, Bernie Madoff, Carmen Reinhart, Celtic Tiger, collapse of Lehman Brothers, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, fiat currency, full employment, German hyperinflation, Irish property bubble, Kenneth Rogoff, offshore financial centre, pension reform, Ponzi scheme, Ronald Reagan, Ronald Reagan: Tear down this wall, South Sea Bubble, tulip mania, women in the workforce

I met Dirk Röthig for lunch at a restaurant in Düsseldorf, on a canal lined with busy shops. From their profitable strategy IKB has announced losses of roughly $15 billion, though their actual losses are probably greater, as German banks are slow to declare anything. Röthig viewed himself, with some justice, more as victim than perpetrator. “I left the bank in December 2005,” he says quickly, as he squeezes himself into a small booth. Then he explains. The idea for the offshore bank had been his. The German management at IKB had taken to it, as he put it, “like a baby takes to candy.” He’d created the bank when the market was paying higher returns to bondholders: Rhineland Funding was paid well for the risk it was taking. By the middle of 2005, with the financial markets refusing to see a cloud in the sky, the price of risk had collapsed: the returns on the bonds backed by American consumer loans had collapsed.

The Polish government keeps no official statistics on the movement of its workforce, but its Foreign Ministry guesstimates that, since their admission to the European Union, a million Poles have left Poland to work elsewhere—and that, at the peak, in 2006, a quarter of a million of them were in Ireland. For the United States to achieve a proportionally distortive demographic effect it would need to hand green cards to 17.5 million Mexicans. HOW DID ANY of this happen? There are many theories: the elimination of trade barriers, the decision to grant free public higher education, a low corporate tax rate introduced in the 1980s, which turned Ireland into a tax haven for foreign corporations. Maybe the most intriguing was offered by a pair of demographers at Harvard, David E. Bloom and David Canning, in a 2003 paper called “Contraception and the Celtic Tiger.” Bloom and Canning argued that a major cause of the Irish boom was a dramatic increase in the ratio of working-age to non–working-age Irishmen, brought about by a crash in the Irish birthrate. This in turn had been mainly driven by Ireland’s decision, in 1979, to legalize birth control.

 

pages: 413 words: 119,379

The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis

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Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, colonial rule, corporate social responsibility, crony capitalism, Deng Xiaoping, Donald Trump, F. W. de Klerk, Gini coefficient, Livingstone, I presume, McMansion, megacity, offshore financial centre, oil shock, open economy, purchasing power parity, rolodex, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, structural adjustment programs, trade route, transfer pricing, upwardly mobile, urban planning, Washington Consensus, WikiLeaks

‘If there is an opportunity for some oil, they call us, taking into account this joint venture we have,’ Vicente told me.42 Isaías Samakuva, the leader of the Angolan opposition political party into which Unita has evolved since its defeat in the civil war, told me that China Sonangol was ‘the key to all the support that is given to Mr dos Santos, to his rule’ but that understanding how the Futungo drew wealth and power from the company was impossible because ‘everything is in the dark’.43 Not quite everything is in the dark. Corporate filings in Hong Kong and elsewhere reveal glimpses of the Queensway Group’s corporate labyrinth. But, as in Dan Gertler’s deals in Congo, many of the trails vanish behind the thick walls of offshore finance. For example, Manuel Vicente and other senior Angolan officials have been named in company filings alongside founding members of the Queensway Group as directors of a company called Worldpro Development Limited. Its registration documents in Hong Kong give no indication of the company’s purpose and state that it is wholly owned by World Noble Holdings Limited, which is registered in the British Virgin Islands, a Caribbean archipelago where companies can keep their owners secret.

In three British Crown dependencies – the British Virgin Islands and the Cayman Islands in the Caribbean and Bermuda in the North Atlantic – as well as the Marshall Islands, an outpost in the Pacific partly controlled by the United States, the figure exceeded 100 per cent. Bermuda topped the chart with a profit-to-GDP ratio of 647.7 per cent. At this point the notion that multinationals that use tax havens apportion profits fairly becomes absurd: the total profits declared by American companies were several times the size of each tax haven’s entire economy. The United States alone is losing as much as $60 billion a year to tax dodges based on income shifting, according to estimates Gravelle cited – and the United States probably has the most advanced system to enforce payment and hunt down tax evaders. In a time of austerity multinationals that pay minute tax bills compared with their earnings have faced popular outrage, among them Starbucks and Amazon in the UK (not to mention Bono, a vocal antipoverty campaigner whose band, U2, switched part of its business affairs from Ireland to the Netherlands to reduce its tax exposure in 2006).

‘I am extremely worried about a political system where the voters are starving and the politicians buy votes with money from natural resource companies,’ Kamitatu said. ‘Is that democracy?’ Dan Gertler’s Congolese mining deals have made him a billionaire. Many of the transactions in which he has played a part are fiendishly complicated, involving multiple interlinked sales conducted through offshore vehicles registered in tax havens where all but the most basic company information is secret. Nonetheless, a pattern emerges. A copper or cobalt mine owned by the Congolese state or rights to a virgin deposit are sold, sometimes in complete secrecy, to a company controlled by or linked to Gertler’s offshore network for a price far below what it is worth. Then all or part of that asset is sold at a profit to a big foreign mining company, among them some of the biggest groups on the London Stock Exchange.

 

Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity by Paul Ely Beckerman, Andrés Solimano

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banking crisis, banks create money, barriers to entry, capital controls, Carmen Reinhart, carried interest, central bank independence, centre right, clean water, currency peg, declining real wages, disintermediation, financial intermediation, floating exchange rates, Gini coefficient, income inequality, income per capita, labor-force participation, land reform, London Interbank Offered Rate, Mexican peso crisis / tequila crisis, microcredit, money: store of value / unit of account / medium of exchange, offshore financial centre, open economy, pension reform, price stability, rent-seeking, school vouchers, seigniorage, trade liberalization, women in the workforce

Connected lending and portfolio concentration were commonplace—indeed, many banks belonged to economic groups that used them to serve their own financing needs. These practices aggravated the risks of bank lending in a contingency-prone economy. Liberalization provided banks scope to engage in additional risky activities, including aggressive interest-rate competition, offshore banking, and U.S.-dollar operations. While interestrate competition was a presumable objective of financial liberalization, absence of effective supervision meant banks could undertake riskier operations than they could safely manage. Managers of more conservative banks found themselves having to engage in risky activities in response to competition. Offshore banking turned out to be a source of instability. Banks ran their offshore funding operations pretty much as if they were onshore, taking deposits and doing other business in branches within Ecuador. Although the Banking Superintendency nominally regulated these offshore operations, it was unable in fact to work effectively outside Ecuador.

Although the Banking Superintendency nominally regulated these offshore operations, it was unable in fact to work effectively outside Ecuador. After the crisis began in 1998, the authorities’ inadequate knowledge of the offshore banks’ situation complicated their ability to deal with it. This is why in December 1998, for example, the authorities had little choice but to extend the same guarantee to offshore deposits that they provided to onshore deposits. The March 1999 deposit freeze applied to the off-shore banks, but banking authorities in some places— in particular, the United States—did not recognize it.19 Since the onset of the crisis, the authorities have concluded that, however logical the argument for allowing offshore operations may once have seemed, their inability to supervise such operations left the authorities little choice but to conclude them (the March 2000 dollarization legislation provided for a gradual phase-out).

 

pages: 388 words: 125,472

The Establishment: And How They Get Away With It by Owen Jones

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anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, centre right, citizen journalism, collapse of Lehman Brothers, collective bargaining, don't be evil, Edward Snowden, Etonian, eurozone crisis, falling living standards, Francis Fukuyama: the end of history, full employment, glass ceiling, hiring and firing, housing crisis, inflation targeting, investor state dispute settlement, James Dyson, laissez-faire capitalism, market fundamentalism, Monroe Doctrine, Mont Pelerin Society, moral hazard, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, open borders, Plutocrats, plutocrats, profit motive, quantitative easing, race to the bottom, rent control, road to serfdom, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, stakhanovite, statistical model, The Wealth of Nations by Adam Smith, transfer pricing, union organizing, unpaid internship, Washington Consensus, Winter of Discontent

Attempts to avoid paying taxes are becoming ever more sophisticated, fuelled by the mentality that tax is almost an illegitimate burden. Tax havens across the world allow the wealthiest individuals and corporations to systematically stash cash away from the prying eyes of the tax collector. In the spring of 2013, 2 million secret records – largely from the offshore tax haven of the British Virgin Islands – were leaked, revealing that up to £21 trillion of the world’s wealthiest individuals were hidden away, Britons among them. As Richard Murphy puts it, the interaction between, say, the British legal system and the Cayman Islands legal system created a result unintended by both. ‘Companies play off legal systems, one against the other,’ he says. ‘When they say it is legal, they actually are very often careful about not defining where it is legal, or how legal systems interact.’ Jersey may be a tax haven, but Section 134A of its tax code is a tough anti-abuse measure for local residents, forcing them to pay all the tax they owe.

Jersey may be a tax haven, but Section 134A of its tax code is a tough anti-abuse measure for local residents, forcing them to pay all the tax they owe. The ingeniousness of tax havens such as Jersey is that they allow the wealthy elites of foreign countries to use them as somewhere to record their transactions, granting them the ability to undermine the tax law of their country of origin. Crucially, they could do so in total secrecy. Multinational empires simply move profits around their subsidiaries in different tax havens. Their costs end up in countries with higher rates of tax, and those costs then end up deducted against tax; their profits, on the other hand, end up in tax havens such as Jersey. That is why campaigners have focused on demanding a programme of international tax transparency called ‘country-by-country reporting’.

When in the mid-1980s he joined a forerunner of the accountancy firm KPMG, Murphy was told that if he kept his head down he could become a partner in a decade or so: ambitious and driven, his response was to resign on the spot. He helped set up companies in the UK and elsewhere and, at the age of twenty-six, helped bring the iconic board game Trivial Pursuit to Britain. ‘Nobody thought there was anything pernicious about tax havens,’ he recalls as we sit outside a café in East London on a glorious August day. ‘Nobody knew very much about them, there were no academic studies on them. But I saw tax haven activity and I just decided it offended my morality.’ With two other partners, Murphy set up his own accountancy business. It was a firm with a difference: it would not offshore people’s tax affairs, create trusts or engage in other forms of tax avoidance. ‘Commercially, it was a highly successful model,’ he says with pride.

 

pages: 471 words: 109,267

The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

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banking crisis, Big bang: deregulation of the City of London, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, knowledge economy, labour market flexibility, market bubble, millennium bug, North Sea oil, Northern Rock, offshore financial centre, pension reform, Plutocrats, plutocrats, Ponzi scheme, profit maximization, purchasing power parity, shareholder value, Skype, smart meter, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

Only after the crash, barely months before they left office, did ministers allow HMRC to put more offenders’ names into the public domain. As for making all tax returns public, as in Finland, the government’s political imagination failed. It did blow wind into HMRC sails. New disclosure rules in 2004 allowed the tax authorities to take swifter action on loopholes; court rulings gave them access to 400,000 offshore bank accounts held by UK residents, 100,000 of which were not declaring income or interest. After the crash, in a stable-doors exercise, rescued banks had to list where they sheltered their money – one had 500 tax-haven subsidiaries. In April 2009 HMRC set up a High Net Worth Unit, looking at complex share and property dealings. The Germans had shown the power of shame when in 2008 they started buying stolen computer discs containing Swiss and Liechtenstein bank records. At last, as a result of the recession, the UK cut subsidies for the Isle of Man, forcing its toy-town government to put up taxes.

Many ordinary people welcomed anti-social behaviour measures. Donna Charmaine Henry on the Clapham Park Estate believed CCTV improved their lives, and demand was strong in crime-prone areas for more, not less, surveillance. But the consequent charge against Labour is inconsistency. These ministers acted tough on crime and terrorism; a tough state would have pursued crime into the boardrooms and tax havens. Anti-social behaviour in the streets was penalized, while grand larceny in the City was winked at. A tough state would have made the connection between deregulated labour markets and migration chaos. Brown’s infatuation with the neoliberal, hands-off approach led him to pursue low wages and – we now know – the importation of large numbers of unskilled migrants. Labour made little or no attempt to explain or justify the social changes resulting from the migrant boom or adequately target compensatory spending on areas and people most affected.

 

pages: 326 words: 106,053

The Wisdom of Crowds by James Surowiecki

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AltaVista, Andrei Shleifer, asset allocation, Cass Sunstein, Daniel Kahneman / Amos Tversky, experimental economics, Frederick Winslow Taylor, George Akerlof, Howard Rheingold, I think there is a world market for maybe five computers, interchangeable parts, Jeff Bezos, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, moral hazard, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Toyota Production System, transaction costs, ultimatum game, Yogi Berra

He did not want to go to prison. And he had something valuable to trade for his freedom: the encrypted records of all the depositors who had put money into Guardian Trust. So he cut a deal. He pled guilty (and was sentenced to five years’ probation and five hundred hours of community service). And he told the government everything he knew about tax cheats. The most interesting information Mathewson had to offer was that offshore banks were no longer catering only to drug dealers and money launderers. Instead, these banks served many Americans who had earned their money honestly but simply didn’t want to pay taxes on it. As Mathewson told a Senate panel in 2000, “Most of [Guardian’s] clients were legitimate business people and professionals.” A typical Mathewson client was someone like Mark Vicini, a New Jersey entrepreneur who ran a computer company called Micro Rental and Sales.

And, between 1991 and 1994, Vicini sent $9 million to the Caymans, $6 million of which he never mentioned to the IRS. This saved him $2.1 million in unpaid taxes. (It also eventually earned him a five-month stint in federal prison, where he was sent after pleading guilty to tax evasion.) Mathewson’s clients were not alone, either. In fact, the nineties saw a boom in tax evasion. By the end of the decade, two million Americans had credit cards from offshore banks. Fifteen years earlier, almost none did. Promoters, who often used the Internet to push their scams, advertised “layered trusts,” “offshore asset protection trusts,” and “constitutional pure trusts.” A small but obstinate (and obtuse) group of tax evaders advised people that they didn’t have to pay their taxes because the income tax had never actually been passed by Congress. And old standbys—keeping two sets of books, incorporating yourself as a charity or a church and then writing off all your expenses as charitable contributions—stayed alive.

 

pages: 452 words: 110,488

The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan

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1960s counterculture, affirmative action, corporate governance, David Brooks, deindustrialization, East Village, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, Plutocrats, plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, rolodex, Ronald Reagan, shareholder value, Silicon Valley, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, Thorstein Veblen, War on Poverty, winner-take-all economy, World Values Survey, young professional

Nobody objects on the latter grounds, and certainly not on the former. I'm not surprised. The IRS reports that tax evasion has gotten worse in recent years, costing the U.S. Treasury a minimum of $250 billion a year, and maybe twice that. Wealthy Americans are the biggest offenders, but sophisticated tax evasion is becoming a more populist activity. For example, as many as two million Americans now have illegal offshore bank accounts that they use to evade taxes, a problem that increased dramatically in the 1990s. Good weather, it turns out, is only part of the Caribbean's appeal. ♦ A leading high school basketball player named LeBron James, the next Michael Jordan some say, shows up one day at his school in Akron driving a new $50,000 Hummer H2 sports utility vehicle crammed with three TVs. The Ohio High School Athletic Association immediately launches an investigation, suspecting that the Hummer is a gift from a sports agent or university recruiter.

At the same time, federal agencies like the SEC, the IRS, and the Justice Department have been starved of the resources needed to stop white-collar crime. Why not inflate earnings reports if the chances of being prosecuted are next to nil? Why not commit a fraud that nets you $70 million—when a year or two in a Club Fed prison camp is the worst possible punishment? Why not hide your income in an illegal offshore bank account when you know that the IRS is too overwhelmed to bother with you because it actually lost enforcement capacity during the '80 and '90s—even as the number of tax returns increased? Professional watchdog groups have also been asleep on the job. Why worry about being disbarred for bilking your clients when state bar associations lack the resources or wherewithal to fully investigate much of the misconduct by lawyers reported to them?

 

pages: 457 words: 128,838

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey

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3D printing, Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, California gold rush, capital controls, carbon footprint, clean water, collaborative economy, collapse of Lehman Brothers, Columbine, Credit Default Swap, cryptocurrency, David Graeber, disintermediation, Edward Snowden, Elon Musk, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, Internet of things, inventory management, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, Satoshi Nakamoto, seigniorage, shareholder value, sharing economy, short selling, Silicon Valley, Silicon Valley startup, Skype, smart contracts, special drawing rights, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, supply-chain management, Ted Nelson, The Great Moderation, the market place, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, Turing complete, Tyler Cowen: Great Stagnation, Uber and Lyft, underbanked, WikiLeaks, Y Combinator, Y2K, Zimmermann PGP

What could possibly go wrong? With shiny lobbies, Victorian-style insignia, and names conveying integrity and security, these exchange houses can look similar to bank branches, but they operate outside the banking system. In addition to swapping dollars for pesos, they manage a network of accounts to shift money overseas at lower costs than bank wires. Now that the government was placing strict constraints on offshore bank wires, these places were in demand as convenient, extra-official money transmitters. I was uncomfortable with this seemingly shady option, but Miguel, my closest friend in Buenos Aires, told me that this casa de cambio handled his business weekly in fully legal transactions with his associates overseas. He trusted them fully and I trusted him. This was the way things worked in Argentina: you trusted whom you knew, and to resolve your business affairs you frequently leaned on those relationships more than you relied on the legal protection of a corrupt judicial system.

Ironically, this rise to a new level of mania—even beyond that of bitcoin’s first four years of existence—would eventually force bitcoin’s supporters to confront the challenges of its Wild West days and contemplate how it might mature. The mania’s starting point was in March 2013, with what we’ll call the Cypriot bump. The tiny island nation of Cyprus, split between Greek and Turkish states, fell into the grip of a financial crisis because its banks, their cash balances swollen with deposits from wealthy Russians seeking a tax haven, had invested heavily in the bonds of neighboring Greece. That larger neighbor had become the basket case of the European Union, which had just forced the government in Athens to impose a “haircut,” or mandated losses, on its investors. The EU did this to ensure that private-sector investors who’d made risky bets on Greece shouldered some of the burden of the bailout that German and other euro-zone taxpayers were bearing.

Because of this, shifting money around the region’s island nations requires constant and costly currency exchanges, which further undermines trade relationships that are already constrained because their tourism-, finance-, and commodity-heavy economies compete with rather than complement each other. To make matters worse, a number of central banks impose capital controls on their citizens. Barbadians such as Ifill, for instance, are limited in the amount of foreign currency they can buy. That Barbados, the Cayman Islands, the Bahamas, and other Caribbean nations serve as tax havens for hedge funds and other foreign financial institutions is an irony not lost on the region’s tightly controlled residents. This mix of monetary systems and financial regulations, and the frustration that it breeds, make the sunny islands of the Caribbean ripe for bitcoin—or so says Gabriel Abed. Friends call him Mr. Bit, and it’s not clear if the nickname is meant seriously or as playful ribbing.

 

pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money: store of value / unit of account / medium of exchange, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, open economy, paradox of thrift, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus

Across Baniyas Road, which runs alongside the wharf, are Iranian banks where letters of credit can be arranged on the spot to finance the shipment of goods—without regard to U.S. trade sanctions. On the Creek itself are the dhows—beamy, high-prowed wooden sailing vessels with large lateen rigs ready to embark on the voyage across the Persian Gulf to Bandar Abbas and other ports on the Iranian coast. In Dubai, smuggling is not even vaguely disreputable; it is a way of life. Dubai is an international financial center and tax haven, its boulevards and backstreets choked with international banks. Dubai is the principal offshore banking center for Iran. Major Dubai banks act as correspondents to Iranian banks for the facilitation of payments and foreign exchange transactions with the rest of the world, including Iran’s conversion of its reserves into euros and gold and slow dumping of the dollar. Dubai also acts as the banking center for the Somali pirate trade. While pirates, hostage crews and patrolling navies engage in standoffs in the Arabian Sea, pirate agents make the rounds in Dubai to negotiate ransom and provide wire instructions for final payment.

 

pages: 362 words: 86,195

Fatal System Error: The Hunt for the New Crime Lords Who Are Bringing Down the Internet by Joseph Menn

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Brian Krebs, dumpster diving, fault tolerance, Firefox, Menlo Park, offshore financial centre, pirate software, Plutocrats, plutocrats, popular electronics, profit motive, RFID, Silicon Valley, zero day

Even in their haste to flee, they had the presence of mind to take the hard drive from their computer. And the news got worse from there. In a single month the previous fall, at the peak of the attacks in Costa Rica, a staggering $1.2 million had passed through the couple’s account. The day before they disappeared, phone records showed repeated calls to numbers in the Turks & Caicos Islands, an offshore banking haven. Andy had thought Stran was just another mule, someone who passed along money to the big players. Now it looked like Stran was the kingpin—and one who had been tipped off by the authorities, to boot. The police did find Timur’s brother, Yan Arutchev, believed to be the last part of Stran. Yan admitted to accepting money on his brother’s behalf after electronic transfers, but said he didn’t know what it was for.

., some $4 million daily. Those investors who still had a stomach for the industry turned to gambling companies with few or no customers in the U.S. After President George W. Bush signed the online gambling ban into law on October 13, 2006, Justice Department prosecutors really turned on the gas, starting with one of the big companies that handled payments, Neteller Plc. Based in the Irish Sea tax haven of the Isle of Man, Neteller had been founded in 1999 by Canadians John Lefebvre and Stephen Lawrence as an Internet payment system like PayPal. It became increasingly important to online gamblers after credit cards and big banks stopped sending money to companies that were obviously in the betting business. That forced many in the U.S. to transfer money first from their online bank accounts to a service such as PayPal, then from that service to the casino or sportsbook.

 

pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

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accounting loophole / creative accounting, Airbnb, Ben Bernanke: helicopter money, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, winner-take-all economy, Wolfgang Streeck

Culture wars, ‘family values’, lifestyle choices, ‘political correctness’, the age and sex of politicians, and the way they dress and look and speak deliver an unending supply of opportunities for pseudo-participation in pseudo-debates, never allowing for boredom to arise: whether the foreign minister should or should not have his male companion accompany him on a state visit to the Middle East; if there are enough women cabinet members, and in sufficiently powerful positions; how female ministers attend to their small children, too little or too much; whether the president of the Republic should use a motor cycle when visiting his lover; and how often a week the minister of economic affairs takes his daughter to Kindergarten in the morning. With exciting issues like these filling the public space, who will want to hear about the entirely predictable failure of international financial diplomacy to agree on meaningful regulation of offshore banking and the shadow banking system? While I fully concur with Merkel’s diagnosis of the current demise of democracy in the course of capitalist development, I am a little concerned about the way Merkel sets up his argument conceptually, in particular about the ‘model’ language he uses to structure his exposition. To determine if and under what conditions democracy and capitalism are compatible, Merkel distinguishes three ‘types’ of capitalism – ‘market-liberal’, ‘organized and embedded’ and ‘neoliberal’ – and three types of democracy – ‘minimalist’, ‘embedded’ or ‘middle-ground’, and ‘maximizing’.7 Having laid out his menu, he then picks the two models, one of capitalism and one of democracy, that he thinks best match each other.

By 2007, taxation levels were back where they had been twelve years earlier, only to decline further in the course of the financial crisis. A contributing factor was the ‘globalization’ of the capitalist economy, which led to increased tax competition among countries, resulting in tax cuts for corporations and earners of high incomes.14 It also extended the opportunities for owners of capital to evade taxation by moving assets between countries or into international tax havens.15 If, in other words, the increasing fiscal problems of the rich capitalist democracies after the 1970s were due a revolution of rising demands, that revolution occurred not among ordinary citizens, but among capital and those in command of it. Another respect in which early theories of fiscal crisis had failed to anticipate what was coming was that they underestimated the possibilities of capitalist states to finance deficits for a protracted period of time by borrowing.

For example, one might have mentioned declining overall growth rates intensifying distributional conflicts and sharply paring down the willingness of the rich to make concessions to the poor. One could also have spent more time on what I believe is a particularly important aspect of the weakening of states and governments, which is the immense capacity today of rich citizens and corporations to escape taxation by moving income to low-tax jurisdictions, or capital to tax havens. The results include a weakening ability of states to redistribute to the bottom of their societies, together with increasingly degressive taxation and rising indebtedness of underfunded states unable to discharge their obligations to their citizens with their stagnant or shrinking tax revenue. An upshot is the growing dependence of citizens on private borrowing to compensate for declining public services and supports.

 

pages: 651 words: 135,818

China into Africa: trade, aid, and influence by Robert I. Rotberg

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barriers to entry, BRICs, colonial rule, corporate governance, Deng Xiaoping, energy security, European colonialism, failed state, global supply chain, global value chain, income inequality, Khartoum Gordon, labour market flexibility, land reform, megacity, microcredit, offshore financial centre, out of africa, profit maximization, purchasing power parity, RAND corporation, Scramble for Africa, South China Sea, special economic zone, structural adjustment programs, trade route, Washington Consensus

Countries higher up along the spectrum of the skills-resource endowment ratio export more manufactured products relative to processed or primary goods, and a larger proportion of higher-technology manufactured products. This seems to be a compelling story of trade relations between Africa and China. 10. See Broadman, Africa’s Silk Road, 289–357. 11. Ibid., 235–287. 12. See Li Anshan, 31, and Martyn Davies, 141, in this volume. 13. Since Mauritius is a major offshore financial center, it is difficult to determine the actual FDI source country, particularly because of pass-through investments. 06-7561-4 ch6.qxd 9/16/08 4:16 PM Page 109 henry lee and dan shalmon 6 Searching for Oil: China’s Oil Strategies in Africa Pressured by skyrocketing demand, Chinese oil companies have branched out across the globe seeking new oil supplies to feed the country’s economic growth.

According to the Office of the President of Zambia, all firms—local, foreign, and Chinese—can establish operations in the zone.17 However, the author was told by China’s MOFCOM that investment in the zone was exclusively for Chinese firms—even Sino-Zambian joint ventures are excluded.18 This lack of clarity over policy from both governments is of concern and needs to be addressed in order to maximize the local developmental benefits that the SEZ will offer to the African private sector. Indian Ocean Rim Trading Hub The second official SEZ was announced in July 2007 and will be located in Mauritius. That country provides a strategic destination for Chinese investment: it is well situated on the Indian Ocean rim; it is an offshore financial center with attractive investment laws; Mauritian firms are well integrated into the economies of South Asia; it is a member of the Southern African Development Community and of the Common Market for Eastern and Southern Africa, and thus enjoys preferential market access to the African region; and the country has a sizable ethnic Chinese community that trades with China. All of these factors have led to the PRC deciding to announce a SEZ in Mauritius.

 

pages: 554 words: 168,114

Oil: Money, Politics, and Power in the 21st Century by Tom Bower

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Ayatollah Khomeini, banking crisis, bonus culture, corporate governance, credit crunch, energy security, Exxon Valdez, falling living standards, fear of failure, forensic accounting, index fund, interest rate swap, kremlinology, LNG terminal, Long Term Capital Management, margin call, Mikhail Gorbachev, millennium bug, new economy, North Sea oil, offshore financial centre, oil shale / tar sands, oil shock, passive investing, peak oil, Piper Alpha, price mechanism, price stability, Ronald Reagan, shareholder value, short selling, Silicon Valley, sovereign wealth fund, transaction costs, transfer pricing, éminence grise

Systematically, some of Shell’s Nigeria managers gave contracts to friends and received backhanders, or paid inflated invoices and pocketed the cash. The auditors found hefty sums paid for “travel expenses” to politicians and government officials and their families. Usually the same expenses were also paid by the government, and the officials kept the difference. At the top level, vast sums of money received from Shell in royalties and taxes were diverted by Nigeria’s politicians and officials to private offshore bank accounts. Brian Lavers, Shell’s country chairman until 1991, had been under pressure to pay bribes to government officials and local chiefs. To avoid participating in any illegal activity, Shell’s board agreed to pay middlemen, farmers and tribal chiefs as “consultants” and for “services” to build social amenities including schools, roads and cinemas. Beyond Lavers’s control, these were constructed for inflated prices, allowing Shell’s local managers and their friends to steal considerable sums of money.

Foreign investors occasionally found difficulty identifying the right person to bribe, because there were so many. Officially, the Western oil majors repudiated kickbacks, but circumstances made refusal difficult. Many key officials in the food chain in Russia and around the Caspian asked contractors to pay for “services” supplied by intermediate companies especially established for skimming. The service fees were deposited in offshore bank accounts, especially in the Cayman Islands. While Statoil of Norway had been caught and expelled from Iran for bribing the son of President Rafsanjani, there were no supervisors in Russia or around the Caspian likely to cause such embarrassment. Nor was Washington complaining. Corruption was tolerated for the sake of democracy’s future. Once Russians and the Caspian managers became property owners, Washington’s reformers believed, the property rights of foreign investors would be protected.

Other advisers, including ex-ambassadors, academics and Mark Heathcote, a former senior MI6 officer, suggested that the oligarchs’ access to the Kremlin had become restricted. They could no longer buy more assets, Browne was told, but they needed to pay officials more bribes to keep their empires. Evidence of the oligarchs’ declining influence, said BP’s advisers, was Roman Abramovich’s agreement to sell Sibneft to Gazprom for $14 billion. That money, it was speculated, would be deposited in an offshore bank to be divided between Abramovich and Alexei Miller. Only John Gerson, another former MI6 officer, argued the opposite, that BP was “in for big trouble.” All those reports, except Gerson’s, encouraged Hayward to calculate that the Kremlin would direct Fridman and the partners to be similarly paid off. If anything, BP’s executives believed, their relationship with the Kremlin was protecting the oligarchs.

 

pages: 452 words: 134,502

Hacking Politics: How Geeks, Progressives, the Tea Party, Gamers, Anarchists and Suits Teamed Up to Defeat SOPA and Save the Internet by David Moon, Patrick Ruffini, David Segal, Aaron Swartz, Lawrence Lessig, Cory Doctorow, Zoe Lofgren, Jamie Laurie, Ron Paul, Mike Masnick, Kim Dotcom, Tiffiniy Cheng, Alexis Ohanian, Nicole Powers, Josh Levy

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4chan, Affordable Care Act / Obamacare, Airbnb, Bernie Sanders, Burning Man, call centre, Cass Sunstein, collective bargaining, crony capitalism, crowdsourcing, don't be evil, facts on the ground, Firefox, hive mind, immigration reform, informal economy, jimmy wales, Kickstarter, liquidity trap, Mark Zuckerberg, obamacare, Occupy movement, offshore financial centre, Plutocrats, plutocrats, prisoner's dilemma, rent-seeking, Silicon Valley, Skype, technoutopianism, WikiLeaks, Y Combinator

Patrick Ruffini Unlike the skin-deep remedy of DNS blocking (where the content would remain online, just not at a domain name), follow the money had already shown its effectiveness in cutting off online offshore gambling. Credit card companies, including Visa and MasterCard, already had well-established policies against supporting merchants who dealt in pirated or counterfeit goods, making censorship concerns a non-issue. Studies released during the debate showed that 95% of the trade in spam or online counterfeit goods flowed through just three offshore banks. This approach addressed these choke-points. Ironically, though the DNS blocking provisions in SOPA and PIPA represented a drastic departure for how the Internet was architected and policed, its net impact on rogue website activity would have been minimal. Gabriel Levitt Despite the statutory barriers to personal drug importation, the FDA has never prosecuted an individual for personally importing prescription medication for his or her own use.

Unlike the skin-deep remedy of DNS blocking (where the content would remain online, just not at a domain name), follow the money had already shown its effectiveness in cutting off online offshore gambling. Credit card companies, including Visa and MasterCard, already had well-established policies against supporting merchants who dealt in pirated or counterfeit goods, making censorship concerns a non-issue. Studies released during the debate showed that 95% of the trade in spam or online counterfeit goods flowed through just three offshore banks. This approach addressed these choke-points. Ironically, though the DNS blocking provisions in SOPA and PIPA represented a drastic departure for how the Internet was architected and policed, its net impact on rogue website activity would have been minimal. 80 T H E T E A PA RT Y E N T E R S T H E F R AY DAVID SEG AL We had a pretty clear sense of what our role in the effort needed to be, at least for the time-being: Demand Progress was substantially under-resourced, and certainly wouldn’t win this fight on its own, or as party to the small coalition that was responsible for organizing the bulk of the anti-COICA and PIPA work to date.

 

Year 501 by Noam Chomsky

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anti-communist, Bartolomé de las Casas, Berlin Wall, Bolshevik threat, Bretton Woods, British Empire, capital controls, colonial rule, corporate governance, cuban missile crisis, declining real wages, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, European colonialism, experimental subject, Fall of the Berlin Wall, Howard Zinn, invisible hand, land reform, land tenure, means of production, Monroe Doctrine, non-tariff barriers, offshore financial centre, Plutocrats, plutocrats, price stability, Ralph Nader, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, Simon Kuznets, strikebreaker, structural adjustment programs, the scientific method, The Wealth of Nations by Adam Smith, trade liberalization, trickle-down economics, union organizing, War on Poverty, working poor

Furthermore, “the invasion has had the long-term effect of neutering the island’s political life,” Carter Special Assistant Peter Bourne reports from Grenada where he is teaching at the Medical School whose students were “rescued”: “No creative vision aimed at plans for solving Grenada’s social and economic ills has emerged from the lackluster and pliantly pro-American leaders” as the island suffers from record levels of alcoholism and drug abuse, and “crippling social malaise,” while much of the population can only “flee their beautiful country.” There is, however, one bright spot, Ron Suskind reports in a front-page Wall Street Journal article headlined “Made Safe by Marines, Grenada Now is Haven for Offshore Banks.” The economy may be “in terrible economic shape,” as the head of a local investment firm and member of Parliament observes—thanks to USAID-run structural adjustment programs, the Journal fails to add. But the capital “has become the Casablanca of the Caribbean, a fast-growing haven for money laundering, tax evasion and assorted financial fraud,” with 118 offshore banks, one for every 64 residents. Lawyers, accountants, and some businessmen are doing well; as, doubtless, are the foreign bankers, money launderers, and drug lords, safe from the clutches of the carefully crafted “drug war.”25 The US liberation of Panama recorded a similar triumph.

 

pages: 192 words: 75,440

Getting a Job in Hedge Funds: An Inside Look at How Funds Hire by Adam Zoia, Aaron Finkel

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backtesting, barriers to entry, collateralized debt obligation, commodity trading advisor, Credit Default Swap, credit default swaps / collateralized debt obligations, discounted cash flows, family office, fixed income, high net worth, interest rate derivative, interest rate swap, Long Term Capital Management, merger arbitrage, offshore financial centre, random walk, Renaissance Technologies, risk-adjusted returns, rolodex, short selling, side project, statistical arbitrage, systematic trading, unpaid internship, value at risk, yield curve, yield management

As the market has grown, so too have fund sizes. 119 c10.indd 119 1/10/08 11:10:52 AM 120 Getting a Job in Hedge Funds By the end of 2006, the average size of a fund of hedge funds had reached $178 million, from $21 million in 2001, according to the 2007 Eureka Global Fund of Hedge Funds Directory. The Eureka survey also found that: • More than half (55%) of all fund of hedge funds have less than $100 million in AUM. • Fully 29% of all fund of hedge funds are based in the United States, and 24% are in the United Kingdom. Switzerland (17%), various offshore financial centers (14%), and France (5%) are the other leading domiciles for fund of funds. • Long/short equity funds account for one-third of the total, followed by multistrategy funds with 20%. • Emerging markets–focused funds are attracting the most new assets and have produced the best returns over the past five years. • About 60% of Asian fund of hedge funds are managed out of the United States and UK. • Over the past few years, fund of funds with more than $1 billion in assets have performed consistently better than their smaller peers. • Fees account for 22.5% of fund of funds returns, in contrast to absolute return funds, where fees represent less than 7% of the total.

 

pages: 309 words: 95,495

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip

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Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, capital controls, central bank independence, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, Daniel Kahneman / Amos Tversky, diversified portfolio, double helix, endowment effect, Exxon Valdez, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, global supply chain, hindsight bias, Hyman Minsky, Joseph Schumpeter, Kenneth Rogoff, London Whale, Long Term Capital Management, market bubble, moral hazard, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, savings glut, technology bubble, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk

And members of the euro zone, if not possessing the same Teutonic dedication to balanced budgets and hard work as Germany, were assumed to at least be getting close; default by a sovereign borrower was unthinkable. For countries on the outside, joining the euro became as much a seal of approval as joining the gold standard had been more than a century earlier. Cyprus, for example, a tiny island country that had long marketed itself as an offshore finance center, in particular to Russians and other eastern Europeans, needed entry to the euro so that the lenders who financed its banks’ sprawling operations around the eastern Mediterranean need not worry about devaluation. The euro led to a surge of lending by northern banks to southern countries and a plunge in the interest rates southern countries paid relative to what Germany paid. (Sources: bank lending chart data courtesy of the Federal Reserve Bank of San Francisco; interest rate data from OECD Main Economic Indicators) But confidence that the euro had made crises a thing of the past proved to be its undoing.

 

pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Washington Consensus

For details see footnote 10 below. 8 An excellent recent exposition of this argument is in Hutton, Writing on the Wall. Hutton argues that China’s economic model is unsustainable because of the contradictions between an authoritarian state and a market economy, and he offers numerous examples of the dysfunctions that result. 9 “Since 1950 only thirteen economies have managed to grow at 7 percent or faster for at least 25 years. However, once one strips out three offshore financial centers and ports that are not fair points of comparison (Hong Kong, Singapore, Malta), an oil field, and an enormous diamond mine with small populations (Oman, Botswana), there are really only eight case studies of interest. Of these, four economies grew and then stalled: Indonesia, Thailand, Malaysia, and earlier, Brazil. One is a huge, fast-growing, lower middle-income state, where everyone is just now trying to decide whether it will keep growing or stall: China.

In a system of full capitalism, there should be (but, historically, has not yet been) a complete separation of state and economics, in the same way and for the same reasons as the separation of state and church.”2 Most serious political philosophers, sociologists, and economic historians have long realized that the opposite is true. Any society driven purely by market incentives will fail catastrophically, in economic as well as political terms. The freest, most incentive-driven market economies in the world are not the United States or Hong Kong or even tax havens such as the Cayman Islands but failed states and gangster societies such as Somalia, Congo, and Afghanistan.3 The overriding importance of political institutions in creating the conditions for successful capitalism has been established in great works of social scholarship going back to Adam Smith’s Theory of Moral Sentiments and Max Weber’s Protestant Ethic and the Spirit of Capitalism.4 But after the Thatcher-Reagan revolutions of the 1980s, business leaders, academic economists, and conservative politicians decided to ignore the historical realities described by sociologists and political scientists in favor of the oversimplified assumptions of market fundamentalist ideologues such as Ayn Rand.

 

pages: 497 words: 144,283

Connectography: Mapping the Future of Global Civilization by Parag Khanna

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1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, 9 dash line, additive manufacturing, Admiral Zheng, affirmative action, agricultural Revolution, Airbnb, Albert Einstein, amateurs talk tactics, professionals talk logistics, Amazon Mechanical Turk, Asian financial crisis, asset allocation, autonomous vehicles, banking crisis, Basel III, Berlin Wall, bitcoin, Black Swan, blockchain, borderless world, Boycotts of Israel, Branko Milanovic, BRICs, British Empire, business intelligence, call centre, capital controls, charter city, clean water, cloud computing, collateralized debt obligation, complexity theory, corporate governance, corporate social responsibility, credit crunch, crony capitalism, crowdsourcing, cryptocurrency, cuban missile crisis, data is the new oil, David Ricardo: comparative advantage, deglobalization, deindustrialization, dematerialisation, Deng Xiaoping, Detroit bankruptcy, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, forward guidance, global supply chain, global value chain, global village, Google Earth, Hernando de Soto, high net worth, Hyperloop, ice-free Arctic, if you build it, they will come, illegal immigration, income inequality, income per capita, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, labour market flexibility, labour mobility, LNG terminal, low cost carrier, manufacturing employment, mass affluent, megacity, Mercator projection, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Peace of Westphalia, peak oil, Peter Thiel, Plutocrats, plutocrats, post-oil, post-Panamax, private military company, purchasing power parity, QWERTY keyboard, race to the bottom, Rana Plaza, rent-seeking, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Scramble for Africa, Second Machine Age, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, six sigma, Skype, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, Stuxnet, supply-chain management, sustainable-tourism, TaskRabbit, telepresence, the built environment, Tim Cook: Apple, trade route, transaction costs, UNCLOS, uranium enrichment, urban planning, urban sprawl, WikiLeaks, young professional, zero day

SEZs represent a strategic option to escape histories of failure and, as China did, achieve in twenty years what took two hundred in the West. Mauritius, for example, used EPZs to graduate from agriculture to textiles and then investment zones and tax treaties to shift to financial services, which now make up more than 70 percent of its economy versus less than 5 percent for agriculture. By making itself Africa’s offshore financial hub, it is both a gateway for sizable pools of Asian investment into the continent and the source of 40 percent of the FDI that enters India. Not bad for a country whose sugar-driven economy of the 1960s generated a per capita income of $200.*1 FROM EXCLAVE TO ENCLAVE The NIC 2030 report actually used the wrong term for SEZs, referring to them as “enclaves.” In fact, the perception of foreign-run zones on national soil implies that they are exclaves, restricted and walled off—“spatially fortified” in urban planning parlance—both segmented from the economy (requiring specially imported skills) and segregated from the society (isolated from local communities).

Miami in turn will soon face competition from its friendly Latino offshore cousin Puerto Rico. Leveraging the tax-free status and location inside America’s security perimeter, Puerto Rico’s massive new Port of the Americas will subsume the entire southern city of Ponce and allow for efficient transshipment of smaller cargoes up and down the entire East Coast as well. Puerto Rico has also become a favored American tax haven, changing its laws in 2013 to eliminate capital gains taxes to attract the investment of ultra-high-net-worth hedge fund managers such as John Paulson, who calls it the “Singapore of the Caribbean.”8 Just as Tennessee and Michigan compete for automotive assembly, America’s onshore is now competing with America’s offshore in ports, shipping, and finance as well. Over the horizon, America’s southern ports may also be welcoming goods from what just a few years ago seemed the most unlikely of origins: Cuba.

 

pages: 225 words: 11,355

Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn

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asset-backed security, bank run, banking crisis, Bernie Madoff, bonus culture, Bretton Woods, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, disintermediation, diversification, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, global reserve currency, Home mortgage interest deduction, Isaac Newton, joint-stock company, liquidity trap, London Interbank Offered Rate, margin call, market clearing, moral hazard, mortgage tax deduction, Northern Rock, offshore financial centre, paradox of thrift, pattern recognition, pension reform, pets.com, Plutocrats, plutocrats, Ponzi scheme, profit maximization, pushing on a string, reserve currency, risk tolerance, risk-adjusted returns, road to serfdom, Ronald Reagan, shareholder value, Silicon Valley, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, value at risk, very high income, War on Poverty, Y2K, yield curve

Now, suddenly, Bagehot’s key notion that banking markets can only be stabilized by a ‘‘lender of last resort’’—a central bank or the equivalent in a clearing house—has come home. The global ‘‘financial economy’’ has become, over a generation, vastly greater in size than even the largest economies like the United States and Japan. Nobody has the resources to stop a panic in the classic sense, least of all the offshore banking centers. Since their birth, the Euromarkets have grown much faster than both the ‘‘real’’ global economy and the financial economy of individual states. This swelling of the sheer scale of the global financial economy was possible because banking in the Euromarkets gradually became almost purely concerned with trading in financial instruments unlinked to the real economy of buying and selling stuff.

 

pages: 264 words: 79,589

Kingpin: How One Hacker Took Over the Billion-Dollar Cybercrime Underground by Kevin Poulsen

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Apple II, Brian Krebs, Burning Man, corporate governance, dumpster diving, Exxon Valdez, Hacker Ethic, hive mind, index card, McMansion, Mercator projection, offshore financial centre, packet switching, pirate software, Ponzi scheme, Robert Hanssen: Double agent, Saturday Night Live, Silicon Valley, Steve Jobs, Steve Wozniak, Steven Levy, traffic fines, web application, WikiLeaks, zero day, Zipcar

The only silver lining to his incarceration was that he’d met a talented hacker looking to get back at the system. Norminton made it clear that he saw real potential in Max, and the pair took to walking the yard every day, swapping war stories and fantasizing about how they might work together when they hit the streets. With Norminton’s guidance, Max could easily learn to crack brokerage houses, where they’d tap into overstuffed trading accounts and drain them into offshore banks. One big haul and they’d have enough cash for the rest of their lives. After five months, Norminton and his schemes were sent home to sunny Orange County, California, while Max remained at Taft with another year left on his sentence—long, tedious days of bad food, standing for count, and the sound of chains and keys. In August 2002, Max was granted early release to a sixty-one-bed halfway house in Oakland, where he shared a room with five other ex-cons.

 

pages: 252 words: 75,349

Spam Nation: The Inside Story of Organized Cybercrime-From Global Epidemic to Your Front Door by Brian Krebs

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barriers to entry, bitcoin, Brian Krebs, cashless society, defense in depth, Donald Trump, employer provided health coverage, mutually assured destruction, offshore financial centre, payday loans, pirate software, placebo effect, ransomware, Silicon Valley, Stuxnet, the payments system, transaction costs, web application

Unknown hackers or ChronoPay insiders had leaked huge caches of his firm’s internal correspondence—tens of thousands of emails and accounting documents—as well as hundreds of hours of phone conversations that Vrublevsky recorded with others. The information painstakingly documented the breadth of ChronoPay’s involvement in the rogue pharmacy and fake antivirus business endeavors. These required the creation of an elaborate network of shell companies and offshore bank accounts—all documented in well-organized Microsoft Excel spreadsheets, and in some cases described in Vrublevsky’s own voice. This cache of purloined documents contained not only evidence of wrongdoing by ChronoPay and its executives, but also intricate, sometimes lurid details about some of the most powerful people in the cybercrime underground. It took many months to read through all of the materials, but more importantly to discover the most significant emails and documents.

 

pages: 432 words: 127,985

The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry by William K. Black

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accounting loophole / creative accounting, affirmative action, Andrei Shleifer, business climate, cognitive dissonance, corporate governance, Donald Trump, fear of failure, financial deregulation, friendly fire, George Akerlof, hiring and firing, margin call, market bubble, moral hazard, offshore financial centre, Ponzi scheme, race to the bottom, Ronald Reagan, short selling, The Market for Lemons, transaction costs

In my case, Keating used the S&L’s resources to sue me for $400 million and to hire private detectives to investigate me (Tuohey 1987). The third reason control frauds are so destructive is that they provide a “legitimate” way for the CEO to convert company assets to personal assets. All fraudsters have to balance the potential gains from fraud with the risks.2 The most efficient fraud mechanism for the CEO is to steal cash from the company, e.g., by wiring it to his account at an offshore bank. No S&L control fraud, and none of the ongoing huge frauds, did so. Stealing from the till in large amounts from a large company guarantees detection and makes the prosecutor’s task simple. The strategy could appeal only to those willing to live in hiding or in exile in a country without an extradition treaty. Marc Rich (pardoned by President Clinton) notwithstanding, few fraudulent CEOs follow this strategy.

Enron and its fellow conspirators (virtually every major energy trader in America and several electrical generators) caused blackouts in California, raised the price of electrical power dramatically, and bankrupted California’s electrical utilities. (These control frauds were aimed at customers, not creditors.) Similarly, corporate tax fraud surged as some of the nation’s top audit and law firms pushed fraudulent tax shelters and schemes for using tax havens to avoid taxation. Enron was so active in these frauds that it marketed its services as a consultant for eliminating corporate taxes. The indirect, nonfinancial impacts of the S&L control frauds cannot be quantified. One of these impacts is political scandal. The control frauds’ manipulation of Speaker Wright became widely known. The disclosure weakened Wright while he was in office and contributed to his decision to resign.

 

Great Britain by David Else, Fionn Davenport

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active transport: walking or cycling, Albert Einstein, Beeching cuts, British Empire, call centre, car-free, carbon footprint, clean water, colonial rule, Columbine, congestion charging, credit crunch, David Attenborough, Etonian, food miles, glass ceiling, global village, haute cuisine, illegal immigration, Isaac Newton, James Watt: steam engine, land reform, Livingstone, I presume, Mahatma Gandhi, new economy, North Sea oil, Northern Rock, offshore financial centre, place-making, Skype, South of Market, San Francisco, Stephen Hawking, the market place, trade route, transatlantic slave trade, transatlantic slave trade, upwardly mobile, urban planning, urban renewal, urban sprawl, Winter of Discontent

ALDERNEY Manche Iles Express sails from Diélette, Guernsey and Jersey. Aurigny Air Services and Blue Islands fly from Bournemouth, Guernsey, Jersey and Southampton. Return to beginning of chapter JERSEY pop 88,200 Jersey is the biggest and, its rivals would say, the brashest of the Channel Islands. Shimmering steel and glass, and pinstripe suits, set the tone in capital St Helier, an offshore finance centre. However, the island is much more than that, and many visitors prefer to stay in the harbour village of St Aubin. Here, contemporary affluence mixes happily with nautical charm, with cobbled streets climbing the hill from the boat masts. The coast is 48 miles long; exquisite sandy beaches fringe the south, east and west sides, and rugged cliffs frame the north. In between lie tranquil lanes and some excellent museums, which bring Jersey’s rich history to life

With the Maritime Museum and the Durrell, Jersey has a range of imaginative, interactive attractions – yet another good reason to hop across the Channel from mainland Blighty. * * * HIGHLIGHTS Imagining yourself a member of Enid Blyton’s Famous Five on twee, carefree Sark Exploring the 13th-century Castle Cornet in Guernsey’s hilly St Peter Port Following in the paw prints of Prince Blücher von Wahlstatt’s extinct wallabies, among neolithic tombs on the cobweb-banishing common on Herm Discovering another side to a renowned offshore banking centre on Jersey’s laid-back west coast at St Ouen’s Bay Gazing at swaying sailboats from a half-timbered hotel in Jersey’s St Aubin (opposite) Catching a dinky passenger plane to distinctive Alderney, where seabirds nest in Nazi lookout towers POPULATION: 151,562 AREA: 120 SQ MILES AS WELL AS ENGLISH, TWO FRENCH DIALECTS ARE SPOKEN ON THE CHANNEL ISLANDS: JÈRRIAIS AND GUERN2 ÉSIAIS * * * History The Channel Islands are rich in archaeological sites from the Stone Age onwards.

Used by the Romans as trading posts, the islands were part of Normandy until 1066, only becoming English when William of Normandy (‘William the Conqueror’) was crowned king. For centuries the islands were used as sparring grounds, but in 1483 England and France agreed that the territory would remain neutral in the event of war. In WWII, these happy-go-lucky resorts became the only British soil to be occupied by German forces. The postwar years have seen the fishing, tourism and farming industries decrease, to be replaced by the big bucks of offshore banking. Today the finance sector employs the biggest chunk of the workforce. Getting There & Away Return flights to Jersey and Guernsey, the main points of entry, vary wildly between £70 and £300 – shop around. JERSEY Condor Ferries ( 01534-872240; www.condorferries.com) sails from Guernsey (from 55 minutes), Poole (four hours), Portsmouth (10 hours), St Malo, France (1¼ hours) and Weymouth (3½ hours).

 

pages: 843 words: 223,858

The Rise of the Network Society by Manuel Castells

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Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, borderless world, British Empire, capital controls, complexity theory, computer age, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, industrial robot, informal economy, information retrieval, intermodal, invention of the steam engine, invention of the telephone, inventory management, James Watt: steam engine, job automation, job-hopping, knowledge economy, knowledge worker, labor-force participation, labour market flexibility, labour mobility, laissez-faire capitalism, low skilled workers, manufacturing employment, Marshall McLuhan, means of production, megacity, Menlo Park, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, planetary scale, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Silicon Valley, Silicon Valley startup, social software, South China Sea, South of Market, San Francisco, special economic zone, spinning jenny, statistical model, Steve Jobs, Steve Wozniak, Ted Nelson, the built environment, the medium is the message, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, total factor productivity, trade liberalization, transaction costs, urban renewal, urban sprawl

The roots of the transformation of finance are to be found in the deregulation of the industry and the liberalization of domestic and international financial transactions throughout the 1980s and 1990s, first in the US and the UK, then, gradually, in most of the world.126 The process culminated in November 1999 when President Clinton abolished the institutional barriers to consolidation between different segments of the finance industry legislated in the 1930s and 1940s to prevent the kind of financial crises that led to the Great Depression of 1929. From 2000 onwards, banks, securities firms, and insurance companies in the United States can operate jointly or even merge operations in a single financial firm. For a number of years, the proliferation of offshore banking and investment firms, for instance hedge funds, had already bypassed many of the financial constraints. And mega-mergers, such as the one between CitiCorp and Travelers, had made a mockery of regulations. Yet, by making official the hands-off policy of the federal regulator, the US signaled the freedom for private companies to manage money and securities in any way the market would bear, with no other limits than those established by the law and the courts relating to trade in general.

Northern Telecom Noyce, Bob NSFNET nuclear warfare Nuland, Sherwin B. O’Brien, Richard occupational categories occupational structure; class relations; education; employment; post-industrialism O’Connor, David OECD; Employment Outlook OECD countries: employment; exports; FDI; ILO research; inflation; Internet use; job creation; multinational corporations; productivity; R&D; trade in services office architecture, Shaw, D. E. & Co. office work offshore banking offshore production Ohmae, Kenichi oil prices on-line community on-line games on-line journalism on-line shopping on-line teaching on-line trading Opium Wars opto-electronics Oracle organizational transformation: capitalism; firms; flexibility; information technologies; innovation; networking; production; shift in mentality; technological development Osaka declaration Osiris Therapeutics Osterman, Paul other, the outsourcing outwork Owen, Bruce M.

 

pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, invisible hand, Jean Tirole, joint-stock company, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, payday loans, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, War on Poverty, Washington Consensus, We are the 99%, working poor

The relevance of the rise of the neoliberal globalized financial regime to the crisis is a matter of great concern to the thought collective and to others (such as Ben Bernanke) who seek to offload responsibility for the crash onto someone else. Because there was no obvious watershed linking policy to theory comparable to Bretton Woods, and the post-1980 infrastructure of international finance grew up piecemeal, the relationship between neoliberalism and the growth of shadow and offshore banking is only beginning to be a subject of interest. Evidence, by construction, is often inaccessible. However, the drive to offshore outsource manufacturing in the advanced economies, which was mutually symbiotic with the frustration of capital controls, was clearly a function of neoliberal doctrines concerning the unbounded benefits of freedom of international trade, combined with neoliberal projects to reengineer the corporation as an arbitrary nexus of contractual obligations, rather than as a repository of production expertise.

“The Role of the Category of Ignorance in Sociological Theory,” American Sociological Review 27 (1962): 492–508. Schulman, Bruce, and Julian Zelizer, eds. Rightward Bound (Cambridge, Mass.: Harvard University Press, 2008). Sent, Esther-Mirjam. The Evolving Rationality of Rational Expectations (New York: Cambridge University Press, 1998). Shaxson, Nicholas. Treasure Islands: Uncovering the Damage of Offshore Banking (New York: Palgrave Macmillan, 2011). Shearmur, Jeremy. Hayek and After (London: Routledge, 1996). Sheper-Hughes, Nancy, and Loic Wacquant, eds. Commodifying Bodies (London: Sage, 2002). Sherden, William. The Fortune Sellers (New York: Wiley, 1998). Sherman, Gabriel. “Revolver,” New York, April 2011, at http://nymag.com/news/business/wallstreet/peter-orszag-2011-4/index6.html. Shiller, Robert.

 

pages: 299 words: 83,854

Shortchanged: Life and Debt in the Fringe Economy by Howard Karger

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big-box store, blue-collar work, corporate social responsibility, credit crunch, delayed gratification, financial deregulation, illegal immigration, labor-force participation, late fees, London Interbank Offered Rate, low skilled workers, microcredit, mortgage debt, New Journalism, New Urbanism, offshore financial centre, payday loans, predatory finance, race to the bottom, Silicon Valley, Telecommunications Act of 1996, telemarketer, underbanked, working poor

The Internet has created a new playing field by enabling fringe corporations to skip over state commercial barriers, thereby providing fresh opportunities to circumvent usury laws. In fact, the Internet has allowed payday lenders, fringe mortgage lenders, and predatory credit card companies to operate not only outside of state laws, but sometimes even outside of U.S. borders. For example, payday lenders can use electronic transfers to send cash to borrowers through offshore banks. State commercial barriers are being broken down in all areas, including credit cards. For example, consumers no longer have to apply for credit cards at local banks; instead, they can apply online to almost any bank in the United States. Some fringe lenders in states with strict usury laws have installed Internet kiosks that allow customers to apply for loans in states with liberal or no interest caps.

 

pages: 398 words: 108,889

The Paypal Wars: Battles With Ebay, the Media, the Mafia, and the Rest of Planet Earth by Eric M. Jackson

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bank run, business process, call centre, disintermediation, Elon Musk, index fund, Internet Archive, iterative process, Joseph Schumpeter, market design, Menlo Park, moral hazard, Network effects, new economy, offshore financial centre, Peter Thiel, Sand Hill Road, shareholder value, Silicon Valley, Silicon Valley startup, telemarketer, The Chicago School, Turing test

These sell-offs forced many countries to devalue their currencies by lowering their official exchange rate against the dollar, an action that effectively made the local currency worth less by weakening its global purchasing power. This in turn caused local prices to skyrocket which decreased the value of money held in savings accounts. Whenever this scenario played out, the citizens of these countries—especially the poor and middle class, who seldom had access to offshore banking options—were always hit the hardest. If PayPal could find a way to empower these people to move and transfer money with the click of a mouse, then we would indeed be on the verge of creating something far more revolutionary than just a new way to split up dinner bills. As the use of the Internet spread, even the lower classes could theoretically whisk their money away to safety by exchanging it for a more stable foreign currency and storing it far away from the reach of their own floundering governments.

 

pages: 389 words: 109,207

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone

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Albert Einstein, anti-communist, asset allocation, Benoit Mandelbrot, Black-Scholes formula, Brownian motion, buy low sell high, capital asset pricing model, Claude Shannon: information theory, computer age, correlation coefficient, diversified portfolio, en.wikipedia.org, Eugene Fama: efficient market hypothesis, high net worth, index fund, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, John von Neumann, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, New Journalism, Norbert Wiener, offshore financial centre, publish or perish, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, short selling, speech recognition, statistical arbitrage, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, traveling salesman, value at risk, zero-coupon bond

As in America, Russia’s casinos had links to organized crime. Unlike in America, the banks did too. Many of those who started Russian banks were gangsters of the vorovskoi mir—“thieves’ world,” also known as the Russian Mafiya. In July 1998, the International Monetary Fund made a $17 billion loan package to Russian banks. It has been reported that about $4.5 billion of this money was quickly wired to mobsters’ offshore bank accounts. The thug-controlled banks had no intention of repaying many of the Western loans. The Russian treasury was scarcely more credit-worthy. The U.S. Treasury has such a flawless credit record that economists often fall into the error of identifying its bonds with the “risk-free” investment of theory. No one made that mistake in Russia. Russia’s treasury bonds, called GKOs, were the junkiest of junk bonds, paying 40 percent interest and up.

 

pages: 291 words: 90,200

Networks of Outrage and Hope: Social Movements in the Internet Age by Manuel Castells

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access to a mobile phone, banking crisis, call centre, centre right, citizen journalism, cognitive dissonance, collective bargaining, conceptual framework, crowdsourcing, currency manipulation / currency intervention, disintermediation, en.wikipedia.org, housing crisis, income inequality, microcredit, Mohammed Bouazizi, Occupy movement, offshore financial centre, Port of Oakland, social software, statistical model, We are the 99%, web application, WikiLeaks, World Values Survey, young professional

They used their shares as collateral to borrow extensively from each other and then used these loans to finance the purchase of additional shares from the three banks, thus increasing the price of their shares and boosting their balance sheets. Furthermore, they plotted together to broaden the scope of their speculative operations on a global scale. Their fraudulent schemes were disguised through a web of jointly owned firms headquartered in offshore banking locations, such as the Isle of Man, the Virgin Islands, Cuba, and Luxembourg. Bank customers were persuaded to increase their debt, converting it into lower interest Swiss francs or Japanese yen. Unlimited credit permitted people to engage in unlimited consumption, artificially stimulating domestic demand and propelling economic growth. Furthermore, to cover their operations, the banks made favorable loans to selected politicians, as well as generous financial contributions to political parties for their election campaigns.

 

pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

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accounting loophole / creative accounting, Albert Einstein, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

Per capita income in 1992 was three times its 1960 level. The benefits of this growth were widespread. The proportion of the population below the poverty line fell from 60 percent in 1970 to 11 percent in 1996. In 1997, just a year before Suharto’s fall from power, the United Nations honored him for his success in reducing poverty. Meanwhile, Suharto’s family and cronies became immensely wealthy, allegedly siphoning billions of dollars into offshore bank accounts. Suharto’s government was like “a monarchy, with a king whose authority has never been questioned, and whose children believe their wealth is God-given,” according to a Western ambassador. Estimates of the Suharto family fortune range from $15 billion to $45 billion. The Suharto family influence reached far and wide. They held significant shares in over twelve hundred companies, according to one estimate: banks, airlines, hotels, shipping companies, telecommunications companies, shopping malls, television and radio stations, and newspapers.

 

pages: 459 words: 109,490

Merchant of Death: Money, Guns, Planes, and the Man Who Makes War Possible by Stephen Braun, Douglas Farah

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air freight, airport security, anti-communist, Berlin Wall, blood diamonds, Donald Trump, en.wikipedia.org, failed state, Mikhail Gorbachev, offshore financial centre, out of africa, Plutocrats, plutocrats, private military company

Sheltered behind layers of shell companies and airplanes that constantly shed old identities, Bout appeared safe from U.S. law. With its far-flung business interests and scattered aircraft fleet on several continents, Bout’s network was a post-Cold War phenomenon, operating with clandestine ties to numerous governments but beholden to none. Its hidden structure was comparable to Latin America’s drug cartels, with their offshore bank accounts, small fleets of drug-carrying planes, and highly mobile legions of smugglers stationed from Medellín to Miami. But where cocaine-ferrying organizations were flagrant criminal enterprises, the international legal status of Bout’s arms deliveries remained murkier—and there was no certainty that any other nation possessed the political will to shut down his organization. The United States’ tough new antibrokering law had broken new ground, but in Europe, regulations covering arms middlemen were much weaker, and in most of Africa, nonexistent.

 

pages: 509 words: 132,327

Rise of the Machines: A Cybernetic History by Thomas Rid

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1960s counterculture, A Declaration of the Independence of Cyberspace, agricultural Revolution, Albert Einstein, Alistair Cooke, Apple II, Apple's 1984 Super Bowl advert, back-to-the-land, Berlin Wall, British Empire, Brownian motion, Buckminster Fuller, business intelligence, Claude Shannon: information theory, conceptual framework, connected car, domain-specific language, Douglas Engelbart, dumpster diving, Extropian, full employment, game design, global village, Haight Ashbury, Howard Rheingold, Jaron Lanier, job automation, John von Neumann, Kevin Kelly, Marshall McLuhan, Menlo Park, Mother of all demos, new economy, New Journalism, Norbert Wiener, offshore financial centre, oil shale / tar sands, pattern recognition, RAND corporation, Silicon Valley, Simon Singh, speech recognition, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, technoutopianism, Telecommunications Act of 1996, telepresence, V2 rocket, Vernor Vinge, Whole Earth Catalog, Whole Earth Review, Y2K, Yom Kippur War, Zimmermann PGP

Britain refused to accept the principality’s sovereignty, as did the United States, the UN, and all other international organizations. Hastings and Lackey, however, had perfect timing. In 1999, Prince Roy was battling Alzheimer’s and his health was deteriorating. The “royal” family considered leaving Sealand, making it available for other uses. In November that year, Hastings visited the platform for the first time. He already had experience in offshore financing and online gambling in Anguilla, where he had met Lackey. After inspecting Sealand that November, the entrepreneurs were inspired. They decided to move forward. “The biggest inspiration was Vernor Vinge, True Names,” recalled Lackey.92 The vision was to have individuals acting in the Other Plane, able to “live on hardware and transact stuff on their own and not have to be under any government,” Lackey recounted later in Palo Alto.

 

pages: 525 words: 116,295

The New Digital Age: Transforming Nations, Businesses, and Our Lives by Eric Schmidt, Jared Cohen

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3D printing, access to a mobile phone, additive manufacturing, airport security, Amazon Mechanical Turk, Amazon Web Services, anti-communist, augmented reality, Ayatollah Khomeini, barriers to entry, bitcoin, borderless world, call centre, Chelsea Manning, citizen journalism, clean water, cloud computing, crowdsourcing, data acquisition, Dean Kamen, Elon Musk, failed state, fear of failure, Filter Bubble, Google Earth, Google Glasses, hive mind, income inequality, information trail, invention of the printing press, job automation, Julian Assange, Khan Academy, Kickstarter, knowledge economy, Law of Accelerating Returns, market fundamentalism, means of production, mobile money, mutually assured destruction, Naomi Klein, offshore financial centre, peer-to-peer lending, personalized medicine, Peter Singer: altruism, Ray Kurzweil, RFID, self-driving car, sentiment analysis, Silicon Valley, Skype, Snapchat, social graph, speech recognition, Steve Jobs, Steven Pinker, Stewart Brand, Stuxnet, The Wisdom of Crowds, upwardly mobile, Whole Earth Catalog, WikiLeaks, young professional, zero day

Paper trails ensure that instructions are carried out properly; therefore, as Assange said, “if they internally balkanize so that information can’t be leaked, there’s a tremendous cost to the organizational efficiency of doing that.” And inefficient organizations mean less powerful ones. Openness, on the other hand, introduces new challenges for this movement of truth-seekers, from Assange’s perspective. “When things become more open, then they start to become more complex, because people start hiding what they’re doing—their bad behavior—through complexity,” he said. He pointed to bureaucratic doublespeak and the offshore financial sector as clear examples. These systems are technically open, he said, but in fact are impenetrable; they are hard to attack but even harder to use efficiently. Obfuscation at this level, where the complexity is legal but still covering something up, is a much more difficult problem to solve than straightforward censorship. Unfortunately, people like Assange and organizations like WikiLeaks will be well placed to take advantage of some of the changes in the next decade.

 

pages: 436 words: 125,809

The Way of the Gun: A Bloody Journey Into the World of Firearms by Iain Overton

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air freight, airport security, back-to-the-land, British Empire, Chelsea Manning, clean water, Columbine, David Attenborough, Etonian, Ferguson, Missouri, gender pay gap, gun show loophole, illegal immigration, interchangeable parts, Julian Assange, knowledge economy, Louis Pasteur, Mahatma Gandhi, More Guns, Less Crime, offshore financial centre, Ronald Reagan, Y2K, Yom Kippur War

My internet searches for the shipping companies that operate out of here ran constantly up against a tide of adverts for young brides and the promises of a lonely heart being filled. But love was not the only relationship that flourished here. Everywhere you saw signs of the coming-together of business and trade. Above the airport’s passport control were three adverts for freight service companies, one showing a lorry fitted with aircraft wings. Others highlighted offshore financial services. Speed and discretion were the key offerings here. Once it was grain merchants that had made Odessa the fourth-richest city in the Russian Empire. Now its exports had diversified. Women and guns were new lures that hooked people here. I smiled at the posing bride and walked down to the docks. Small groups of Japanese tourists had left their cruise-ship and were being shown around.

 

pages: 637 words: 128,673

Democracy Incorporated by Sheldon S. Wolin

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affirmative action, Berlin Wall, British Empire, centre right, collective bargaining, colonial rule, corporate governance, cuban missile crisis, David Ricardo: comparative advantage, dematerialisation, Donald Trump, Fall of the Berlin Wall, full employment, illegal immigration, invisible hand, mutually assured destruction, new economy, offshore financial centre, Ralph Nader, Ronald Reagan, school vouchers, single-payer health, stem cell, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen

That solution is the populist counterpart to the role played by elites in bridging the two constitutions. While corporate power and its ethos are incorporated into the structure of the state,20 the patriotism, nationalism, and unblinking loyalty of the citizenry connect the constitution for preservation to the constitution for increase. That role becomes all the more important as it becomes clearer that globalizing, multinational capitalism has no political loyalties as such. It loves offshore bank accounts as much as it loves producing cars in China, where it can pay workers a monthly wage of sixty dollars.21 Through the convergence of these developments Americans are being successfully “kneaded” into a citizenry less suited to democratic demands and increasingly more accepting and supportive of the dominant forms of power, not out of Nazi enthusiasm, but from fear and misguided patriotism.

 

pages: 205 words: 18,208

The Transparent Society: Will Technology Force Us to Choose Between Privacy and Freedom? by David Brin

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affirmative action, airport security, Ayatollah Khomeini, clean water, cognitive dissonance, corporate governance, data acquisition, death of newspapers, Extropian, Howard Rheingold, illegal immigration, informal economy, Iridium satellite, Jaron Lanier, John von Neumann, Kevin Kelly, means of production, mutually assured destruction, offshore financial centre, open economy, packet switching, pattern recognition, pirate software, placebo effect, Plutocrats, plutocrats, prediction markets, Ralph Nader, RAND corporation, Saturday Night Live, Search for Extraterrestrial Intelligence, Steve Jobs, Steven Levy, Stewart Brand, telepresence, trade route, Vannevar Bush, Vernor Vinge, Whole Earth Catalog, Whole Earth Review, Yogi Berra, Zimmermann PGP

“How does it track or control the money supply when financial markets create new financial instruments faster than regulators can keep track of them?” The Sovereign Individual, by James Dale Davidson and William Rees-Mogg, makes the same argument by pointing out that technology is reducing the ability of government to enforce its power and control. The overhead cost of the modern industrial state will no longer be supported when people find ways to escape it. Wriston has supported efforts to transform offshore banking havens into high-tech sanctuaries, masking cybercommerce from national taxing authorities. Taking a slightly different approach to the same notion, David Post and David Johnson, codirectors of the Cyberspace Law Institute, have proposed that cyberspace should be a separate legal jurisdiction with its own laws and regulations, created and enforced by the online community. This is not a new dream.

 

pages: 520 words: 129,887

Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future by Robert Bryce

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Bernie Madoff, carbon footprint, cleantech, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, decarbonisation, Deng Xiaoping, en.wikipedia.org, energy security, energy transition, flex fuel, greed is good, Hernando de Soto, hydraulic fracturing, hydrogen economy, Indoor air pollution, Isaac Newton, James Watt: steam engine, Menlo Park, new economy, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, purchasing power parity, RAND corporation, Ronald Reagan, Silicon Valley, smart grid, Stewart Brand, Thomas L Friedman, uranium enrichment, Whole Earth Catalog

In November 2009, the New York Times reported that the younger Obiang, who serves as the forest and agriculture minister in his native country, owns a $35 million estate in Malibu as well as a fleet of luxury cars and a private jet. A U.S. Justice Department memorandum says that much of Obiang’s wealth has come “from extortion, theft of public funds, or other corrupt conduct.” The Times reported that during one twelve-month period ending in April 2006, Obiang “funneled at least $73 million into the United States, using shell corporations and offshore bank accounts to launder the money and ultimately buy his Malibu estate and a luxury jet.”5 Obviously, the environmental and societal ills caused by petroleum cannot be denied. Oil is not a perfect fuel. There is no such thing. But oil is—in nearly every case—greener than any of the alternative energy forms that might replace it. No matter whether the replacement is ethanol from corn, biomass—such as wood, straw, or dung—or biofuels made from palm oil or other feedstocks, the conclusion is apparent: Oil (and if you can get it, natural gas) simply has no peers.

 

pages: 414 words: 123,666

Merchants' War by Stross, Charles

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British Empire, dumpster diving, East Village, indoor plumbing, offshore financial centre, packet switching, peak oil, stem cell

Smith glanced at him. "That's why you're on sick leave. You may be interested to know that your story checks out: that is, Beckstein's mother disappeared six months ago. Her house is still there, the bills are being paid on time, but there's nobody home. We haven't gotten a trace on her income stream so far; her credit cards and bank account are ordinary enough, but the deposits are coming in from an offshore bank account in Liechtenstein and that's turning out to be hard to trace. Anyway, I think we can confirm that she's one of them." He stood up again and paced over to the kitchen door then back, as if his legs were incapable of standing still. "This is a, a tactical mess. We'd hoped to get at least a few successful contacts in place before our ability to operate in fairyland was blown. What this means is that they, uh, Beckstein senior's faction, are going to be alert for informants from now on.

 

pages: 507 words: 145,878

Predator's Ball by Connie Bruck

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diversified portfolio, financial independence, fixed income, mortgage debt, offshore financial centre, paper trading, profit maximization, The Predators' Ball, yield management, Yogi Berra, zero-coupon bond

Now hundreds of buyers were in the audience for these presentations. There were the players who had turned nondescript or failing financial companies into dazzling success stories, based on the yield of the bonds that Milken offered them. And there were the money managers—people who ran investment portfolios for thrift institutions, insurance companies, public and private pension funds, mutual funds, offshore banks, college endowments, high-yield funds. Many of them had been converted into believers by Milken back in the seventies, when he had begun tirelessly preaching an esoteric gospel: that in a diversified portfolio of high-yield bonds, otherwise known as “junk” bonds, the reward outweighs the risk. This was a proven theory, well documented by academician W. Braddock Hickman in his enormous multivolume tome Corporate Bond Quality and Investor Experience, published in the fifties.

 

Making Globalization Work by Joseph E. Stiglitz

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affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, inventory management, invisible hand, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus

When the developing countries pointed out that one of the problems in tracing the flow of funds was bank secrecy in offshore Western banks, there was a decided change in tone. The money is in these so-called offshore accounts not because the climate in the Cayman Islands is more conducive to banking; money goes there precisely because of the opportunities it affords for avoiding taxes, laws, and regulations. The existence of these opportunities is not an accidental loophole. The secrecy of the offshore banking centers exists because it is in the interests of certain groups in the advanced industrial countries. There was an accord among the advanced industrial countries to do something about bank secrecy, but in August 2001 the Bush administration vetoed it. Then, when it was discovered that bank secrecy had been used to finance the terrorists involved in the September 11 attacks, the United States changed its views __but only where fighting terrorism was involved.

 

pages: 509 words: 137,315

Islands in the Net by Bruce Sterling

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back-to-the-land, Berlin Wall, British Empire, Buckminster Fuller, industrial robot, Malacca Straits, offshore financial centre, South China Sea, wage slave

Kymera joint project: yes. Russian software deal: yes. The Sovs still have hard-currency problems, but we can cut a good countertrade in natural gas. Kuwaiti housing project: no. Islamic Republic: the terms are good but it stinks politically. No.” She paused. “Now here’s one you didn’t know about. Grenada United Bank. The Committee’s slipping this one in.” For the first time, Emily looked uneasy. “They’re an offshore bank. Not too savory. But the Committee figures it’s time for a gesture of friendship. It won’t do our reputation much good if the whole thing is hashed out in public. But it’s harmless enough—we can let it go.” Emily yanked open a wooden drawer with a squeak and put the Report away. “So much for this quarter. Things look good, generally.” She smiled. “Hello, David, if you’re watching. If you don’t mind, I’d like a private word with Laura now.”

 

pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

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accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, high net worth, income inequality, investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, means of production, moral hazard, mortgage debt, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Plutocrats, plutocrats, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, Winter of Discontent, working poor, Yom Kippur War

Companies registered in tax havens are protected from scrutiny by stringent secrecy laws that are upheld by local officials firmly in the pocket of financial interests. In Switzerland it’s a crime, punishable by prison, to break bank secrecy. The fact that such a company might be owned and run by, say, a British or German bank or multinational doesn’t stop it being a separate legal entity. The tax havens can provide ‘nominee directors’ for the offshore companies to help hide their identities. Charging for such services is the basis of many tax havens’ economies. The British Virgin Islands, for example, with a population of less than 25,000, is host to over 800,000 companies. There are examples of single buildings in tax havens providing the address of more than 1,000 companies. Tax havens include not only exotic locations like the Cayman Islands or Mauritius but metropolitan financial centres such as the City of London and Zurich, and countries like Ireland, Luxembourg and Switzerland; some argue that the US and UK themselves and several other leading economies could be included.55 ‘Offshore’ jurisdictions may actually be onshore, like the City, or the US states of Delaware, Nevada and Wyoming; most of the Fortune 500 top companies are registered in Delaware.

Thanks to John Christensen for this quote. 50 This section draws substantially from Nicholas Shaxson’s superb (2012) Treasure islands: Tax havens and the men who stole the world, London: Vintage. See also Urry, J. (2014) Offshoring, Cambridge: Polity. 51 Research by Actionaid: ‘FTSE 100 tax haven tracker’, http://www.actionaid.org.uk/tax-justice/ftse-100-tax-haven-tracker. 52 Murphy, R. and Christensen, J. (2014) ‘Tax us if you can’, 2nd edn, London: Tax Justice Network, available at: http://www.taxjustice.net/cms/front_content.php?idcatart=134&lang=1. 53 Palan, R., Murphy R. and Chavagneux, C. (2010) Tax havens: How globalization really works, Ithaca, NY: Cornell University Press, pp 5–6. 54 Channel 4 News, 14 June 2013. 55 See Palan et al (2010), pp 38–40. 56 Said, S. (2011) ‘The 10 biggest tax havens in the world’, The Richest, 15 September, http://www.therichest.com/expensive-lifestyle/location/the-10-biggest-tax-havens-in-the-world/. 57 http://www.financialsecrecyindex.com/index.html. 58 The Bureau of Investigative Journalism (2012) ‘City of London Corporation reveals its secret £1.3bn bank account’, 20 December, http://www.thebureauinvestigates.com/2012/12/20/city-of-london-corporation-reveals-its-secret-1-3bn-bank-account/. 59 The Bureau of Investigative Journalism (2012) ‘Streets paved with gold’, 9 July, http://www.thebureauinvestigates.com/2012/07/09/streets-paved-with-gold-the-local-authority-that-works-for-the-banks/. 60 Shaxson (2012), p 265; Nelson, F. (1996) ‘Labour rift over city overhaul’, Independent, 7 April, http://www.independent.co.uk/news/labour-rift-over-city-overhaul-1303565.html.

See also http://blog.ourfuture.org/20130628/believe-it-or-not13-mind-blowing-facts-about-tax-evading-corporations. 74 Howker, E. and Malik, S. (2012) ‘Cameron family fortune made in tax havens’, Guardian, 20 April, http://www.guardian.co.uk/politics/2012/apr/20/cameron-family-tax-havens. 75 http://www.taxresearch.org.uk/Blog/2013/09/10/david-cameron-takes-leave-of-his-senses-as-he-declares-the-uk-has-no-tax-havens-left/#sthash.PMFksAlX.dpuf. 76 Watts, R. and Ungoed-Thomas, J. (2009) ‘Minister in charge of offshore clampdown ran tax haven firm’, Sunday Times, 22 March, http://www.thesundaytimes.co.uk/sto/business/article157241.ece. Myners was already in trouble for approving a £703,000-per-year pension for Fred Goodwin, head of the failed bank RBS. Worryingly, Myners was more recently appointed as an independent director to reform the failing Cooperative Group. 77 Newman, M. (2012) ‘Conservative peer hired as tax haven lobbyist’, The Bureau of Investigative Journalism, 17 April, http://www.thebureauinvestigates.com/2012/04/17/conservative-peer-hired-as-tax-haven-lobbyist/. 78 Sayal, R. and Williams, M. (2012) ‘Tory treasurer wants UK to become more like a tax haven’, Guardian, 21 September, http://www.guardian.co.uk/business/2012/sep/20/tory-treasurer-make-uk-tax-haven. 79 Mason, R. (2012) ‘Britain could prevent the use of tax havens by ending “archaic” business rules’, Telegraph, 21 September, http://www.telegraph.co.uk/news/politics/conservative/9557273/Britain-could-prevent-the-use-of-tax-havens-by-ending-archaic-business-rules.html. 80 Drucker, J. (2013) ‘Europe eases corporate tax dodge as worker burdens rise’, Bloomberg News, 13 May, http://www.bloomberg.com/news/2013-05-13/europe-eases-corporate-tax-dodge-as-worker-burdens-rise.html. 81 Murphy, R. (2013) ‘For a man who says he thinks tax evasion is repugnant George Osborne is doing his utmost to promote it’, Tax Research UK, 23 March, http://www.taxresearch.org.uk/Blog/2012/03/23/for-a-man-who-says-he-thinks-tax-evasion-is-repugnant-george-osborne-is-doing-his-utmost-to-promote-and-assist-it/. 82 Palan et al (2010), p 7. 83 Centre for Economics and Business Research (2011) ‘The 50p tax – good intentions, bad outcomes: the impact of high rate marginal tax on government revenues in a world with no borders’, http://conservativehome.blogs.com/files/cebr-report---final.pdf.

 

pages: 845 words: 197,050

The Gun by C. J. Chivers

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air freight, Berlin Wall, British Empire, cuban missile crisis, defense in depth, illegal immigration, joint-stock company, Khartoum Gordon, mutually assured destruction, offshore financial centre, Ponzi scheme, RAND corporation, South China Sea, trade route, Transnistria

The deals, to a casual observer, were masked by the patina of legitimacy. And once customers were assured of this, Minin passed along the prices for purchases and shipment, arranged transit, and ensured that each party at each leg had the necessary paperwork to present to the authorities, such as they were, to stamp, sign, or seal. All that was required was money, and contacts, and a willingness to break the law. Once the payments from Africa were posted in his offshore bank accounts, Minin dispatched planeloads of Ukraine’s weapons—made for the Cold War, cached in European bunkers, marooned by the Soviet collapse, and tended by government officials both incompetent and criminal—on their journey to Africa, thereby moving guns from a northern Cold War front to the postcolonial power struggles to the south. In this way, the Kalashnikovs and their ammunition, paired fuels for modern-day African war, were handed out to the thugs.

 

pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

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affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, invisible hand, John Harrison: Longitude, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, London Interbank Offered Rate, lone genius, low skilled workers, Mark Zuckerberg, market bubble, market fundamentalism, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, obamacare, offshore financial centre, paper trading, patent troll, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, women in the workforce

We have the technology to create an efficient electronics payment mechanism for the twenty-first century, but we have a banking system that is determined to maintain a credit and debit card system that not only exploits consumers but imposes large fees on merchants for every transaction. (d) Make it more difficult for banks to engage in predatory lending and abusive credit card practices, including by putting stricter limits on usury (excessively high interest rates). (e) Curb the bonuses that encourage excessive risk taking and shortsighted behavior. (f) Close down the offshore banking centers (and their onshore counterparts) that have been so successful both at circumventing regulations and at promoting tax evasion and avoidance. There is no good reason that so much finance goes on in the Cayman Islands; there is nothing about it or its climate that makes it so conducive to banking. It exists for one reason only: circumvention. Many of these reforms are interrelated: a more competitive banking system is less likely to engage in abusive practices, less likely to be successful in rent seeking.

 

pages: 700 words: 201,953

The Social Life of Money by Nigel Dodd

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accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial innovation, Financial Instability Hypothesis, financial repression, floating exchange rates, Fractional reserve banking, German hyperinflation, Goldman Sachs: Vampire Squid, Hyman Minsky, illegal immigration, informal economy, interest rate swap, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money: store of value / unit of account / medium of exchange, mortgage debt, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer lending, Ponzi scheme, post scarcity, postnationalism / post nation state, predatory finance, price mechanism, price stability, quantitative easing, quantitative trading / quantitative finance, remote working, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Satoshi Nakamoto, Scientific racism, seigniorage, Skype, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, special drawing rights, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, Wave and Pay, WikiLeaks, Wolfgang Streeck, yield curve, zero-coupon bond

The shifts can be in response to fluctuating supply and demand (of monetary instruments) and changes in the political order. Far from being mutually exclusive, as mainstream thinking about the economy suggests, states and markets are part of the same basic configuration; they form an “ambiguous unity” (Hart 1986: 638). The relatively short-lived predominance of nation-states in the production and management of currency is giving way to a phase where money markets, offshore banking, and electronic payment systems are undermining the monetary sovereignty of nation-states (Hart 2001: 235). Money is as plural and dynamic today as it has ever been: “The money form is not standing still” (Hart 2001: 237). What distinguishes Hart’s approach is that it deals not with the difficulties that the erosion of state fiat money presents to governments but rather with the opportunities it presents to everyone else.

 

pages: 740 words: 217,139

The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama

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Admiral Zheng, agricultural Revolution, Andrei Shleifer, Asian financial crisis, Ayatollah Khomeini, barriers to entry, Berlin Wall, blood diamonds, California gold rush, cognitive dissonance, colonial rule, conceptual framework, correlation does not imply causation, currency manipulation / currency intervention, demographic transition, Deng Xiaoping, double entry bookkeeping, equal pay for equal work, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, hiring and firing, invention of agriculture, invention of the printing press, Khyber Pass, labour market flexibility, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Scramble for Africa, spice trade, Stephen Hawking, Steven Pinker, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Washington Consensus

Globalization has been called the “twilight of sovereignty.”37 This is surely an exaggeration, but technology and increased mobility have made it much harder for states to enforce laws on their own territory, collect taxes, regulate behavior, or do many of the other things associated with traditional political order. In the days when most wealth was held in the form of land, states could exercise considerable leverage on wealthy elites; today, that wealth can easily flee to offshore bank accounts.38 It is therefore no longer possible to speak simply about “national development.” In political science, comparative politics and international relations have traditionally been regarded as distinct subfields, the one dealing with things that happen within states, the other with relationships among states. Increasingly these fields will have to be studied as an integrated whole. How we got to this point, and how political development takes place in the contemporary world, will be the subject of the second volume of this work.

 

pages: 903 words: 235,753

The Stack: On Software and Sovereignty by Benjamin H. Bratton

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1960s counterculture, 3D printing, 4chan, Ada Lovelace, additive manufacturing, airport security, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Berlin Wall, bioinformatics, bitcoin, blockchain, Buckminster Fuller, Burning Man, call centre, carbon footprint, carbon-based life, Cass Sunstein, Celebration, Florida, charter city, clean water, cloud computing, connected car, corporate governance, crowdsourcing, cryptocurrency, dark matter, David Graeber, deglobalization, dematerialisation, disintermediation, distributed generation, don't be evil, Douglas Engelbart, Edward Snowden, Elon Musk, en.wikipedia.org, Eratosthenes, ethereum blockchain, facts on the ground, Flash crash, Frank Gehry, Frederick Winslow Taylor, future of work, Georg Cantor, gig economy, global supply chain, Google Earth, Google Glasses, Guggenheim Bilbao, High speed trading, Hyperloop, illegal immigration, industrial robot, information retrieval, intermodal, Internet of things, invisible hand, Jacob Appelbaum, Jaron Lanier, Jony Ive, Julian Assange, Khan Academy, linked data, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Masdar, McMansion, means of production, megacity, megastructure, Menlo Park, Minecraft, Monroe Doctrine, Network effects, new economy, offshore financial centre, oil shale / tar sands, packet switching, PageRank, pattern recognition, peak oil, performance metric, personalized medicine, Peter Thiel, phenotype, place-making, planetary scale, RAND corporation, recommendation engine, reserve currency, RFID, Sand Hill Road, self-driving car, semantic web, sharing economy, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, smart cities, smart grid, smart meter, social graph, software studies, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Startup school, statistical arbitrage, Steve Jobs, Steven Levy, Stewart Brand, Stuxnet, Superbowl ad, supply-chain management, supply-chain management software, TaskRabbit, the built environment, The Chicago School, the scientific method, Torches of Freedom, transaction costs, Turing complete, Turing machine, Turing test, universal basic income, urban planning, Vernor Vinge, Washington Consensus, web application, WikiLeaks, working poor, Y Combinator

The oceanic datacenter symbolizes the infrastructural offshoring that is one productive accident of the Cloud layer: the delamination of the layers of territory, economy, and sovereignty, one from the other, potentially perforating the domain of the state with the economies of nonstate infrastructure beamed in from the middle of the open ocean. This may conjure images of other ad hoc circumventions of national geography, such as pirate radio, offshore banking, and unrecognized microstates. But unlike these, the Cloud layer is not a peculiar outlier from an otherwise stable system of territorial sovereignty; rather, it is the technical basis of an emergent global system, an exception that takes on the force and diction of a geopolitical norm. The Cloud layer hosts more than a few streams of pirate data; it can carry entire cultures, economies, societies, and religions.

 

pages: 300 words: 78,475

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

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American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

The middle class, by and large, plays by the rules, then watches as its jobs disappear. The corporate class games the system—making sure its license to break the rules is built into the rules themselves. One of the most glaring examples of this continues to be the ability of corporations to cheat the public out of tens of billions of dollars a year by using offshore tax havens.35 Indeed, it’s estimated that companies and wealthy individuals funneling money through offshore tax havens are evading around $100 billion a year in taxes—leaving the rest of us to pick up the tab. And with cash-strapped states all across the country cutting vital services to the bone, it’s not like we don’t need the money. Here is Exhibit A of two sets of rules: According to the White House, in 2004, the last year data on this was compiled, U.S. multinational corporations paid roughly $16 billion in taxes on $700 billion in foreign active earnings—putting their tax rate at around 2.3 percent.36 Know many middle-class Americans getting off that easy at tax time?

In December 2008, the Government Accountability Office reported that 83 of the 100 largest publicly traded companies in the country—including AT&T, Chevron, IBM, American Express, GE, Boeing, Dow, and AIG—had subsidiaries in tax havens, or, as the corporate class comically calls them, “financial privacy jurisdictions.”37 Even more egregiously, of those 83 companies, 74 received government contracts in 2007.38 GM, for instance, got more than $517 million from the government—i.e. the taxpayers—that year, while shielding profits in tax-friendly places like Bermuda and the Cayman Islands. And Boeing, which received over $23 billion in federal contracts that year, had 38 subsidiaries in tax havens, including six in Bermuda. It’s as easy as opening up an island P.O. box, which is why another GAO study found that more than 18,000 companies are registered at a single address in the Cayman Islands, a country with no corporate or capital gains taxes.39 America’s big banks—including those that pocketed billions from the taxpayers in bailout dollars—seem particularly fond of the Cayman Islands.

At the time of the GAO report, Morgan Stanley had 273 subsidiaries in tax havens, 158 of them in the Caymans.40 Citigroup had 427, with 90 in the Caymans. Bank of America had 115, with 59 in the Caymans. Goldman Sachs had 29 offshore havens, including 15 in the Caymans. JPMorgan had 50, with seven in the Caymans. And Wells Fargo had 18, with nine in the Caymans. Perhaps no company exemplifies the corporate class/middle class double standard more than KBR/Halliburton. The company got billions from U.S. taxpayers, then turned around and used a Cayman Islands address to reduce its expenses.41 As the Boston Globe’s Farah Stockman reported, KBR, until 2007 a unit of Halliburton, “has avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven.” In 2008, KBR listed 10,500 Americans as being officially employed by two companies that, as Stockman wrote, “exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean.”42 Aside from the tax advantages, Stockman points out another benefit of this dodge: Americans who officially work for a company whose headquarters is a computer file in the Caymans are not eligible for unemployment insurance or other benefits when they get laid off—something many of them found out the hard way.

 

pages: 361 words: 97,787

The Curse of Cash by Kenneth S Rogoff

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Andrei Shleifer, Asian financial crisis, bank run, Ben Bernanke: helicopter money, Berlin Wall, bitcoin, blockchain, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, cryptocurrency, debt deflation, distributed ledger, Edward Snowden, ethereum blockchain, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial intermediation, financial repression, forward guidance, frictionless, full employment, George Akerlof, German hyperinflation, illegal immigration, inflation targeting, informal economy, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, Kenneth Rogoff, labor-force participation, large denomination, liquidity trap, money: store of value / unit of account / medium of exchange, moral hazard, moveable type in China, New Economic Geography, offshore financial centre, oil shock, open economy, payday loans, price stability, purchasing power parity, quantitative easing, RAND corporation, RFID, savings glut, secular stagnation, seigniorage, The Great Moderation, the payments system, transaction costs, unbanked and underbanked, unconventional monetary instruments, underbanked, unorthodox policies, Y2K, yield curve

To get a better sense of orders of magnitude, it is interesting to compare these overall tax evasion figures to estimates of tax evasion stemming from wealth hidden in tax havens like Luxembourg, the Virgin Islands, Bahamas, Cypress, Panama, and, of course, Switzerland. In his 2015 book, The Hidden Wealth of Nations, University of California professor Gabriel Zucman has estimated that total foreign financial wealth held in tax havens (including stocks, bonds, and bank accounts) amounts to about $7.6 trillion, or 8% of the world’s financial wealth of $95 trillion. Zucman estimates that the combined annual tax losses to the world’s governments due to tax havens are at least $200 billion per year, consisting of tax evasion on offshore income (dividends, interest payments, etc.) of about $125 billion, with the rest mainly being avoidance of wealth and inheritance taxes.

., 236n10 Stein, Jeremy, 177 Stockholms Banco, 25 subsidized debit cards, 48, 99–100, 204, 218 substituting interest-bearing debt for paper currency, cost of, 86–90 Suharto, 71 Summers, Lawrence, 122 Suzuki, Takashi, 235n6 Svennson, Lars, 231 Sweden: banknotes and coins in circulation, 108; cashless society, movement to, 107–9; currency/GDP ratio, 1995, 46–47; currency/GDP ratio, 2015, 36–37; decline in use of notes and coins, 84; declining total demand for large notes, 108; discount rate cuts in response to recent crises, 132; early private notes issued in, 25; financial stability concerns, negative interest rates and, 178; interest rates near the zero bound, 131; low-income individuals, accommodations for, 3; negative interest rates, payment on bonds and, 163; negative interest rates in, 5, 123; phaseout of large-denomination paper currency in, 95, 107, 109; revenue as a percentage of GDP, 2006–2015, 84 Swiss National Bank, 160–61, 246n23 Switzerland: borrowing capacity and debt-financed gold purchases, 246n23; currency/GDP ratio, 2015, 36; currency per capita, 37, 40; discount rate cuts in response to recent crises, 132; financial stability concerns, negative interest rates and, 178; foreign demand for paper currency of, 34; foreign holdings of currency, 41; interest rates near the zero bound, 131; large-denomination notes of, 31, 37; negative interest rates in, 5, 123; revenue as a percentage of GDP, 2006–2015, 83–84; as tax haven, 66; underground economy, estimated size of, 62–63 “taper tantrum” of May 2014, 126, 141 Tax Equity and Fiscal Responsibility Act of 1982, 233n6 tax evasion: in Canada, 65–66; consumer reward programs for verifying retail receipts, 65; in Europe, 61–65, 83; reducing, lost “profits” from printing currency covered by, 2; tax havens and, 66; in the United States, 60–61, 83; use of cash to facilitate, 59, 217 tax havens, 60, 66 Taxing Woman, A (Japanese film), 35 tax prepayment problem, 179–80 Taylor, John, 134, 188, 228, 231 Taylor rule, 193, 227–30, 244n5 Teles, Pedro, 243n10 terrorism, 76–77 Thatcher, Margaret (former prime minister, United Kingdom), 119 This Time Is Different data set, 252n2, 252n4 Trabandt, Mathias, 255n10 trade: misreporting of, 67 Tullock, Gordon, 174 Turkey, 191 Turner, Adair, 155 unbanked individuals.

Since nominal GDP has grown by roughly 30% since the last IRS benchmark year (2006), and assuming tax evasion has grown proportionately with GDP (which seems quite conservative, given that marginal tax rates have significantly increased and the size of the underground economy generally increases when growth tails off), this would translate to a 2015 net tax gap of $500 billion for federal taxes alone. True, some component of this gap is due to tax havens (e.g., in the Caribbean or Panama), perhaps 10–20%.6 But a large fraction of the remaining tax evasion derives from areas where there is no third-party information available,7 which of course rules out checks, credit card payments, and the like. That is, of the remaining tax gap, a large fraction (say, at least 50% and probably more) derives from cash-intensive areas.8 In the United States, state taxation is roughly 36% of the amount of federal taxation, and local taxation adds another 27% (so combined state and local tax collection is about two-thirds of federal tax revenue).9 Thus, accounting for evasion of state and local taxes would presumably raise total tax evasion estimates significantly, though not necessarily proportionately, because the tax mix is different.

 

pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, We are the 99%

Note that these financial statistics and balance-of-payments data in theory cover the entire world. In particular, banks in the tax havens are theoretically required to report their accounts to international institutions. The “anomaly” can presumably be explained by various statistical biases and measurement errors. FIGURE 12.6. The net foreign asset position of rich countries Unregistered financial assets held in tax havens are higher than the official net foreign debt of rich countries. Sources and series: see piketty.pse.ens.fr/capital21c. By comparing all the available sources and exploiting previously unused Swiss bank data, Gabriel Zucman was able to show that the most plausible reason for the discrepancy is that large amounts of unreported financial assets are held in tax havens. By his cautious estimate, these amount to nearly 10 percent of global GDP.55 Certain nongovernmental organizations have proposed even larger estimates (up to 2 or 3 times larger).

Banking data are already automatically shared with the tax authorities in a country with 300 million people like the United States, as well as in countries like France and Germany with populations of 60 and 80 million, respectively, so there is obviously no reason why including the banks in the Cayman Islands and Switzerland would radically increase the volume of data to be processed. Of course the tax havens regularly invoke other excuses for maintaining bank secrecy. One of these is the alleged worry that governments will misuse the information. This is not a very convincing argument: it is hard to see why it would not also apply to information about the bank accounts of those incautious enough to keep their money in the country where they pay taxes. The most plausible reason why tax havens defend bank secrecy is that it allows their clients to evade their fiscal obligations, thereby allowing the tax havens to share in the gains. Obviously this has nothing whatsoever to do with the principles of the market economy. No one has the right to set his own tax rates.

In particular, it is more than twice as large as the official negative net position of the combined rich countries (see Figure 12.6).57 Now, all the evidence indicates that the vast majority (at least three-quarters) of the financial assets held in tax havens belongs to residents of the rich countries. The conclusion is obvious: the net asset position of the rich countries relative to the rest of the world is in fact positive (the rich countries own on average more than the poor countries and not vice versa, which ultimately is not very surprising), but this is masked by the fact that the wealthiest residents of the rich countries are hiding some of their assets in tax havens. In particular, this implies that the very sharp increase in private wealth (relative to national income) in the rich countries in recent decades is actually even larger than we estimated on the basis of official accounts.

 

pages: 320 words: 87,853

The Black Box Society: The Secret Algorithms That Control Money and Information by Frank Pasquale

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Affordable Care Act / Obamacare, algorithmic trading, Amazon Mechanical Turk, asset-backed security, Atul Gawande, bank run, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, bonus culture, Brian Krebs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chelsea Manning, cloud computing, collateralized debt obligation, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, cryptocurrency, Debian, don't be evil, Edward Snowden, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, financial innovation, Flash crash, full employment, Goldman Sachs: Vampire Squid, Google Earth, Hernando de Soto, High speed trading, hiring and firing, housing crisis, informal economy, information retrieval, interest rate swap, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, Julian Assange, Kevin Kelly, knowledge worker, Kodak vs Instagram, kremlinology, late fees, London Interbank Offered Rate, London Whale, Mark Zuckerberg, mobile money, moral hazard, new economy, Nicholas Carr, offshore financial centre, PageRank, pattern recognition, precariat, profit maximization, profit motive, quantitative easing, race to the bottom, recommendation engine, regulatory arbitrage, risk-adjusted returns, search engine result page, shareholder value, Silicon Valley, Snapchat, Spread Networks laid a new fibre optics cable between New York and Chicago, statistical arbitrage, statistical model, Steven Levy, the scientific method, too big to fail, transaction costs, two-sided market, universal basic income, Upton Sinclair, value at risk, WikiLeaks

Other regulators are trying to help here.101 CFTC and SEC staff conclude “that current technology is capable of representing derivatives using a common set of computer-readable descriptions[, which] are precise enough to use both for the calculation of net exposures and to serve as part or all of a binding legal contract.”102 As with the SEC’s Consolidated Audit Trail,103 which tracks trading, the idea here is to develop methods not merely for real-time monitoring of troubling developments, but also for red-flagging the most problematic trading strategies.104 W AT C H I N G ( A N D I M P R O V I N G ) T H E W AT C H E R S 171 However ambitiously American fi nance regulators may set standards, their efforts are compromised by the internationalization of  major fi rms, which plead that any stringent national standard for recording information may make it harder to do business overseas. They want to wait for international coordination— a process that could take decades. Or they could simply move their trading overseas. If the proliferation of tax havens is any guide, there are plenty of places willing to bend (or end) rules to lure finance business.105 A small, hopeful step toward improving government understanding of financial flows happened when Congress passed the Foreign Account Tax Compliance Act (FATCA). Thanks in part to a series of embarrassing investigations into tax havens by Senator Carl Levin, that law targets illicit income.106 But there is little reason in principle why its auditing requirements could not be expanded to encompass a larger view of financial flows. Just as we need to know where shadowy data brokers’ data is coming from, and where it (and the inferences drawn from it) are going to, we need to have a much better sense of where funds are flowing from, and where they (and the income they generate) is going to.

It requires foreign fi nancial institutions (FFIs) to report fi nancial information about accounts held by American citizens, or pay a withholding tax.108 Congress enacted FATCA in response to the problem of international tax evasion. Too many U.S. citizens were using offshore accounts to avoid paying U.S. taxes, reminiscent of the financial firms who locate dozens of shell companies in “secrecy jurisdictions” to deflect the attention of auditors or regulators.109 FATCA is shaping up to be a major advance in tracking global money flows.110 Tax havens may seem like an outlier in the global economy, a problem well outside the run of ordinary business. But tax havens 172 THE BLACK BOX SOCIETY are among “the most powerful instruments of globalization,” critical to many business strategies.111 Shell company networks can be structurally similar to the webs of entities used by tax evaders. FATCA requires that FFIs report both on accounts held directly by individuals and on interests in accounts held by shell entities for the benefit of U.S. individuals.

Scott Peppet’s article “Unraveling Privacy”[0] has described how individual behavior can render past models of privacy protection obsolete. Scott R. Peppet, “Unraveling Privacy: The Personal Prospectus and the Threat of a Full-Disclosure Future,” Northwestern Law Review 105 (2011): 1153–1204. 211. Nicholas Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (New York, NY: Vintage Books, 2012); Hedda Leikvang, “Piercing the Veil of Secrecy: Securing Effective Exchange of Information to Remedy the Harmful Effects of Tax Havens,” Vanderbilt Journal of Transnational Law 45 (2012): 330; David Leigh, Harold Frayman, and James Ball, “Front Men Disguise the Offshore Game’s Real Players” (Nov. 2012). International Consortium of Investigative Journalists. Available at http://www.icij.org /front-men -disguise-offshore-players. 212.

 

pages: 221 words: 55,901

The Globalization of Inequality by François Bourguignon

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Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, income inequality, income per capita, labor-force participation, minimum wage unemployment, offshore financial centre, open economy, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

Given this, it is the tax rate on income from capital that should be raised. But the major obstacle to this— and one of the reasons for the asymmetry between the taxation of labor and capital—is the international mobility of capital, one of the core features of globalization. The worry is that raising the tax rate on income from capital would drive capital owners to invest it in other countries that have more favorable tax systems, as is notoriously the case with tax havens. In other words, there is a concern that tax evasion or optimization could shrink the tax base, resulting in a drop in tax revenue and in the volume of transfers to the lower end of the income distribution that these taxes make possible. We do not have very precise estimates for the elasticity of the tax base in relation to the tax rate. It is therefore difficult to measure the room that states have to maneuver on this subject.

Gabriel Zucman estimates that an average of 8% of household fiSee “The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review,” Journal of Economic Literature 50, no. 1 (2012): 3–50. 6  The 72 cents figure is taken from Emmanuel Saez, Joel Slemrod, and Seth Giertz, The Elasticity of Taxable Income, p. 9. The 55 cents figure is obtained by applying their calculation to the top of their range of estimates of the elasticity of taxable income. 7  This was prior to the recent reforms by the Hollande administration aimed at closing the gap between the taxation of labor and capital income. 5  162 Chapter 5 nancial wealth in developed countries is located in tax havens, with this number logically being substantially higher for high incomes and large fortunes.8 Beyond a certain threshold of taxation, international coordination would become necessary if taxation is to be used to help correct for rising inequalities in rich countries. This is definitely a key issue. Independent of short-­and medium-­term changes in the tax base, there is also the concern that, over the longer term, a rise in taxation might hinder a country’s potential for innovation and creativity, and as a result its potential for growth.

In particular, it is quite possible that the developed world is caught in a race toward the bottom in progressive taxation matters, each nation protecting itself against mobility by weakening its tax system. If this is the case, then only some form of international coordination may solve the problem. From that point of view, the recent initiatives by G20 countries to regulate the international activity of banks and the flow of capital to tax havens are encouraging. Recent initiatives by the United States to reduce tax evasion, the current negotiations between Switzerland, the United States, and some European countries to re-­establish some transparency also go in the right direction. They could also be the sign that another kind of globalization is coming into being in the area of capital flows control. At the global level, poor countries are the issue.

 

pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population, World Values Survey

Calculation based on World Bank data. 15. See R. Kozul-Wright and P. Rayment, The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (London: Zed Books and Third World Network, 2007), Chapter 4, for an excellent review of the evidence. 16. On tax havens, see N. Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (London: Vintage, 2012), and the website of Tax Justice Network, www.taxjustice.net. At the time of writing (autumn 2013), there has been a lot of talk of a clamp-down on tax havens, especially through the G20, but no concrete action has been taken. 17. Christian Aid, ‘The shirts off their backs: how tax policies fleece the poor’, September 2005, downloadable from: http://www.christianaid.org.uk/images/the_shirts_off_their_backs.pdf. 18. The story of this debacle is told in full in Chang, Bad Samaritans, Chapter 1 (‘The Lexus and the Olive Tree revisited’). 19.

Here we will look at income per capita figures, given that we have already talked a lot about overall output figures, such as GDP and GNP, that are identical to overall income figures in theory and are very similar to them in practice. Countries that we typically know as the richest countries have over $40,000 per capita income According to the World Bank, in 2010, the country with the highest income (GNI) per capita in the world was Monaco ($197,460), followed by Liechtenstein ($136,540). However, both these are tax havens with tiny populations (33,000 and 36,000 respectively). So, if we exclude countries with a population of less than half a million, Norway, with a per capita income of $85,380, is the richest country (that is, it has the highest per capita GNI). A selection of the richest countries is listed in Table 6.1. They are mostly in Western Europe and Western offshoots. A few Asian countries belong to this group, with Japan and Singapore firmly in the upper league.

* These companies minimized their tax obligations in countries like Britain by inflating the costs for their British subsidiaries by having their subsidiaries in third countries ‘over-charge’ (that is, charge more than what they would have in open markets) the British subsidiaries for their services. These third countries were countries with a corporate tax rate that is lower than the UK rate (e.g., Ireland, Switzerland or the Netherlands) or even tax havens, namely, countries that attract foreign companies to set up ‘paper companies’ by charging very low, or even no, corporate taxes (e.g., Bermuda, the Bahamas).16 The age-old trick of transfer pricing Taking advantage of the fact that they operate in countries with different tax rates, TNCs have their subsidiaries over-charge or under-charge each other – sometimes grossly – so that profits are highest in those subsidiaries operating in countries with the lowest corporate tax rates.

 

pages: 237 words: 72,716

The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer

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Branko Milanovic, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, labour market flexibility, labour mobility, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income

Specifically, he advocates that capital equipment should be expensed immediately and the corporate tax rate lowered to 25% to be globally competitive because “what makes blue-collar people able to sustain a reasonable standard of living, the investment in the industrial sector, and that is treated poorly by our tax code and our government policy.” 176 T. Raffel and G. Samuels Deficit reduction has motivated Western governments to tackle tax havens, which coincidentally may help address wealth inequalities when stricter tax enforcement captures more unreported earnings. Monks and Rasmussen advocate stronger tax regimes and higher progressive income taxes in countries with comparatively lower rates. “We need to solve the tax haven problem and taxation problem,” advises Rasmussen. “We need to ensure that capital income is treated in principle the same way as labor income, which will mean an increase in taxation, I admit that. But could you explain to me, why not? Why should the CEO be taxed more lightly than the hard-working industrial worker, why?

In the seventies, when I was a young Ph.D. student in the U.S., I remember my fellow British students were saying they didn’t want to work in the U.K. at any price! So too much redistribution through tax is killing the generation of economic value. And when people can move around, then you cannot tax them significantly more than the average worldwide tax rate, or even much more than what the acceptable tax havens would do. So that doesn’t work anymore. 24 B. Collomb Do we have other means to reduce inequality? If redistribution doesn’t work, can you reduce inequality at the source of revenue? Social consensus, maybe? If it’s not acceptable, or if it’s considered to be excessive to make too much money, will inequality be curbed? I am not sure, in a free market economy you can control the phenomenon.

On tax levels, we may also go back to the higher estate taxes we had in the U.S., for example. There’ll be a little bit of tax increase, clearly. It’s always difficult to ask a business person to recommend a higher tax level, so I’m not sure I would recommend it, but I think it will happen and I won’t fight against it in the U.S. In France, I would fight it because we are already at a level which is too high. I guess things which are being done against tax havens are going to improve the inequality situation. Things which are being done against corruption are going to improve the inequality situation. But if we have again a growing economy, if we have a lively economy, there will be still a lot of opportunities to make a lot of money by having a good idea and developing it. I don’t think we want to hinder that. So I don’t believe we’ll go back to the fifties, because in the fifties there were much less opportunities for people to make a difference, and that was not good.

 

pages: 235 words: 62,862

Utopia for Realists: The Case for a Universal Basic Income, Open Borders, and a 15-Hour Workweek by Rutger Bregman

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autonomous vehicles, banking crisis, Bartolomé de las Casas, Berlin Wall, Bertrand Russell: In Praise of Idleness, Branko Milanovic, cognitive dissonance, computer age, conceptual framework, credit crunch, David Graeber, Diane Coyle, Erik Brynjolfsson, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Gilder, happiness index / gross national happiness, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, income inequality, invention of gunpowder, James Watt: steam engine, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, Kodak vs Instagram, labour market flexibility, labour mobility, low skilled workers, means of production, megacity, meta analysis, meta-analysis, microcredit, minimum wage unemployment, Mont Pelerin Society, Nathan Meyer Rothschild: antibiotics, Occupy movement, offshore financial centre, Peter Thiel, post-industrial society, precariat, RAND corporation, randomized controlled trial, Ray Kurzweil, Ronald Reagan, Second Machine Age, Silicon Valley, Simon Kuznets, Skype, stem cell, Steven Pinker, telemarketer, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tyler Cowen: Great Stagnation, universal basic income, wage slave, War on Poverty, We wanted flying cars, instead we got 140 characters, wikimedia commons, women in the workforce, working poor, World Values Survey

Invariably, it all revolves around the question: Which knowledge and skills do today’s students need to get hired in tomorrow’s job market – the market of 2030? Which is precisely the wrong question. In 2030, there will likely be a high demand for savvy accountants untroubled by a conscience. If current trends hold, countries like Luxembourg, the Netherlands, and Switzerland will become even bigger tax havens, enabling multinationals to dodge taxes even more effectively, leaving developing countries with an even shorter end of the stick. If the aim of education is to roll with these kinds of trends rather than upend them, then egotism is set to be the quintessential 21st-century skill. Not because the law or the market or technology demand it, but solely because that, apparently, is how we prefer to earn our money.

The prevalence of the terms “GNP” and “GDP” in books published in English, 1930–2008 Initially, the more common measure was the gross national product (GNP), but in the 1970s this was superseded by the GDP. The GNP adds up all a country’s economic activity (including activities abroad), while the GDP adds up all activities within its borders (including by foreign enterprises). In the U.S., the gap between GNP and GDP is never more than a few percent, but in tax havens, it’s a different story. Ireland is a good example: Where its GNP and GDP were still about equal in 1980, by 2009 Ireland’s GNP was one-fifth the size of its GDP because the GDP had since been inflated by billions in foreign capital. Source: Google Ngram As one historian explains, “The first thing you do in 1950s and ‘60s if you’re a new nation is you open a national airline, you create a national army, and you start measuring GDP.”23 But that last item became progressively trickier.

Major dilemmas such as how to structure a democracy or what a country needs to prosper, can’t be answered by an RCT, let alone solved by throwing some cash at the problem. To fixate on all those clever studies is to forget that the most effective anti-poverty measures happen elsewhere in the economic food chain. The OECD estimates that poor countries lose three times as much to tax evasion as they receive in foreign aid.16 Measures against tax havens, for example, could potentially do far more good than well-meaning aid programs ever could. We could even think on a bigger scale than that. Imagine there was a single measure that could wipe out all poverty everywhere, raising everybody in Africa above our Western poverty line, and in the process put a few extra months’ salary in our pockets too. Just imagine. Would we take that measure? No.

 

pages: 913 words: 299,770

A People's History of the United States by Howard Zinn

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affirmative action, agricultural Revolution, Albert Einstein, anti-communist, Bartolomé de las Casas, Bernie Sanders, British Empire, clean water, colonial rule, death of newspapers, desegregation, equal pay for equal work, feminist movement, friendly fire, full employment, Howard Zinn, illegal immigration, land reform, Mercator projection, Mikhail Gorbachev, minimum wage unemployment, Monroe Doctrine, new economy, New Urbanism, offshore financial centre, Plutocrats, plutocrats, profit motive, Ralph Nader, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, Rosa Parks, Silicon Valley, strikebreaker, Telecommunications Act of 1996, The Wealth of Nations by Adam Smith, transcontinental railway, union organizing, Upton Sinclair, very high income, War on Poverty, Works Progress Administration

The real reason for the invasion, one high American official told Gwertzman, was that the United States should show (determined to overcome the sense of defeat in Vietnam) that it was a truly powerful nation: “What good are maneuvers and shows of force, if you never use it?” The connection between U.S. military intervention and the promotion of capitalist enterprise had always been especially crass in the Caribbean. As for Grenada, an article in the Wall Street Journal eight years after the military invasion (October 29, 1991) spoke of “an invasion of banks” and noted that St. George’s, the capital of Grenada, with 7500 people, had 118 offshore banks, one for every 64 residents. “St. George’s has become the Casablanca of the Caribbean, a fast-growing haven for money laundering, tax evasion and assorted financial fraud. . . .” After a study of various U.S. military interventions, political scientist Stephen Shalom (Imperial Alibis) concluded that people in the invaded countries died “not to save U.S. nationals, who would have been far safer without U.S. intervention, but so that Washington might make clear that it ruled the Caribbean and that it was prepared to engage in a paroxysm of violence to enforce its will.”

 

pages: 444 words: 151,136

Endless Money: The Moral Hazards of Socialism by William Baker, Addison Wiggin

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Andy Kessler, asset allocation, backtesting, bank run, banking crisis, Berlin Wall, Bernie Madoff, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, capital asset pricing model, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, crony capitalism, cuban missile crisis, currency manipulation / currency intervention, debt deflation, Elliott wave, en.wikipedia.org, Fall of the Berlin Wall, feminist movement, fiat currency, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, housing crisis, income inequality, index fund, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, land reform, liquidity trap, Long Term Capital Management, McMansion, moral hazard, mortgage tax deduction, naked short selling, offshore financial centre, Ponzi scheme, price stability, pushing on a string, quantitative easing, RAND corporation, rent control, reserve currency, riskless arbitrage, Ronald Reagan, school vouchers, seigniorage, short selling, Silicon Valley, six sigma, statistical arbitrage, statistical model, Steve Jobs, The Great Moderation, the scientific method, time value of money, too big to fail, upwardly mobile, War on Poverty, Yogi Berra, young professional

Upon one’s death, the negative basis created through the repeated cashing out through boosting the mortgage gets erased, offsetting much of the burden of the punitive death tax rate. Quite a bit of wealth escapes taxation entirely, either from the use of offshore havens or from illegal activities that are cash oriented. The OECD estimates that between $5 trillion and $7 trillion, or 6 to 8 percent of total global assets under management (AUM) resides in tax havens, with $1.4 trillion of this in the Cayman Islands alone. The Tax Justice Network suggests that tax revenue lost to tax havens is about one-quarter trillion dollars annually, with about $100 billion of this being in avoidance of taxes in the United States. By comparison, the total taxes collected from the roughly one million returns filed by households in the top tax bracket were $345 billion in 2006. Assuming the poor don’t fly to Liechtenstein, Andorra, or the Caymans to open accounts or to deposit cash, there appears to be considerable leakage from top bracket U.S. taxpayers seeking to avoid the government’s 70 percent take by the time of death, or perhaps they simply wish to launder illicit funds.

If the average pretax rate of return on capital employed is north of 20 percent generally, then a 1 percent tax rate would be the equivalent to a 5 percent income tax. Double taxation still exists. It is essential to appreciate that those who pay capital gains are doing so on money that is residual to the prior application of corporate or individual tax rates—unless that individual hails from the über-rich and can make use of borrowing or derivatives or perhaps even a foreign tax haven. To enjoy the low capital gains tax rate, such assets typically exist in a structure such as a domestic C-corporation or a commercial real estate direct investment or partnership. The former is taxed at a 35 percent rate pretty much across the board, and the latter would generate rental income subject to the regular tax table. There are many who are not part of the super wealthy who have small businesses or a small plot of second tier commercial real estate that might need to be sold, perhaps due to divorce, a change in financial The Rich are Different from You and Me 171 condition, or use for another investment, or to simply spend and enjoy.

Anecdotal evidence of evasion surfaced once again recently when in July 2008 UBS announced that accounts for 20,000 U.S. clients opened through its private bankers in Switzerland would need to be closed amid investigations by the United States.7 Considering The Rich are Different from You and Me 173 that only an estimated 250,000 households earn greater than $500,000 per year, might one generalize that the border fence in place to discourage capital flight looks like, ahem, Swiss cheese? Given that this is for one bank and one highly visible tax haven, does it not take much imagination to conjure up hundreds of thousands of such accounts? In February 2009, UBS entered into a $780 million settlement agreement with the U.S. Department of Justice. Although billed as a massive victory for the U.S. government, in reality UBS has agreed to name a mere 250 clients, and perhaps as many as 400 among the 20,000. These are probably individuals whose identities the Swiss Financial Markets Supervisory Authority had already planned to reveal in earlier negotiations, because they were also persona non grata in Switzerland for having violated tax laws of that country.

 

pages: 379 words: 114,807

The Land Grabbers: The New Fight Over Who Owns the Earth by Fred Pearce

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Asian financial crisis, banking crisis, big-box store, blood diamonds, British Empire, Cape to Cairo, carbon footprint, clean water, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, index fund, Jeff Bezos, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, Mohammed Bouazizi, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, urban planning, urban sprawl, WikiLeaks

They grumble that Payne’s crowd are all talk. And Emergent does seem to be everywhere and nowhere. AgriLand is registered in Luxembourg, while its management is in London. Its land buying is done through EmVest, a Pretoria-based joint venture with Grainvest, a subsidiary of the Russell Stone Group, a South African company that combines agricultural investment with selling financial services. It banks in Mauritius, a tax haven. The fund’s publicity promises that it is “breaking new ground in Africa” and bringing development. “Local smallholders benefit because we hire and train them in new methods of farming,” Payne says. “Some will want to transfer those methods to their own plots.” Well, maybe in theory. But most of its activity is more prosaic than the PR. Its partners in Pretoria “have a lot of people of Afrikaner descent, people who were brought up on the land, very capable farmers, very tough,” Murrin told Reuters.

Other bad (and golden) boys tied up in the land rush include Anthony “Chocfinger” Ward, whose Armajaro Holdings spectacularly cornered the world’s cocoa futures, allowing him to pocket $40 million in two months as prices soared; Guy Hands, ex–Goldman Sachs bond trader and chairman of Terra Firma; litigious Dan Gold and his QVT Financial hedge fund; and Zambia-born former England Test cricketer and spin bowler Phil Edmonds, of whom more later. The Wall Street Journal found forty-five private equity groups wanting to spend over $2 billion in African agriculture in 2010, with London their biggest center of operations. Or rather London and the cloud of tax havens that the last vestiges of the British Empire have bequeathed to the world: the Cayman Islands, British Virgin Islands, Isle of Man, and Channel Islands. I continued my tour of London’s land investors in a mews side street behind the rugby stadium in Twickenham, where I met the “Togo boys.” A group of smart city slickers with nice cars and stubbly chins got lucky with the West African government of tiny Togo.

The Greenleaf website was still saying six hundred in late 2011, when there were only half as many at work, and Peters said the maximum would be four hundred because of mechanization. West Africa is popular with other British “boutique” investment firms that allow you to scratch a personal profit from a patch of African soil. In 2011, GreenWorld BVI, which is incorporated in the British Virgin Islands tax haven, was offering online gamblers two and a half acres of “high quality farmland” to grow rice in Sierra Leone for around $3000. The investment was “specifically designed to be both profitable as well as socially responsible . . . allowing you to invest like a major institutional investor, but at a fraction of the initial cost.” Meanwhile Agri Capital, based in Alderley Edge, Cheshire, was offering what appeared to be the same land at the same price, with the promise that “our aim is to harvest your profit.”

 

pages: 322 words: 107,576

Bad Science by Ben Goldacre

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Asperger Syndrome, correlation does not imply causation, experimental subject, Ignaz Semmelweis: hand washing, John Snow's cholera map, Louis Pasteur, meta analysis, meta-analysis, offshore financial centre, p-value, placebo effect, Richard Feynman, Richard Feynman, risk tolerance, Ronald Reagan, the scientific method, urban planning

Chandra, a disgraced researcher whose papers have been discredited and retracted, who has been the subject of major articles on research fraud, including one by Dr Richard Smith in the British Medical Journal called ‘Investigating the previous studies of a fraudulent author’. There is an entire three-part investigative documentary series on his worrying career made by Canada’s CBC (you can watch it online), and at the conclusion of it he was, to all intents and purposes, in hiding in India. He has 120 different bank accounts in various tax havens, and he did, of course, patent his own multivitamin mixture, which he sells as an ‘evidence-based’ nutrition supplement for the elderly. The ‘evidence’ is largely derived from his own clinical trials. In the name of scrupulous fairness, I am happy to clarify that much of this has come out since the first edition of Holford’s book; but there had been serious questions about Chandra’s research for some time, and nutrition academics were wary about citing it, simply because his findings seemed to be so incredibly positive.

Chandra, a disgraced researcher whose papers have been discredited and retracted, who has been the subject of major articles on research fraud, including one by Dr Richard Smith in the British Medical Journal called ‘Investigating the previous studies of a fraudulent author’. There is an entire three-part investigative documentary series on his worrying career made by Canada’s CBC (you can watch it online), and at the conclusion of it he was, to all intents and purposes, in hiding in India. He has 120 different bank accounts in various tax havens, and he did, of course, patent his own multivitamin mixture, which he sells as an ‘evidence-based’ nutrition supplement for the elderly. The ‘evidence’ is largely derived from his own clinical trials. In the name of scrupulous fairness, I am happy to clarify that much of this has come out since the first edition of Holford’s book; but there had been serious questions about Chandra’s research for some time, and nutrition academics were wary about citing it, simply because his findings seemed to be so incredibly positive.

Chandra, a disgraced researcher whose papers have been discredited and retracted, who has been the subject of major articles on research fraud, including one by Dr Richard Smith in the British Medical Journal called ‘Investigating the previous studies of a fraudulent author’. There is an entire three-part investigative documentary series on his worrying career made by Canada’s CBC (you can watch it online), and at the conclusion of it he was, to all intents and purposes, in hiding in India. He has 120 different bank accounts in various tax havens, and he did, of course, patent his own multivitamin mixture, which he sells as an ‘evidence-based’ nutrition supplement for the elderly. The ‘evidence’ is largely derived from his own clinical trials. In the name of scrupulous fairness, I am happy to clarify that much of this has come out since the first edition of Holford’s book; but there had been serious questions about Chandra’s research for some time, and nutrition academics were wary about citing it, simply because his findings seemed to be so incredibly positive.

 

pages: 382 words: 92,138

The Entrepreneurial State: Debunking Public vs. Private Sector Myths by Mariana Mazzucato

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Apple II, banking crisis, barriers to entry, Bretton Woods, California gold rush, call centre, carbon footprint, Carmen Reinhart, cleantech, computer age, credit crunch, David Ricardo: comparative advantage, demand response, deskilling, energy security, energy transition, eurozone crisis, everywhere but in the productivity statistics, Financial Instability Hypothesis, full employment, Growth in a Time of Debt, Hyman Minsky, incomplete markets, information retrieval, invisible hand, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, natural language processing, new economy, offshore financial centre, popular electronics, profit maximization, Ralph Nader, renewable energy credits, rent-seeking, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, Silicon Valley ideology, smart grid, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, total factor productivity, trickle-down economics, Washington Consensus, William Shockley: the traitorous eight

In fact, Duhigg and Kocieniewski (2012) note that Apple adopts a similar approach in the global sphere by setting up various subsidiaries in corporate tax havens such as Luxembourg, Ireland, the Netherlands and the British Virgin Islands in order to shuffle profits around and benefit from low-tax advantages. US tax code allows American companies to assign their product or service intellectual property (IP) rights to their foreign subsidiaries, which also allows companies to reduce their tax liabilities at a significant rate. In the case of Apple, as Duhigg and Kocieniewski explain, the company’s Irish subsidiaries reportedly own the IP rights of many products and receive royalty payments from Apple’s product sales. Ownership of those Irish subsidiaries is also shared with another Apple subsidiary (Baldwin Holdings Unlimited) in another tax haven location, the British Virgin Islands. It is difficult to calculate the exact figures regarding how much Apple has managed to save through this global tax-shuffling scheme.

Given the massive returns generated by their success, shouldn’t entrepreneurs then return some of the rewards to the government, so it can continue taking the big risks that can later be turned into market game-changers? One could indeed hold that the reward is created in new tax revenues. Yet, globalization and information technology have enabled profits to migrate to low tax regions or even within tax havens. It is clear that innovation is needed in the tax system to ensure that high-risk public spending can continue to guarantee future private innovation. Mazzucato’s analysis provides a framework for thinking about ways to reform the current model to achieve that. The other direction for public sector innovation relates to ‘green’ technology. It is my own conviction that other than saving the planet, the green direction can, if properly supported, save the economy.

 

pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

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Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, joint-stock company, Joseph Schumpeter, labour market flexibility, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, means of production, Menlo Park, moral hazard, moveable type in China, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Plutocrats, plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, We are the 99%, Wolfgang Streeck

Increasingly, rival interest groups fought to raise their share of government revenue. This was taken to extremes in the US, where the fiscal system is now riddled with concessions and exemptions won through lobbying and special pleading. The result everywhere is a high degree of complexity and the growth of tax bureaucracies, along with a new form of tax revolt whereby armies of lawyers and accountants exploit avoidance opportunities, often via off-shore tax havens, on behalf of their clients. Their guiding philosophy is the dictum of the British judge Lord Clyde, who said: No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations as to enable the Inland Revenue to put the largest shovel into his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket.

But should Piketty’s assertion turn out to be right, the already extreme levels of inequality in pre-tax income and wealth in much of the developed world would indeed become even more extreme. Hence his case for far higher marginal tax rates on high incomes and a progressive global wealth tax.199 If policymakers found his arguments persuasive, that would imply a return to the level of taxation reached in Western democracies in the 1970s – the high water mark in terms of redistribution. Since then, globalisation, the growth of competition between different tax jurisdictions and of tax havens, has restrained the power of governments to tax. Yet reformers such as Margaret Thatcher and Ronald Reagan largely failed in their efforts to shrink the size of the state. And, paradoxically, we now have more taxation without representation on a voluntary basis, because declining turnouts in elections in the US and Europe mean that a growing proportion of the electorate pays taxes but does not vote.

Chilton 1 railway mania (Britain 1840s) 1 Rajan, Raghuram 1, 2, 3, 4 Rand, Ayn 1, 2 Raphael 1 Reading, Brian 1, 2, 3, 4 Reagan, Ronald 1, 2, 3, 4, 5 Reformation 1, 2 regulators 1 regulatory arbitrage 1 Renaissance 1, 2, 3 Republic (Plato) 1, 2 retail banking 1 Reynolds, Joshua 1, 2 Ricardo, David 1 Richelieu, Cardinal 1 Ring of the Nibelung (Wagner) 1, 2, 3 Ritblat, John 1 Roaring Twenties 1, 2 robber barons 1, 2, 3 Robinson Crusoe (Daniel Defoe) 1 Rockefeller, John D. 1, 2 rogue traders 1 Rolls-Royce 1 Roman republic 1 Roosevelt, Franklin 1 Rosenberg, Harold 1 Roseveare, Henry 1 Roubini, Nouriel 1 Rousseau, Jean-Jacques 1, 2 de Rouvroy, Claude-Henri 1 Royal Exchange (London) 1 Rubens, Peter Paul 1, 2 rural exodus 1 Ruskin, John 1, 2, 3 Saatchi, Maurice 1, 2 Samuelson, Paul 1 Sandel, Michael 1 sarakin banks (Japan) 1 Sarkozy, Nicolas 1 Sassoon, Donald 1 Satyricon (Petronius) 1 Savage, Richard 1, 2 Schama, Simon 1, 2 Schiller, Friedrich 1 Scholes, Myron 1 Schopenhauer 1 Schuman, Robert 1 Schumpeter, Joseph 1, 2, 3, 4, 5, 6, 7 Schwed, Fred 1, 2 second industrial revolution (1920s) 1 Sen, Amartya 1 separation of powers 1 Shakespeare 1, 2, 3, 4, 5, 6 shareholder activists 1 shareholder value 1 shareholders 1 Shaw, George Bernard 1 Sherman Antitrust Act (US 1890) 1 Shiller, Robert 1, 2, 3, 4 Shleifer, Andrei 1 short selling 1, 2 Siemens 1 von Siemens, Werner 1 Sinclair, Upton 1 Skidelsky, Robert 1, 2 Smith, Adam 1, 2, 3, 4, 5, 6, 7, 8 Smith, Sidney 1 Smithers, Andrew 1, 2 Smollett, Tobias 1 social democratic model 1, 2 Société Générale 1 Socrates 1 Solon 1 Sombart, Werner 1, 2 Soros, George 1, 2 Sotheby’s 1 South Sea Bubble 1, 2, 3, 4, 5, 6, 7 sovereign debt 1 sovereign debt crisis (2009) 1 Spain 1, 2, 3, 4, 5, 6 speculation 1 Spenser, Edmund 1 Stabilising an Unstable Economy (Hyman Minsky) 1 Steed, Wickham 1 Stephenson, George 1 Stevens, Wallace 1 Streeck, Wolfgang 1 subprime mortgages 1, 2, 3, 4 Sutter, John 1 Sutton, Willie 1 swarf 1 Sweden 1 Swift, Jonathan 1, 2, 3 Tale of Two Cities (Charles Dickens) 1 Taleb, Nassim Nicholas 1, 2 Talleyrand, Charles Maurice de 1 Taoism 1 tax farming 1 tax havens 1 tax revolts 1 taxation 1 Taylor, John 1 Tea Party movement 1 Tennyson, Alfred 1 Thaler, Richard 1 Thatcher, Margaret 1, 2, 3, 4, 5, 6 Theory of Moral Sentiments (Adam Smith) 1 ‘thingism’ 1 Thomas Aquinas 1, 2 Thompson, E. P. 1 Times/Sotheby Art Indices 1 Timon of Athens (Shakespeare) 1 Titian 1 toads (see Madame Nui’s toad) Tocqueville, Alexis de 1 ‘too big/interconnected to fail’ syndrome 1 Toyoda, Sakichi 1 transmutation of base metal into gold 1 Trichet, Jean-Claude 1 trickledown theory 1, 2 Trollope, Anthony 1, 2, 3 tulip mania 1, 2, 3 Turner, Adair 1 two-tier capital structures 1 UBS 1 UK debt 1 entrepreneurs 1, 2 financial services 1 gold standard 1, 2 inequality 1, 2, 3 manufacturing 1, 2, 3, 4, 5 regulation 1, 2 speculation 1 taxation 1 Unto This Last (John Ruskin) 1 US 1 banks 1, 2, 3, 4, 5 Bretton Woods Conference 1 debt 1, 2, 3, 4 dependence on China 1, 2 financial services 1 gold standard 1 inequality 1, 2, 3 literature 1 manufacturing 1, 2, 3 regulation 1 robber barons 1 speculation 1, 2, 3 taxation 1, 2, 3, 4, 5 trade 1 usury laws 1, 2 Utopia (Thomas More) 1, 2 Vanderbilt, Cornelius 1 Vasari 1 Vayanos, Dimitri 1 Veblen goods 1 Venttsel, Elena 1 Vermeer, Jan 1 Vickers Commission (UK) 1 Vico, Gianbattista 1 Victoria, UK Queen 1 Vinik, Jeffrey 1 Volcker, Paul 1, 2, 3 Volcker rule 1 Voltaire 1, 2, 3, 4, 5 Wagner, Richard 1, 2, 3 Wall Street (film) 1 Wall Street Crash (see crash of 1929) war 1 Warhol, Andy 1, 2, 3, 4 Watt, James 1 Way We Live Now, The (Anthony Trollope) 1, 2 Wealth of Nations (Adam Smith) 1, 2, 3 Webb, Beatrice 1 Weber, Max 1 Wedgwood, Josiah 1 Weinstock, Arnold 1 Westinghouse, George 1 Wheatcroft, Geoffrey 1 Wheen, Francis 1 White, Harry Dexter 1 Whitney, Richard 1, 2, 3 Wilde, Oscar 1 Wilson, A.

 

pages: 160 words: 46,449

The Extreme Centre: A Warning by Tariq Ali

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Affordable Care Act / Obamacare, Berlin Wall, bonus culture, BRICs, British Empire, centre right, deindustrialization, Edward Snowden, Fall of the Berlin Wall, financial deregulation, first-past-the-post, full employment, labour market flexibility, land reform, means of production, Mikhail Gorbachev, Monroe Doctrine, mortgage debt, North Sea oil, obamacare, offshore financial centre, reserve currency, Ronald Reagan, South China Sea, The Chicago School, The Wealth of Nations by Adam Smith, trade route, trickle-down economics, Washington Consensus, Wolfgang Streeck

The German sociologist Wolfgang Streeck has, in the last chapter of his Buying Time, sketched the outline of what form a new, democratic European Constitution could take, representing as the continent does a culturally diverse and socially heterogeneous reality. The merchants of the status quo have granted the European Parliament some more powers, but not sovereignty. The largest caucus in the Parliament used this to elect the Luxembourger, Jean-Claude Junker, as the new president. A politician who authorized the tiny duchy to launder money and made it a tax haven for the rich was a symbolic choice. It was to be business as usual. Who is going to snip the umbilical cord? The extreme right or new forces on the left? This remains the great unanswered question. The future of many EU countries, and indeed the the European Union itself (as constituted at present) will depend on the course taken by the crisis in the years ahead. _______________ 1 Perry Anderson, The New Old World (London and New York, 2009), p. 13. 2 Online at www.euromemorandum.eu. 4 Natopolis On 5 September 2014, in Newport, Wales, the North Atlantic Treaty Organization held an emergency conclave.

Since British economic and foreign policies are now in tandem with those of its imperial master, British leaders sometimes attempt to stand out by pre-empting US decisions and posturing as being tougher on assorted ‘enemies’ than Washington itself.1 As Edward Snowden has revealed, British intelligence-gathering outposts like GCHQ operate with impunity. The relative autonomy they enjoy – with less restraints than the NSA – is extremely useful for the latter, which treats GCHQ as a valued surrogate. Similarly, till 2008, British politicians liked to boast that the local ‘light-touch regulation’ put the City of London well ahead of Wall Street, as Britain’s current standing as a virtual tax haven still does, approaching Luxembourg levels if not yet those of the Cayman islands. Given this reality, the right-wing obsession with the European Union seems a bit misplaced. It’s with Washington (not Brussels) that London has long been stuck in the dog-like coital lock sometimes described as a ‘special relationship’. Given this reality, it’s necessary to evaluate the strength and weakness of the American Empire, for the future of what was once the ‘world-island’ and its ruling class is dependent on US global hegemony.

 

pages: 193 words: 47,808

The Flat White Economy by Douglas McWilliams

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access to a mobile phone, banking crisis, Big bang: deregulation of the City of London, bonus culture, cleantech, cloud computing, computer age, correlation coefficient, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, eurozone crisis, George Gilder, hiring and firing, income inequality, informal economy, knowledge economy, low skilled workers, Network effects, new economy, offshore financial centre, Peter Thiel, Productivity paradox, Silicon Valley, smart cities, special economic zone, Steve Jobs, working-age population

This huge amount of money being transferred from London to the rest of the UK should be used to make the rest of the UK more competitive. The ‘Barnett formula’ which tries to guarantee spending levels should be replaced by an incentive formula based on the real level of income inequality (i.e. after adjusting for the cost of living) between the regions so that weaker regions would have lower taxes on both personal and corporate incomes. This will turn the economically weaker parts of the UK into tax havens. It is pretty obvious that this is likely to help rebalance the UK economy – indeed it could do so remarkably quickly. Moreover, since the policy is likely to lead to better utilisation of resources, it is likely to lead to faster economic growth overall and to permit both tax reductions and ultimately better public services as well for the whole country. Whether it would prove politically acceptable depends on whether the relevant vested interests are allowed to veto a proposal that has considerable economic advantages.

One way of promoting such competition might be to publish statistics on comparative success in attracting returners! In that way, parts of the UK like Scotland, where the local elite have been traditionally hostile to returners, might be named and shamed when it can be seen how much this cliquishness is costing the local economy. These are radical proposals, particularly the proposal to replace heavy public spending outside London by turning these regions into tax havens. But my forty years of experience as a professional economist make me believe that they would be by far the best ways to reduce the degree of inequality throughout the UK and help revive the UK regions. If politicians are serious about wanting to reduce the huge scale of inequality between regions in the UK, I challenge them to take on the vested interests and implement these proposals. CHAPTER 7 Immigration – the UK’s Secret Economic Weapon London has a long history of immigration since Roman times.

 

pages: 234 words: 53,078

The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer by Dean Baker

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accounting loophole / creative accounting, affirmative action, Asian financial crisis, Bretton Woods, corporate governance, declining real wages, full employment, index fund, Jeff Bezos, medical malpractice, medical residency, offshore financial centre, price discrimination, risk tolerance

In recent years the IRS has been especially vigilant in policing the returns of people claiming the earned income tax credit (EITC). The EITC is a tax credit for low-income wage-earners that dates back to the Nixon administration. It was 3 During the Clinton administration, the United States worked with other wealthy countries to develop a treaty to crack down on international tax havens. The Bush administration backed away from this international effort in its first six months in office. “A Retreat on Tax Havens,” New York Times, May 26, 2001. 4 See also the discussion of tax loopholes and mechanisms for improving enforcement in Sawicky (2006). 85 intended to offset the payroll tax that these workers pay for Social Security and Medicare. The maximum amount that a family could receive from the EITC in 2005 was slightly over $4,000, with most families receiving substantially less.

 

pages: 278 words: 82,069

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

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Asian financial crisis, banking crisis, Bretton Woods, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, housing crisis, Howard Zinn, Hyman Minsky, income inequality, kremlinology, Long Term Capital Management, margin call, market bubble, market fundamentalism, McMansion, mortgage debt, Naomi Klein, new economy, offshore financial centre, payday loans, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, sovereign wealth fund, structural adjustment programs, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

Until they can contribute convertible currency to the I.M.F. and World Bank like the dollar, euro and yen, they cannot be at the heart of the system. Obama should try to organize his emergency economic stimulus package in the U.S. in tandem with efforts by the Europeans, Japanese and Chinese. It will be much more effective if it is coordinated internationally. He should be uncompromising about the need to end the destabilizing role of tax havens as sources of dodgy lending and tax evasion—a position on which he has staked out ground before his election. Many are under British jurisdiction, and he should combine with France’s President Sarkozy—rotating head of the EU until Christmas—to insist that Britain join with the rest of the world to constrain if not eliminate an important source of financial destabilization. I would like the U.S. to consider going back to Bretton Woods basics—unfashionable though it may seem.

There will be action on bonuses for bank staff that are far too high. But this is only a fraction of what is necessary. We need a paradigm shift toward a greater acceptance of global principles, rules and governance by both banks and governments. We need global rules on the terms and means by which banks are recapitalized and how they are bailed out of their bad loans. Banks need to accept that the world has changed. We need global rules on hedge funds, tax havens and derivative trading. And we need Western governments to lead in de-risking the system by declaring their willingness to manage the values of their currencies in predictable zones. This is what we need. Obama, if he is to be a great reforming president, needs to combine his reforming zeal at home with no less zeal abroad to ensure we get it. How to End the Recession R O B E R T P O L L I N November 24, 2008 The economy needs a shot of public investment—and if it’s green, the payoff will be greatest.

 

pages: 241 words: 83,523

A Swamp Full of Dollars: Pipelines and Paramilitaries at Nigeria's Oil Frontier by Michael Peel

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banking crisis, British Empire, colonial rule, energy security, informal economy, megacity, offshore financial centre, Plutocrats, plutocrats, race to the bottom, Scramble for Africa, trade route, UNCLOS, wage slave

The former governor has declined to respond to this claim or other allegations I put to him via his London-based lawyer. 110 A SWAMP FULL OF DOLLARS It’s striking how undeterred the banks or estate agents involved in the case were by the many warning signs surrounding their wealthy Deltan customer. Alamieyeseigha came festooned with what antimoney-laundering specialists call ‘red flags’. One was that he was holding foreign bank accounts as governor even though Nigerian law did not allow him to do so. Another was that many of his assets were held through offshore companies based in secretive tax havens, such as the British Virgin Islands, the Seychelles and the Bahamas. A third was that – according to a declaration made when he took office in May 1999 – he had assets totalling $575,000 and an annual gubernatorial salary of just $12,000 a year. The numbers just didn’t add up: the London UBS accounts alone, for example, had a balance of more than $2.3m by December 2005. Documents assembled for the Nigerian government’s London court cases to recover money from Alamieyeseigha show in particular the embarrassing eagerness of UBS to win the governor’s business.

During the trial, the court took evidence from both Bagudu and Mohammed Abacha, who was in jail in Nigeria over a suspected murder case that was later dropped. In his final judgement, Mr Justice Rix said Mohammed Abacha and Bagudu were ‘unreliable’ witnesses, adding that Abacha was ‘dishonest’ and Bagudu ‘capable of dishonesty’. Few people outside the Abacha family would dispute Monfrini’s claim that there should be still more money to come back to Nigeria. By 2009, he had identified further targets amounting to more than $1bn, much of it in tax havens. He had decided to focus on $300m in Jersey, $300m in Liechtenstein, $350m in Luxembourg and $60m in the Bahamas. Then there are funds that have yet to be tracked down, because they are held in cash or are sitting unnoticed in accounts fronted by friends of the regime. More than a decade after he was hired to investigate the Abacha case, Monfrini was still pursuing legal action in Austria, the Bahamas, the Cayman Islands, France, Germany, Kenya and the USA.

 

pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

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British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Plutocrats, plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, Washington Consensus

See on this issue Fine and Saad-Filho (2010), especially Chapter 6 and quoted references. 12. ‘Walmart China Closes Chongqing Stores Amidst Pork Mislabeling Scandal’, published on 10 October 2011 at: www.huffingtonpost.com 13. Organisations specialised in ethical labelling generally do not say a word about the fiscal practices of their clients. Many multinationals that claim to work for a ‘fairer’ world do not pay taxes either in producing countries or in consumer countries. Through tax havens, they are able to minimise their tax bill. For example, these practices are observed for the three largest companies that account for more than two-thirds of the global banana market: Dole, Chiquita and Fresh Del Monte. An investigation by The Guardian has shown that these three companies: had combined global sales of over $50bn (£24bn) in the last five years, and made $1.4bn of profits. They paid just $200m (or 14.3% of profits) in taxes between them in that period.

., 132, 156(n4) Smithsonian Migratory Bird Center, Bird-friendly Coffee programme, 54 Social capital, 101, 117, 119 Solidaridad, 3, 38–9, 114; see also Roozen Solomon Islands, 135 Somalia, 135 SOS Wereldhandel; see Fair Trade Organisatie Spaghetti bowl, 27 South Africa, 136, 137, 159(n20), 162(n21) South South relations, 80, 149, 163(n2) Sri Lanka, 134 STABEX, see Export earnings stabilisation system Starbucks, 77, 78, 150; Coffee and farmer equity practices, 55 Stigler, Georges, 42 Stiglitz, Joseph E. and Charlton, Andrew, 31–3, 66 Structural adjustment policies, 17, 18, 42 Structuralist school, 37–8 Sudan, 135 Sugar, 16, 27, 30, 36, 60–2, 80, 85, 90 Sustainable Agriculture Network, 53 Sustainability, 4, 24, 34, 47, 50, 53, 55, 56, 57, 70, 79, 113, 138, 142, 149–50, 158(n5) Sustainable development, 4, 34, 47, 55, 70, 82, 83, 156(n2), 163(n1) Sustainable Fair Trade Management System, 45; see also World Fair Trade Organization Sweden, 63, 162(n29) Switzerland, 53, 127, 128 System for Minerals (Sysmin), 155(n2) Taiwan, 155(n1) Tanzania, United Republic of, 134, 135 Tariff escalation, 26–8, 30 Tariff peaks, 30 Tax havens, 157(n13) Tea, 40, 49, 52, 53, 54, 56, 80, 130, 133, 134, 136 Ten Thousand Villages, 35–6 Thailand, 155(n1) Thatcher, Margaret, 42 Third Worldism, 36–40, 120 Times (the), 160(n2) Timor Leste, 135 Togo, 134, 135, 155(n2) Torrens, Robert, 65 Trade not aid (slogan), 38, 40, 126 Trade structure, 9, 10, 133–8, 141, 154, 163(n2); see also Developing countries Traders, 20, 44, 49, 86, 106, 116–17, 140 Transfair USA, additional income transferred, 125, 128, 130–1, 153; 161(n9), 161(n11); budget and licensee fees, 127–8, 153; exit from Fairtrade, 161(n13); name change, 161(n9); sales, 161(n10) Tribune (La), 159(n18) Truman, Harry, 34, 35 Turkey, 155(n1) Tuvalu, 135 UCIRI (Union de Comunidades Indigenas de la Region del Istmo), 98, 157(n4) Uganda, 134, 135, 138 Un Comtrade, 20, 134 Underdevelopment, see development Unequal exchange, 1–2, 16–22, 25, 37, 62, 76, 120, 132, 133; unequal ecological exchange, 22–4 United Nations, 10, 144, 155(n4) United Nations Conference on Trade and Development (UNCTAD), 9, 10, 13, 14, 16, 20–1, 38, 133, 134, 135, 154, 162(n19), 162(n21), 163(n2) United Kingdom, 8, 25, 31, 32, 36, 46, 53, 56–7, 60–2, 64–9, 71, 127, 128, 132 United States, 16, 20, 22, 23, 25, 27, 29, 31, 32, 35, 36, 42, 46, 53, 54, 61, 63, 67, 71, 79, 90, 125, 127, 128, 130, 131, 132, 136, 156(n2), 158(n8), 158(n9); American System, 26, 67; United States Agency for International Development (USAID), 138; see also Transfair USA UTZ Certified, 54, 55, 56, 70 Van der Hoff, Frans, 3, 38–43, 87–9, 98, 139, 158(n4), 158(n5), 162(n26), 163(n1) 178 Sylla T02779 02 index 178 28/11/2013 13:04 index Vanuatu, 135 Vent for surplus theory, 65 Vertical integration, 19–21, 41 Vietnam, 74 Wage, 79, 80, 158(n7), 160(n26), 160(n27), 161(n5); minimum wage, 51, 95, 98; reservation wage, 94–5; wage employment, 19, 72, 94, 123–4, 128, 131, 133, 137, 142, 162(n22) Wal-Mart, 78, 79 Washington Consensus, 73 Wealth of Nations, see Smith, Adam West Indies, 60–2, Williams, Eric, 60–2 Williamson, Jeffrey G., 162(n27) World Bank, 17, 31, 42; development indicators, 9, 10–12, 15, 30, 89, 131, 137, 153, 161(n7, n14, n17) World Fair Trade Organization, 44–5, 46, 80, 151 World-system theory, 76 World Trade Organization, 26, 28, 29, 31–3, 74, 144, 155(n3) Yemen, 135 Zambia, 135 179 Sylla T02779 02 index 179 28/11/2013 13:04 Sylla T02779 02 index 180 28/11/2013 13:04

 

pages: 233 words: 73,772

The Secret World of Oil by Ken Silverstein

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business intelligence, clean water, corporate governance, Donald Trump, energy security, Exxon Valdez, failed state, Google Earth, offshore financial centre, oil shock, paper trading, rolodex, Ronald Reagan, WikiLeaks, Yom Kippur War

For years Senator Levin of Michigan has advocated reforms that would require companies registered in the United States to reveal their beneficial owners. The World Bank, which found that America is the top destination for corrupt politicians trying to set up shell companies to access the financial system, supports the same goals. Yet Levin’s bill has gone nowhere, thanks to opposition from the United States Chamber of Commerce, the American Bar Association, and the state of Delaware, America’s premier tax haven, where corporations outnumber people. “You can no longer open an account at a respectable bank merely with a suitcase of cash,” the Economist has written in an editorial. “Let the same apply to starting a limited company.” As long as those loopholes remain open there is nothing to prevent future Teodorins from laundering their money in the United States and using the country as their personal shopping mall just as he has.

Glencore’s physical presence in the United States is modest; it has minor holdings in a few American companies and an office in Stamford, Connecticut, that helps run its oil and gas trading business. But its global market power and reach make its operations important to American policy makers as well as to the public. “Wherever you turn in the world of commodities, you bump into Glencore,” says Nicholas Shaxson, author of Treasure Islands, a book about tax havens and an associate fellow at the British think tank Chatham House. “It is twice as big as Koch Industries, and it has an unhealthy grip on some of the world’s most important commodity markets, with influence that stretches from Texas to Tehran to Taipei.” Peter Brandt, a longtime commodities trader, echoes that assessment. “Glencore is at the center of the raw material world,” he told me. “Within this world there are giants, and Glencore is becoming a giant among giants.”

 

pages: 257 words: 71,686

Swimming With Sharks: My Journey into the World of the Bankers by Joris Luyendijk

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bank run, barriers to entry, Bonfire of the Vanities, bonus culture, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, Emanuel Derman, financial deregulation, financial independence, Flash crash, glass ceiling, Gordon Gekko, high net worth, hiring and firing, inventory management, job-hopping, London Whale, Nick Leeson, offshore financial centre, regulatory arbitrage, shareholder value, sovereign wealth fund, the payments system, too big to fail

For protection, pension funds and others relied on the American insurance giant AIG, which insured many of the products. In turn, AIG trusted the credit rating agencies’ triple-A ratings. As time went on, the products became more and more intricate and ‘exotic’ but the triple-A ratings kept coming. Meanwhile, the banks kept some of these complex products on their own balance sheets – often hidden in deliberately complicated ‘vehicles’ in offshore tax havens. The accountants either failed to see any of this, or thought it was fine, or looked the other way, as did regulators and politicians. In 2007, the Labour prime minister, Gordon Brown, praised a gathering of bankers and asset managers in a speech at Mansion House: ‘The financial services sector in Britain, and the City of London at the centre of it, is a great example of a highly skilled, high value-added, talent-driven industry that shows how we can excel in a world of global competition.

The financial products that contained their mortgages began to lose value, or ‘exploded’ and became worthless. Investors had to take big losses but banks, too, had kept some of these products. They had to write off huge sums of money as well – but how much? Not only had many of the products themselves become mind-bogglingly difficult to value or understand but the same was also true of the ‘vehicles’ in offshore tax havens where the banks had placed many of them. Would the banks’ buffers be big enough? At Lehman Brothers they were not, and when this bank had to announce bankruptcy other banks and financial institutions stopped lending each other money. Suddenly the financial world was gripped by a paralysing fear: what would happen tomorrow? Who would be the next to go belly up? The domino effect could cause the global financial system to collapse in a matter of days.

 

pages: 74 words: 19,580

The 99.998271% by Simon Wood

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banking crisis, clean water, equal pay for equal work, Julian Assange, Occupy movement, offshore financial centre, Steve Jobs

These loopholes, which are so damaging to society, are highly unlikely to be closed while politicians are beholden to the corporations and wealthy donors who fund their campaigns. We also have big manufacturers who have used their power and influence over politicians to push through trade agreements which reduce product safety standards and allow them to outsource jobs. Oil companies do the same to block environmental protection laws. Britain has been described as the world’s first onshore tax haven, with the UK’s billionaires 18 paying only 14.7 million pounds income tax on their combined 126 billion pounds in 2006/7. More recent data is unavailable as corporations, banks and the wealthy tend not to be forthcoming with details of their finances. And let us not forget lobbying, which is the attempt, often by individuals, corporations or advocacy groups, to influence government policy and decision-making.

 

pages: 349 words: 134,041

Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives by Satyajit Das

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accounting loophole / creative accounting, Albert Einstein, Asian financial crisis, asset-backed security, Black Swan, Black-Scholes formula, Bretton Woods, BRICs, Brownian motion, business process, buy low sell high, call centre, capital asset pricing model, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, currency peg, disintermediation, diversification, diversified portfolio, Eugene Fama: efficient market hypothesis, financial innovation, fixed income, Haight Ashbury, high net worth, implied volatility, index arbitrage, index card, index fund, interest rate derivative, interest rate swap, Isaac Newton, job satisfaction, locking in a profit, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Marshall McLuhan, mass affluent, merger arbitrage, Mexican peso crisis / tequila crisis, moral hazard, mutually assured destruction, new economy, New Journalism, Nick Leeson, offshore financial centre, oil shock, Parkinson's law, placebo effect, Ponzi scheme, purchasing power parity, quantitative trading / quantitative finance, random walk, regulatory arbitrage, risk-adjusted returns, risk/return, shareholder value, short selling, South Sea Bubble, statistical model, technology bubble, the medium is the message, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, volatility smile, yield curve, Yogi Berra, zero-coupon bond

How else can you explain the calibre of our directors and senior management, not to mention risk managers and auditors?) DAS_Z01.QXP 8/11/06 316 2:10 PM Page 316 Tr a d e r s , G u n s & M o n e y Like all things, the real skill is not obvious It is all about when to get – it is all about when to get out. In rogue out. In rogue trading, it is trading, it is when to take off with the when to take off with the boodle to a tax haven with no extradition treaties. You can’t teach anybody that. boodle to a tax haven with Warren Buffet seems to have recently no extradition treaties. discovered the problems in the derivatives industry. ‘I can assure you that the marking errors in the derivatives business have not been symmetrical. Almost invariably they have favoured the trader who was eyeing a multi-million dollar bonus . . . Only much later did shareholders learn that the reported earnings were a sham.’6 It has been that way more often than not.

There was SPARCS (Special Purpose Asset Repackaging Companies), SNAP (Structured Note Asset Packages) and CRAVE (Custom Repackaged Asset Vehicle). There was a competition amongst dealers to come up with distinctive names for their vehicles. One British structured product professional seemed to be an avid monarchist. He named his vehicles EARLS, CROWNS, CORONETS, etc. The basic ingredients were identical to those used in the pioneering BECS transactions. The key was a SPV located in a tax haven, frequently DAS_C08.QXP 8/7/06 234 4:49 PM Page 234 Tr a d e r s , G u n s & M o n e y the Cayman Islands or British Virgin Islands. The structures were ‘orphan subsidiaries’; that is, the investment bank didn’t own the vehicle. This was so that it was ‘bankruptcy remote’: if anything happened to the investment bank then your money was safe. Of course, you were still likely to lose money if your bet on the future price of soy beans didn’t pay off.

 

pages: 431 words: 132,416

No One Would Listen: A True Financial Thriller by Harry Markopolos

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backtesting, barriers to entry, Bernie Madoff, call centre, centralized clearinghouse, correlation coefficient, diversified portfolio, Emanuel Derman, Eugene Fama: efficient market hypothesis, family office, fixed income, forensic accounting, high net worth, index card, Long Term Capital Management, Louis Bachelier, offshore financial centre, Ponzi scheme, price mechanism, quantitative trading / quantitative finance, regulatory arbitrage, Renaissance Technologies, risk-adjusted returns, risk/return, rolodex, Sharpe ratio, statistical arbitrage, too big to fail, transaction costs

It was not something that was spoken about; it was just something I picked up in conversation. Offshore funds are known as tax havens, places for people to quietly hide money so governments won’t know about it. It’s a means of avoiding law-enforcement and tax authorities. They’re particularly popular in nations with high tax brackets, like France. While offshore funds certainly can be completely legitimate, to me it indicated that at least some of these funds were handling dirty money, untaxed money. An offshore fund allows investors from a high-tax jurisdiction to pretend their income is coming from a low- or no-tax jurisdiction. While I have no direct knowledge, I definitely don’t believe that all income from offshore tax havens is eventually declared to the proper government. But what was a lot more frightening to me was the fact that offshore investments are used by some very dangerous people to launder a lot of money.

See also trade tickets Options Option transactions Order flow and market intelligence payments for Organized crime Over-the-counter market Parkway Capital Payne, Gerald Pearlman, Lou Penna, Nick Personal danger Petters, Tom Pharmaceutical fraud Picower, Jeffrey Plaintiff’s firms Plan administrators Police department Ponzi, Charles Ponzi schemes examples of Harry Markopolos describes to SEC human damage from mechanics of new money requirements Weisman on Ponzi scheme vs. front-running Potemkin trading desk (front) Professional ethics Proof, legal vs. mathematical Prospect Capital Putnam Investments Quants (quantitative analysts) Qui tam cases Qui tam provisions Rampart Investment Management Company Rampart Option Management System Rampart Option Statistical Advantage Rating agencies Red flags Regulatory corruption Reid, Douglas Realtors Renaissance Technologies LLC Reporting Reverse engineering Rewards Ricciardi, Walter Rich, Mark Richards, Lori Risk assumption Roosevelt, Franklin Delano Rosenthal, Stu Royal Bank of Canada Royalty Russian default Russian mafia S&P 500 S&P 500 options Sailing Scannell, Peter Schadt, Rudi Schapiro, Mary Schulman, Diane Schumer, Chuck Schwager, Jack Secrecy Securities and Exchange Commission (SEC): 2005 submission disclosure audits BDO mishandles Harry Markopolos filing Bernie Madoff and bounty program changes at Chuck Schumer call to in congressional hearings criminal investigation damage by inaction of danger from disregards Harry Markopolos complaint Division of Enforcement actions double standard examination team excuses first report to Harry Markopolos meets Garrity Harry Markopolos on Harry Markopolos reports fraud to Harry Markopolos visits ignores Harry Markopolos complaint impact on incompetence of informal inquiry Inspector General Inspector General findings Inspector General investigation Inspector General review investigation of Bernie Madoff jurisdictional problems liability of MARHedge reporting market timing complaint New York regional office New York office incompetence Office of Economic Analysis origins of post BM arrest cover-up powers of regulatory priorities rejects Harry Markopolos market timing investigation resignations from sovereign immunity and negligence systemic incompetence visits Madoff warnings from others whistleblower program See also Cheung, Meaghan; Garrity,Mike; Kotz, David; Manion, Edward; Ward, Grant: Securities and Exchange Commission (SEC) teams: accounting audit enforcement examination inspection investigative Securities Exchange Company Security Segel, Jim Seghers, Conrad Self-regulation Senate Banking Committee Sennen (sailing vessel) Sherman, Brad Short volatility 60 Minutes Skilling, Jeff Slatkin, Reed Social networking Société Générale Sokobin, Jonathan Sorkin, Ira Lee Sovereign immunity and negligence Spitzer, Eliot Split-strike conversion strategy State Street Corporation Steiber, Heide Stein, Ben Stock picking Strategy analysis Structured products Subsidization theory Suh, Simona Suicides Sutton, Willie Tax havens Taxpayers Against Fraud. See also whistleblowers Taylor, Hunt Teahan, Kathleen Teams. See fraud investigation team; Madoff investigation team Terrorists Tewksbury Investment Fund Theft The Nature of Risk (Mamis) “The World’s Largest Hedge Fund Is a Fraud” (Harry Markopolos) Thomsen, Linda Thorp, Edward “To Catch a Thief” (Absolute Return) To Catch a Thief (movie) Trade tickets Trading violations Treasury bill (T-bill) holdings Tremont (fund) U.S.

 

pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, means of production, Mikhail Gorbachev, millennium bug, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Washington Consensus, working poor, éminence grise

The City reclaimed ancient privileges to restore its nineteenth-century position as an international financial centre, although this was now built upon proprietary trading in financial derivatives and securitisation. This was the purposeful, positive use of power to achieve a feasible aim – a dominant City of London. Light-touch regulation became as important a mantra to the City as free collective bargaining had been to the unions. Equally, the freedom to exploit tax havens and relieve foreign nationals from their tax obligations was as pivotal to City power as the unions’ insistence on legal immunity from damages in industrial disputes had been to theirs. Just as the unions portrayed themselves as essential to the construction of a Britain in which working-class interests would be enshrined, so the City portrayed itself as essential to a post-industrial Britain in which financial services would be in the vanguard of national wealth generation.

RBS’s leverage was the highest of any of the mainstream banks, but the five largest US investment banks – Goldman Sachs, Morgan Stanley, Bear Stearns, Lehman Brothers and Merrill Lynch – all had leverage ranging from 35:1 to 50:1. All had to refinance their entire balance sheets every few months – a giant exercise in maintaining investor confidence. Their New York and London offices had become interdependent arms operating a financial axis that, for all practical purposes, was one market, with London permitting lightly regulated trading in derivatives and a network of tax havens that was second to none. The fatal flaw in the model was not that the volumes of credit, securities and traded credit derivatives were worth many times the world’s GDP; it was that less and less capital was being deployed to support the staggering size of the banks’ balance sheets. Andrew Haldane, executive director of the Bank of England, and Piergiorgio Alessandri calculate that incredibly the capital ratios of British and American banks declined by five times from 1980 to 2005.

Edward, 266 Stephenson, George, 126, 127 Stiglitz, Joe, 51, 168–9, 367–8, 371 Strategy Unit, 337 structured investment vehicles, 151, 165, 169, 171, 188, 207, 209 Stutzer, Alois, 86 sub-prime mortgages, 64, 161, 203 Sugar, Alan, 64–5, 67 Summers, Larry, 92, 183 the Sun, 318, 327 Sunday Express, 321 Sunday Times, 318 supermarkets, relentless spread of, 389 Sure Start scheme, 10, 278, 307 Sutton Trust, 273, 293 swaps, 164; credit default swaps, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207 Switzerland, 7, 86, 138, 180 takeovers and mergers, 8, 21, 33, 92, 245, 250, 258, 259, 388 Taliban, 102 Tax Justice network, 296 taxation: American right’s attitude to, 235, 297; capital transfer taxes, 73–4; collapse of tax base, 224, 368; concessions for private equity, 245, 247, 249, 374; Conservative reforms (1979-97), 275–6; corporation tax, 245; as deterrent to innovation, 104, 105; due desert and, 40, 220, 234, 235, 266; foreign nationals and, 32; housing wealth levy proposal, 373–4; inheritance tax, 73–4, 75, 78, 302–4, 393; low rates of, 5, 19, 387; luck and, 73–4, 75, 78, 303; one-off tax on bank bonuses, 26, 179, 249; progressive/redistributive, 78, 79, 80, 303, 387; proposed reforms, 209–10, 372, 373–4; relief on childcare vouchers, 277; tax avoidance, 25, 29, 42, 145, 151, 193, 245, 295–7; tax credits, 142, 277, 278, 336; tax evasion, 42, 145, 295–7; tax havens, 32, 295; tax relief on debt interest, 209–10, 374 teachers, 306, 307, 308 Technology Foresight, 21 Technology Strategy Board, 21 telecommunications, 133–4, 143 Terra Firma (private-equity firm), 28, 178, 247–8 terrorism, 36 Tesco, 246, 295 Tett, Gillian, 195 Thailand, 168 Thaler, Richard, 94–5 Thatcher, Margaret, 32, 81, 135, 144, 275, 290, 334, 388; centralisation of power, 14, 313; Rupert Murdoch and, 318 Thompson (wire service), 331 ‘3i’, 250, 252 Tilly, Charles, 24, 27, 272 The Times, 288, 295, 318, 319, 327, 330, 349 Times Higher Education, 21 Toulmin, Tim, 325, 332 Tourre, Fabrice, 103, 167–8 Toyota, 91, 269 trade unions, 88, 91, 142, 161, 179, 275, 364, 387; decline of, 272, 291–2, 341, 365–6; print and journalism, 320, 332; undue influence of, 31–2, 33, 364 Train to Gain, 306 Transport for London, 336 Treasury, 92, 178, 208, 214, 215, 218, 335, 336, 337, 369 Treasury and Civil Service Committee, 340 Troubled Asset Relief Program (TARP), 175, 176 Truth and Reconciliation Commissions, 24 Turkish oligarchs, 30 Turnbull, Lord, 334 Turner, Lord Adair, 24, 179 Tyler, Tom, 87 UBS, 170, 178 UK Trade and Industry (UKTI), 230–1 Ulpian (Roman jurist), 45 Unipart, 93 United Nations, 68, 332–3, 384 United States: American colonists, 54, 121, 126; annual consumption levels, 375; anti-statism and, 234, 311; banking system, 138, 150–2, 156, 158–9, 160, 162–3, 167–9, 173–6, 181, 191–2, 195–6, 244; big finance’s penetration of the state, 176–8, 183; United States – continued economic conflict with China, 376–7, 378–80, 381, 382, 383; economic history of, 108, 131–4, 300; executive pay in, 67, 101, 172–4; financial crisis/collapse and, 152, 158–9, 181, 192, 358–9, 375; free market policies/theory in, 140, 145, 160, 163, 165, 184, 234–5; Great Depression, 159, 162, 205, 362; ‘growth triangle’ in South Carolina, 254; impact of small firms, 253, 255, 256; international order and, 226, 378–9, 385–6; LTCM crisis, 169–70, 183, 193, 200–1; money market funds in, 156, 158, 161; neo-conservatism and, 17–18, 144, 297; as non-saver, 36; relationship finance in, 244; savings and loans crisis, 161–2, 163–4; short termism of markets, 241; TARP, 175, 176; ‘tea-party’ conservatism, 234, 327, 386; universal male suffrage, 128; universities, 101, 262–3, 264, 308; volatility of economy, 297; welfare and, 80, 281, 283, 297 universities, 21, 252, 261–5, 295, 308, 355, 370, 372; private schools and, 293–4, 306; uncapping of fees proposal, 264–5, 371 Vadera, Shriti, 178 Value Added Tax (VAT), 366–7, 370, 372 Vanderbilt, Cornelius, 133 Venetian empire, 121 venture capitalists, 241, 244–9, 250 Vishny, Robert, 62, 63 Vodafone, 255 Volcker, Paul, 206 voting system: alternative vote system (AV), 345–6; as delivering right-of-centre bias, 343; first-past-the-post system, 97–8, 217, 312, 313, 341, 343, 347; need for reform of, 97–8, 344–6, 347, 391; proportional representation, 97, 98, 344–6, 347, 391 Wales, devolving of power to, 15 Wall Street Journal, 349 Wallis, John Joseph, 113, 116, 129–30 Walpole, Robert, 125, 166 ‘war on terror’, 17, 144 Wars of the Roses, 124 Washington consensus, 163 Washington Post, 183 Watson, David Pitt, 242 Watson, Thomas, 29 Watt, James, 110, 126 ‘weapons of the weak’, 114–15 Weatherstone, Dennis (CEO of JP Morgan), 191–2 Webster, David, 292 Wedgwood, Josiah, 126–7 Weingast, Barry, 113, 116, 129–30 Welch, Jack, 216 welfare/social provision, 34, 80–2, 83–4, 281, 283–5, 297, 335; see also social security benefits; asset based, 298, 301–3, 304; coalition policy on, 343; undermining of popular support for, 80, 281–2, 283, 297, 302–3; universal services, 34, 79, 277, 281 welfare-to-work programmes, 278 Wenger, Arsène, 352 Westminster, Duke of, 64, 65 White, William, 182, 185 Willetts, David, The Pinch, 372 Williams, Rowan (Archbishop of Canterbury), 4, 26 Wilson, Harold, 312 Wilson, Woodrow, 132–3 Wilson Committee into City (1980), 179 Wilthagen, Tom, 299–301 Winstanley College, Wigan, 294 Winston, Robert, 107 wire agencies, 322, 331 Woessmann, Ludger, 305–6 Work Foundation, 94, 233 World Bank, 164, 182, 226, 383, 384 xenophobia, 16, 36 X-Factor, 282, 314 York University, Neuroimaging Centre (YNiC), 263 Young, Michael, 283–4 Young, Toby, 282 Yu Yongding, 381 Zilibotti, Fabrizio, 115–16 Zinoviev letter, 315

 

pages: 478 words: 126,416

Other People's Money: Masters of the Universe or Servants of the People? by John Kay

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Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, call centre, capital asset pricing model, Capital in the Twenty-First Century by Thomas Piketty, cognitive dissonance, corporate governance, Credit Default Swap, cross-subsidies, dematerialisation, diversification, diversified portfolio, Edward Lloyd's coffeehouse, Elon Musk, Eugene Fama: efficient market hypothesis, eurozone crisis, financial innovation, financial intermediation, fixed income, Flash crash, forward guidance, Fractional reserve banking, full employment, George Akerlof, German hyperinflation, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, income inequality, index fund, inflation targeting, interest rate derivative, interest rate swap, invention of the wheel, Irish property bubble, Isaac Newton, London Whale, Long Term Capital Management, loose coupling, low cost carrier, M-Pesa, market design, millennium bug, mittelstand, moral hazard, mortgage debt, new economy, Nick Leeson, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shock, passive investing, peer-to-peer lending, performance metric, Peter Thiel, Piper Alpha, Ponzi scheme, price mechanism, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, railway mania, Ralph Waldo Emerson, random walk, regulatory arbitrage, Renaissance Technologies, rent control, Richard Feynman, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Reagan, Schrödinger's Cat, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, sovereign wealth fund, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, Steve Wozniak, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Tobin tax, too big to fail, transaction costs, tulip mania, Upton Sinclair, Vanguard fund, Washington Consensus, We are the 99%, Yom Kippur War

Countries may invite jurisdictional arbitrage. In the years before the global financial crisis, policymakers in both Britain and the USA understood well that Britain was using looser regulation as a tool to attract business from New York to London. Locations such as the Cayman Islands may be more accommodating still. These offshore locations (‘treasure islands’14) are often described as ‘tax havens’, but they are every bit as much regulatory havens as tax havens. The Grimaldis of Monaco were the first to discover the potential profitability of such activity when they set up the Monte Carlo casino a hundred and fifty years ago, and jurisdictional arbitrage has since become a major revenue source for many small states. Regulatory arbitrage, fiscal arbitrage and accounting arbitrage all cost money. From the perspective of the non-financial economy, the resources devoted to arbitrage are a dispiriting waste.

.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62

 

pages: 433 words: 125,031

Brazillionaires: The Godfathers of Modern Brazil by Alex Cuadros

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affirmative action, Asian financial crisis, big-box store, BRICs, cognitive dissonance, crony capitalism, Deng Xiaoping, Donald Trump, Elon Musk, facts on the ground, family office, high net worth, index fund, invisible hand, Jeff Bezos, Mark Zuckerberg, NetJets, offshore financial centre, profit motive, rent-seeking, risk/return, savings glut, short selling, Silicon Valley, sovereign wealth fund, stem cell, The Wealth of Nations by Adam Smith, too big to fail, transatlantic slave trade, transatlantic slave trade, We are the 99%

The guy is freaking out, but he accepts the hug, and Maluf makes his pitch about all the roads he built, Faria Lima, and so on. Of the allegations against him, Maluf asks, poking his finger in the air, “Have you ever seen one bit of proof? One bit?” “No one ever finds anything,” the guy concedes with a chagrined smile. He says this because most people don’t read court documents for fun. But one case from the British island of Jersey shows in detail how Maluf works. Jersey is a notorious tax haven, but like Switzerland in recent years, it’s bowed to international pressure for better transparency and cooperation with outside investigators. So its courts moved quickly when Brazilian prosecutors brought a civil suit in 2009 seeking to recover ten million dollars Maluf had stashed there. The suit centered on a road that gained fame as the most expensive in the world, mile for mile: Roberto Marinho Avenue.

That Edir Macedo enjoys the same impunity as Paulo Maluf seems to show that, wherever you come from in Brazil, money talks. I saw other similarities, as in the structure of their alleged schemes. According to the 2009 case Macedo is fighting, pastors would deliver undeclared cash donations in garbage sacks to doleiros—black-market money changers—who spirited the funds to bank accounts in New York and then to shell companies in offshore tax havens. To bring the now-anonymous money back into Brazil, the shell companies made loans to pastors to invest in a slew of private businesses: security firms, accounting firms, travel agencies, an air-taxi business, even a health insurance provider. To expand Record’s national network, they also used the money to acquire regional TV stations. They bought radio stations to form Rede Aleluia, the Hallelujah Network.

From an interview in HSM Management (January–February 2008). 204“I saw that I would never be an astro.” From an interview with Tênis Brasil, quoted in Oliveira, “O legado de Lemann.” 204Lemann never made a secret of his philanthropy. Lemann’s press people provided details on his gifts. 2043G’s funds in the Cayman Islands. Filings with the U.S. Securities and Exchange Commission show 3G Capital’s funds domiciled in the Caribbean tax haven. 205one of his foundations awarded a scholarship. Verônica Serra received a scholarship from Fundação Estudar. 205calling for higher taxes on billionaires. In Warren E. Buffett, “Stop Coddling the Super-Rich,” New York Times, August 14, 2011. 205Andrew Carnegie’s Gospel of Wealth. Details from David Nasaw, Andrew Carnegie (New York: Penguin, 2006), with quote from Carnegie’s The Gospel of Wealth and Other Writings (New York: Penguin, 2006). 206“These guys have so much power through their wealth.”

 

pages: 829 words: 229,566

This Changes Everything: Capitalism vs. The Climate by Naomi Klein

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1960s counterculture, battle of ideas, Berlin Wall, big-box store, bilateral investment treaty, British Empire, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, Climategate, cognitive dissonance, colonial rule, Community Supported Agriculture, complexity theory, crony capitalism, decarbonisation, deindustrialization, dematerialisation, Donald Trump, Downton Abbey, energy security, energy transition, equal pay for equal work, Exxon Valdez, failed state, Fall of the Berlin Wall, feminist movement, financial deregulation, food miles, Food sovereignty, global supply chain, hydraulic fracturing, ice-free Arctic, immigration reform, income per capita, Internet Archive, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, market fundamentalism, moral hazard, Naomi Klein, new economy, Nixon shock, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, patent troll, planetary scale, post-oil, profit motive, quantitative easing, race to the bottom, Ralph Waldo Emerson, Rana Plaza, Ronald Reagan, smart grid, special economic zone, Stephen Hawking, Stewart Brand, structural adjustment programs, Ted Kaczynski, the scientific method, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, transatlantic slave trade, trickle-down economics, Upton Sinclair, uranium enrichment, urban planning, urban sprawl, wages for housework, walkable city, Washington Consensus, Whole Earth Catalog, WikiLeaks

Consider the following list, by no means complete: • A “low-rate” financial transaction tax—which would hit trades of stocks, derivatives, and other financial instruments—could bring in nearly $650 billion at the global level each year, according to a 2011 resolution of the European Parliament (and it would have the added bonus of slowing down financial speculation).49 • Closing tax havens would yield another windfall. The U.K.-based Tax Justice Network estimates that in 2010, the private financial wealth of individuals stowed unreported in tax havens around the globe was somewhere between $21 trillion and $32 trillion. If that money were brought into the light and its earnings taxed at a 30 percent rate, it would yield at least $190 billion in income tax revenue each year.50 • A 1 percent “billionaire’s tax,” floated by the U.N., could raise $46 billion annually.51 • Slashing the military budgets of each of the top ten military spenders by 25 percent could free up another $325 billion, using 2012 numbers reported by the Stockholm International Peace Research Institute.

Pacala, “Equitable Solutions to Greenhouse Warming: On the Distribution of Wealth, Emissions and Responsibility Within and Between Nations,” presentation to International Institute for Applied Systems Analysis, November 2007, p. 3. 49. “Innovative Financing at a Global and European Level,” European Parliament, resolution, March 8, 2011, http://www.europarl.europa.eu. 50. “Revealed: Global Super-Rich Has at Least $21 Trillion Hidden in Secret Tax Havens,” Tax Justice Network, press release, July 22, 2012. 51. “World Economic and Social Survey 2012: In Search of New Development Finance,” United Nations Department of Economic and Social Affairs, 2012, p. 44. 52. Sam Perlo-Freeman, et. al., “Trends in World Military Expenditure, 2012,” Stockholm International Peace Research Institute, April 2013 http://sipri.org. 53. “Mobilizing Climate Finance: A Paper Prepared at the Request of G20 Finance Ministers,” World Bank Group, October 6, 2011, p.15, http://www.imf.org. 54.

., 153, 201 storm barriers, 108, 109 Strahl, Chuck, 362 stranded assets, 146 StratoShield, 262, 268n, 271 stratosphere, sulfur dioxide in: from volcanic eruptions, 258–59, 273–74 see also Pinatubo Option strontium-90, 203 structural inequity, 40 Stuffed and Starved (Patel), 135 Stutz, John, 94 Suckling, Kierán, 206 Sudan, 270 sulfur dioxide emissions, 208 Suncor Energy, 234, 246 sunlight, reflection of, see Solar Radiation Management SuperFreakonomics (Levitt and Dubner), 262–63, 271–72 Superfund Act of 1980, 202 super-rich, 19 supply lines, length of, 76 Supreme Court, Canada: Haida Nation case in, 369 Indigenous land rights affirmed by, 368, 371–72 sustainability, 55, 77, 447 Sustainable Energy Blueprint, 213 Swarthmore College, 355 Swearengin, Paula, 310 Sweden, 179 Swift Boat Veterans for Truth, 34 Swiss Re Americas, 49 SWN Resources, 299 Sydney, Australia, 446 Syngenta, 9 Syriza party (Greek), 181–82, 297 Take, The, 123 Tambococha oil field, 410 tarmac, melting of, 1–2 Tar Sands Blockade, 302 tar sands oil (bitumen), 2, 94, 139, 140, 144, 145, 234, 237, 252–53, 254, 310, 349, 352, 358, 446 call for global moratorium on, 353 diluted (dilbit), 325, 331 grassroots opposition to, 321–22 high risk in, 324 Indigenous opposition to, 322, 375 open-pit extraction of, 329 opposition to, 234 water use in mining of, 346 see also Alberta tar sands; pipelines tax cuts, 39, 72 for consumers, 112 taxes, 19, 39, 42, 117, 119 airline, 250–51 carbon, 112, 114, 125, 157, 218, 250, 400, 461 corporate, 19, 115 financial transaction, 114 luxury, 93 pollution-based, 284 on the rich, 113–14, 118, 153 transition, 418 tax havens, closure of, 114 Tax Justice Network, 114 tax refunds, 118 Tea Party, 3, 38, 227 technology, 16, 24, 76, 142, 186, 236 and domination of nature, 56–57 extreme extraction and, 310 see also geoengineering TED Talks, 211, 236 Tellus Institute, 94 temperatures, extreme, 2 Temple, William, 183 Tercek, Mark, 208n TerraPower, 264 Texaco, 309 Texas: drought of 2011 in, 47, 440 fracking in, 347 Keystone XL and, 361 water pollution in, 329 Texas, University of, 329 Texas City Prairie Preserve, oil and gas drilling on, 192–95, 196, 215 Thames River, 446 Thatcher, Margaret, 39, 42, 60 Thie, Hans, 131 think tanks, conservative, 38, 203 Third World Network, 77 Thomas-Flurer, Geraldine, 367 Thompson, Lonnie G., 15 Thoreau, Henry David, 184, 286 350.org, 140, 156, 233n, 353, 356 tidal power, 127 Tiger Management, 208 tight-rock formations, 311; see also shale, fracking of Tillerson, Rex, 111, 314 Time magazine, Planet Earth on cover of, 74, 204 Tiputini oil field, 410 Tjelmeland, Aaron, 192, 195 Tongue River, 389, 390 Tongue River Railroad (proposed), 389 tornados, 406 Toronto, 55, 65, 67, 73, 126 Total, 246 Totnes, England, 364 Toyota, 196 trade, see free trade agreements; international trade trade unions, 81, 83, 177, 204, 454 job creation and, 126–27 job protection by, 126, 178 NAFTA opposed by, 84 transaction tax, 418 TransCanada, 149, 346, 359, 361, 362 see also Keystone XL pipeline Transition Town movement, 364 Transocean, 330 Trans-Pacific Partnership, 78 transportation infrastructure, 85, 90, 127 travel, wealth and, 113 Treaty 6, 372 tree farms, 222 Trenberth, Kevin, 272, 275 Trent River, 300 trickle-down economics, 19 Trinity nuclear test, 277 triumphalism, 205, 465 Tropic of Chaos (Parenti), 49 tropics, techno-fixes and risk to, 49 Trump, Donald, 3 Tschakert, Petra, 269 Tsilhqot’in First Nation, 345 Tsipras, Alexis, 181–82, 466 Tsleil-Waututh First Nation, 323 Tutu, Desmond, 464 Tuvalu, 13 2 degrees Celsius boundary, 87–88, 89, 150, 354, 456 Tyndall Centre for Climate Change Research, 13, 21, 56, 86–87, 214, 283 typhoons, 107, 175, 406, 465 Uganda, 222 ultra-deepwater “subsalt” drilling, 145 Undesirables (Isaacs), 167 unemployment, 180 unemployment insurance, 454 Unified Campesino Movement of Aguán, 222 Union of Concerned Scientists, 201 Clean Vehicles Program at, 237 United Kingdom, 13, 149, 170, 224, 225 compensation of slave-owners in, 415–16, 457 “dash for cash” in, 299 divestment movement in, 354 flooding in, 7, 54, 106–7 fracking in, 299–300, 313 Industrial Revolution in, 172–73, 410 negatives of privatization in, 128 politics of climate change in, 36, 150 supports for renewable energy cut in, 110 Thatcher government of, 39 World War II rationing in, 115–16 United Nations, 7, 18, 64, 87, 114 Bloomberg as special envoy for cities and climate change of, 236 Clean Development Mechanism (CDM), 219–20, 224, 226 climate governance and, 280 climate summits of, 5, 11, 65, 150, 165, 200; see also specific summits Department of Economic and Social Affairs, 110 Intergovernmental Panel on Climate Change, see Intergovernmental Panel on Climate Change (IPCC) international agreements and, 17 Special Rapporteur on the Right to Food, 135 United Nations Conference on the Human Environment of 1972, 202 United Nations Declaration on the Rights of Indigenous Peoples, 377, 383 United Nations Economic Commission for Latin America and the Caribbean, 180 United Nations Environmental Modification Convention, 278 United Nations Environment Programme (UNEP), 272 United Nations Framework on Climate Change, 200, 410 United Nations Framework Convention on Climate Change (UNFCCC), 76, 77, 78–79 United Nations High Commissioner for Refugees, 167 United Nations Rio Declaration on Environment and Development (1992), 55, 293 United Policyholders, 109 United States, 19, 67, 68, 143 carbon emissions from, 409 coal exports from, 320, 322, 346, 349, 374, 376 Copenhagen agreement signed by, 12, 150 energy privatization reversals in, 98 environmental legislation in, 201–2 failure of climate legislation in, 226–27 Kyoto Protocol and, 218–19, 225–26 oil and gas export restrictions in, 71 opposition movement in, 9 solar energy market in, 72 WTO challenges brought against, 65 WTO challenges brought by, 64–65, 68 United States Climate Action Partnership (USCAP), 226–28 University College London, 415–16 uranium, 176 urban planning, green, 16 urban sprawl, 90, 91 US Airways, 1–2 U.S.

 

pages: 273 words: 93,419

Let them eat junk: how capitalism creates hunger and obesity by Robert Albritton

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Bretton Woods, California gold rush, clean water, collective bargaining, computer age, corporate personhood, deindustrialization, Food sovereignty, Haber-Bosch Process, illegal immigration, immigration reform, invisible hand, joint-stock company, joint-stock limited liability company, land reform, late capitalism, means of production, offshore financial centre, oil shale / tar sands, peak oil, price stability, profit maximization, profit motive, South Sea Bubble, the built environment, union organizing, Unsafe at Any Speed, upwardly mobile

Realistically these changes are unlikely to occur without very significant mass mobilizations to push them forward. It has been estimated conservatively that corporations and individuals now escape their legal obligation to pay taxes globally to the amount of $500 billion a year through a variety of tax havens, tax loopholes and tax evasion schemes.6 One way to strengthen the public sector and increase the transparency of corporations would be to find ways to reduce corporate tax evasion through increased corporate transparency. At minimum this would require the end of tax havens, numbered bank accounts and shell corporations, as well as exposing all financial transactions to public accountability. Admittedly, this would not be easy to achieve, for any effective control of corporate tax evasion would require a great deal more international cooperation than now exists.

 

pages: 334 words: 98,950

Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang

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affirmative action, Albert Einstein, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

A Christian Aid report documents cases of underpriced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528, and overpriced imports such as German hacksaw blades at $5, 485 each, Japanese tweezers at $4, 896, and French wrenches at $1, 089.24 This is a classic problem with TNCs, but today the problem has become more severe because of the proliferation of tax havens that have no or minimal corporate income taxes.Companies can vastly reduce their tax obligations by shifting most of their profits to a paper company registered in a tax haven. It may be argued that the host country should not complain about transfer pricing, because, without the foreign direct investment in question, the taxable income would not have been generated in the first place. But this is a disingenuous argument. All firms need to use productive resources provided by government with taxpayers’ money (e.g., roads, the telecommunications network, workers who have received publicly funded education and training).

 

pages: 349 words: 114,038

Culture & Empire: Digital Revolution by Pieter Hintjens

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4chan, airport security, anti-communist, anti-pattern, barriers to entry, Bill Duvall, bitcoin, blockchain, business climate, business intelligence, business process, Chelsea Manning, clean water, congestion charging, Corn Laws, correlation does not imply causation, cryptocurrency, Debian, Edward Snowden, failed state, financial independence, Firefox, full text search, German hyperinflation, global village, GnuPG, Google Chrome, greed is good, Hernando de Soto, hiring and firing, informal economy, invisible hand, James Watt: steam engine, Jeff Rulifson, Julian Assange, Kickstarter, M-Pesa, mutually assured destruction, Naomi Klein, national security letter, new economy, New Urbanism, Occupy movement, offshore financial centre, packet switching, patent troll, peak oil, pre–internet, private military company, race to the bottom, rent-seeking, reserve currency, RFC: Request For Comment, Richard Feynman, Richard Feynman, Richard Stallman, Satoshi Nakamoto, security theater, Skype, slashdot, software patent, spectrum auction, Steve Crocker, Steve Jobs, Steven Pinker, Stuxnet, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trade route, transaction costs, union organizing, web application, WikiLeaks, Y2K, zero day, Zipf's Law

For example, we used to need to pay a travel agent to organize travel. Today, we can do it ourselves, so trivially that we forget what a chore this used to be. The cost of creating legal entities is falling, driven by a very competitive US market. Europe still lags behind. Some smaller European countries such as Estonia and Macedonia are positioning themselves as the Delawares of Europe (not to be confused with tax havens like Cyprus, which have as their model secrecy and low taxes rather than simple efficiency). Government departments are increasingly using email instead of paper, and accepting tax returns and other reporting via the Internet through standardized formats. This reduces the need for accountants and other middlemen. Products have gone digital in many domains, eliminating manufacturing costs, and sharply reducing the costs of packaging and marketing.

"Can I open an account?" "Yes, certainly. Do you have identification?" "No, though I do have this check." "That'll do nicely, sir." This was a cross-border specialty. For decades, Germans seeking to avoid the high taxes of their country could hop over the border to Austria, open an anonymous numbered account, and put undeclared cash income there. High taxes and old laws left Europe littered with convenient little tax havens: Andorra, Monaco, Luxembourg, Jersey, Malta, Liechtenstein. Even Belgium welcomed tax refugees from the Netherlands, as did Germany from Austria, and Switzerland from anywhere in the world and especially from corrupt foreign dictatorships. Anti-money laundering (AML) regulations ended such liberties. Ostensibly, the purpose was to catch drug traffickers, by requiring identification for any transaction, and justification for any transfer over $10,000.

 

pages: 347 words: 99,317

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity by Ha-Joon Chang

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affirmative action, Albert Einstein, banking crisis, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

A Christian Aid report documents cases of underpriced exports like TV antennas from China at $0.40 apiece, rocket launchers from Bolivia at $40 and US bulldozers at $528, and overpriced imports such as German hacksaw blades at $5,485 each, Japanese tweezers at $4,896, and French wrenches at $1,089.24 This is a classic problem with TNCs, but today the problem has become more severe because of the proliferation of tax havens that have no or minimal corporate income taxes. Companies can vastly reduce their tax obligations by shifting most of their profits to a paper company registered in a tax haven. It may be argued that the host country should not complain about transfer pricing, because, without the foreign direct investment in question, the taxable income would not have been generated in the first place. But this is a disingenuous argument. All firms need to use productive resources provided by government with taxpayers’ money (e.g., roads, the telecommunications network, workers who have received publicly funded education and training).

 

pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, working poor, yield curve

United Arab Emirates 8. Brazil 9. Switzerland 9. Russia 10. Canada 10. Italy 11. Australia 11. India 12. Austria 12. Canada Speaking purely for myself, quite a few places high on the left-hand list are places I have no desire to live, which probably reflects the fact that the per capita GDP figures are skewed towards small countries that either are rich in resources or are tax havens. Gini coefficient A numeric technique for measuring a society’s inequality. It’s used to measure income inequality in particular. A Gini coefficient of 0 would mean perfect equality, in which everyone had the same income; a Gini coefficient of 1 would be perfect inequality, in which one person had all the money and everybody else had nothing. Here are the top ten least-equal countries in the world, as measured by the CIA, with the most unequal at the top:39 1.

Lenders with excess capital would directly seek out borrowers who need the capital, and both would benefit from the transaction, rather than the current model in which banks borrow money at say 0.25 percent and lend it at 5 percent and pocket the difference. Big companies already cut banks out of the process of borrowing, by raising money through issuing their own bonds. P2P offers a glimpse of a world in which this process has been democratized: people have realized how the system works and are beginning to cut banks out of the picture. paradis fiscal The wonderful French term for tax haven—I love the idea that a tax-free location is a form of paradise, in which people spend all their time cavorting on yachts. petrodollar Money made by selling oil; these transactions are denominated in US dollars because the USA made a deal with Saudi Arabia, after the collapse of the Bretton Woods agreement in 1971, as a way of maintaining demand for the US dollar as the de facto global reserve currency.

 

pages: 364 words: 99,897

The Industries of the Future by Alec Ross

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23andMe, 3D printing, Airbnb, algorithmic trading, AltaVista, Anne Wojcicki, autonomous vehicles, banking crisis, barriers to entry, Bernie Madoff, bioinformatics, bitcoin, blockchain, Brian Krebs, British Empire, business intelligence, call centre, carbon footprint, cloud computing, collaborative consumption, connected car, corporate governance, Credit Default Swap, cryptocurrency, David Brooks, disintermediation, Dissolution of the Soviet Union, distributed ledger, Edward Glaeser, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, fiat currency, future of work, global supply chain, Google X / Alphabet X, industrial robot, Internet of things, invention of the printing press, Jaron Lanier, Jeff Bezos, job automation, knowledge economy, knowledge worker, litecoin, M-Pesa, Mark Zuckerberg, Mikhail Gorbachev, mobile money, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, open economy, peer-to-peer lending, personalized medicine, Peter Thiel, precision agriculture, pre–internet, RAND corporation, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, Satoshi Nakamoto, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, social graph, software as a service, special economic zone, supply-chain management, supply-chain management software, technoutopianism, underbanked, Vernor Vinge, Watson beat the top human players on Jeopardy!, women in the workforce, Y Combinator, young professional

You can now use your Estonian e-residency for a variety of things, such as doing business throughout the EU and leveraging its online-only programs for contracting and tax filing. It’s a way to bypass other countries’ more expensive and less efficient systems. No more paperwork, lower taxes, and, if you own a business, all the freedom that comes with being an incorporated business in the EU. In a similar way to how other countries have created tax havens to benefit from large deposits in their banks, Estonia has established itself as an efficiency haven. Instead of facilitating criminal behavior as tax havens do, Estonia’s system is trying to make business more secure. The ideology behind it is rooted in good government. Among the benefits to Estonia is the additional tax revenue and more than $500 million in fees alone that it expects from 10 million e-residents over the next several years. Every leader I’ve spoken to about Estonia’s e-residency has the same one-word, three-letter response: wow.

 

pages: 124 words: 39,011

Beyond Outrage: Expanded Edition: What Has Gone Wrong With Our Economy and Our Democracy, and How to Fix It by Robert B. Reich

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, affirmative action, banking crisis, carried interest, collateralized debt obligation, collective bargaining, Credit Default Swap, credit default swaps / collateralized debt obligations, desegregation, full employment, Home mortgage interest deduction, job automation, Mahatma Gandhi, minimum wage unemployment, new economy, Occupy movement, offshore financial centre, Plutocrats, plutocrats, Ponzi scheme, race to the bottom, Ronald Reagan, single-payer health, special drawing rights, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, women in the workforce, working poor

We pledge to keep a lid on executive pay so no executive is paid more than fifty times the median pay of American workers. We define “pay” to include salary, bonuses, health benefits, pension benefits, deferred salary, stock options, and every other form of compensation. We pledge to pay at least 30 percent of money earned in the United States in taxes to the United States. We won’t shift our money to offshore tax havens, and we won’t use accounting gimmicks to fake how much we earn. We pledge not to use our money to influence elections. This isn’t too much to ask, is it? Again, it wouldn’t be a legal requirement; corporations would be free to pledge or not to pledge. And consumers would be free to boycott those corporations that don’t make the pledge or that disregard it. But at least we’ll know which corporations that enjoy the benefits of American citizenship act like American citizens.

 

pages: 112 words: 30,160

The Gated City (Kindle Single) by Ryan Avent

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big-box store, carbon footprint, deindustrialization, edge city, Edward Glaeser, income inequality, labor-force participation, low skilled workers, manufacturing employment, offshore financial centre, profit maximization, rent-seeking, Silicon Valley, Thorstein Veblen, transit-oriented development, Tyler Cowen: Great Stagnation

Density facilitates interaction, and it will therefore be most important where economic activity is most dependent on personal interaction. As we’ve seen, that’s likely to be most true in skill-intensive sectors, and especially in industries experimenting with new business models and technologies. As we’ve also seen, the gains to density are constrained when it’s difficult to capitalize on innovation through entrepreneurship. The world’s richest places tend to be dense, well educated, and free-market oriented (or tax havens or oil-rich) – think of New York and the Bay area, of Singapore, Hong Kong, and the Netherlands. Without a stock of skilled workers and a relatively open marketplace, density’s impact on growth and productivity will be limited. One might object that the US is one of the world’s least dense countries. If density is important, why isn’t America poorer? The proper scope over which to consider density is an interesting question.

 

pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

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accounting loophole / creative accounting, affirmative action, asset allocation, barriers to entry, Bonfire of the Vanities, business climate, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, full employment, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Ralph Nader, Ronald Reagan, shareholder value, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

But just as Willie Sutton robbed banks because “that’s where the money is,” tax evasion by the rich is where the money is. Most Americans, after all, have most of their taxes automatically taken out of their wages. Rich people and corporations, by contrast, are largely responsible for reporting their complex earnings and capital gains, and they have the will and the way to use intricate partnerships, offshore tax havens, and other devices that skirt or cross legal lines. Yet, as the investigative reporter David Cay Johnston has painstakingly documented, audits of high-income taxpayers and businesses have plummeted. About the only area where audits have gone up is among poorer taxpayers who claim the Earned Income Tax Credit.12 Another way public officials have cut the taxes of upper-income filers without passing new laws is by leaving in place loopholes through which rich Americans and their accountants shovel lightly taxed cash.

., 95, 96–100, 116, 117, 120, 125, 141, 165, 186, 189, 199, 200, 202, 293, 302 Nixonland (Perlstein), 95, 96–98, 115 Norgay, Tenzing, 102, 135 Norquist, Grover, 208, 212, 284 Nunn, Sam, 181 Obama, Barack, 8, 54, 97, 106, 126, 196, 225, 233, 234–35, 245, 255–73, 282, 284, 286–88, 291, 301–2, 304–5 O’Brien, Larry, 269 Occupational Safety and Health Administration (OSHA), 97 Off Center (Hacker and Pierson), 157, 264 Office of Consumer Representation, 126–27 Office of Management and Budget (OMB), 260 Office of the U.S. Trade Representative, 272 offshore tax havens, 50 oil industry, 63, 104, 119, 144, 189, 280 oligarchies, 4, 6, 76–77, 80, 82 Olin, John, 122–23 Olin Foundation, 123 O’Neill, Paul, 217 O’Neill, Thomas P. “Tip,” 127, 129, 176, 187, 188, 229, 241 opinion polls, 109–10, 126, 148, 152–53, 155, 171, 175, 176, 214, 258, 268, 285–86 Organizing for America (OFA), 259, 285, 304–5 Organization, 102–10; see also interest groups Orszag, Peter, 260 Other People’s Money, and How the Bankers Use It (Brandeis), 80–81, 82 Packer, George, 235 Page, Benjamin, 152 Paine, Thomas, 75 Palin, Sarah, 54, 268 Panama Canal Treaty (1977), 130 parliamentary system, 84, 168, 243, 270 partisanship, 85, 95; see also bipartisanship, Democratic Party, polarization, Republican Party, Paulson, Henry, 41–42, 195, 261 “pay-as-you-go” rules, 213 payroll taxes, 47, 99–100, 214, 312n Pelosi, Nancy, 251, 252, 258, 260 pensions, 29–30, 57, 64, 86, 89, 220 Perkins, Frances, 89 Perlstein, Rick, 95 Perot, Ross, 232 Peterson, Pete, 302 Pharmaceutical Research and Manufacturers of America (PhRMA), 238, 239 pharmaceuticals industry, 238, 239, 271, 275, 281 Philippon, Thomas, 69–70 Phillips, Kevin, 97–98 picketing, common-site, 128–29 Piketty, Thomas, 13–14, 15, 16, 17, 20, 21, 47–48 Pitt, Harvey, 219, 221 Plouffe, David, 259 Polanyi, Karl, 55 polarization, 95–96, 148, 158–60, 188, 189–93, 210–15, 241, 262–73, 286–88, 298–300 Polarized America (McCarty, Poole, and Rosenthal), 158–59 political actions committees (PACs), 118, 121–22, 128, 145–46, 171–72, 173, 177–78, 227 politics: business influence on, 65–66, 74, 79, 84–85, 104–7, 110–12, 116–36, 150–51, 160, 169, 170–72, 179–80, 183–84, 197–98, 207, 230–31, 242–43, 271–75, 282, 292–93, 304 coalitions in, 125, 126–27, 234 conservatism and, 5, 7, 19–24, 41–42, 49, 54, 77, 115, 122–24, 134, 137, 165–66, 179–82, 184, 186–88, 189, 191, 204, 208, 217, 233, 239–41, 267 corruption in, 79, 86, 183, 207, 238–39, 257 economic impact of, 7–8, 71–72, 74–77, 90, 148, 149–51, 239–41, 256–57 “as electoral spectacle,” 100–102 fragmentation of, 84, 91–115 liberalism and, 5, 7, 43, 53–56, 62, 68, 69, 88–90, 91, 95–100, 110, 115, 116–19, 137, 138, 140, 145–48, 159–60, 163, 178, 179, 181, 186–89, 200, 225, 234, 239, 256–57, 305 local, 226, 229–30, 239–41 lower class influence in, 3, 4, 13, 74, 135–36, 143–49, 158, 165, 234, 274 majorities vs. minorities in, 71–72, 76–79, 111–12, 237–44, 269–70, 278, 297–300 media coverage of, 2, 101–6, 107, 121, 127, 140, 155–58, 167–68, 175, 196, 274, 280, 294, 295, 302 middle class influence in, 3, 4, 12, 13, 57, 73, 74, 78, 96, 110–12, 131, 134, 135–36, 138–39, 141–49, 158, 184, 225, 234, 238, 239, 271, 274, 292, 293, 296, 301, 302–3, 304, 305–6 moderates in, 99, 140, 152, 158–60, 163, 179, 180–82, 189–95, 199, 200–201, 209–11, 217, 231–32, 237–41, 244, 245, 261, 263, 264, 267, 280, 281, 293–94 “as organized combat,” 116–36, 138, 259–62, 271–73, 275, 291–93, 295, 300–301 personalities in, 104–5, 171 power, 73, 89–90, 113, 117–18, 169–70, 272–73, 301 progressivism and, 79–82, 83, 86–87, 90, 200, 232, 245, 297, 298, 306 public opinion in, 107, 109–10, 123, 126, 148, 152–53, 155, 171, 175, 176, 214, 258, 268, 281, 285–86, 294–95 reform of, 8, 73, 79–82, 83, 304–6 two-party system for, 85, 86, 89–90, 143, 160, 163–93, 203, 233–34 winner-take-all, see winner-take-all politics “politics of renewal,” 87–91, 255–73, 280–88, 289, 291–97, 300, 301–2, 305 political inequality, 36, 41–42, 52–55, 74–79, 87, 100, 150, 151–55, 167, 191 Poole, Keith, 158–59 populism, 76–79, 95–96, 97, 104, 184, 223–24, 231, 234–35, 261, 282, 292, 295 Positively American (Schumer), 225 Posner, Richard, 248 postmaterialism, 145–46, 147, 179 poverty, 28, 31, 52, 74, 75, 77–79, 88, 89, 111–12 Powell, Lewis, 117–18, 119, 125, 135 predatory lending, 197, 277 presidency, 89, 98–100, 113, 130, 131, 132–33, 137–38, 164, 175, 200 prices: consumer, 32, 52–53, 63, 100, 119 housing, 2, 27, 32–33, 88, 133, 197, 216, 253 inflation of, 21–22, 32, 36, 52–53, 100, 119, 140, 187, 216, 253 Prince, Charles O., III, 226 private equity firms, 228–30 Private Securities Litigation Reform Act (PSLRA) (1995), 219 Procter & Gamble, 117, 120 Progressives, 79–82, 83, 86–87, 90, 200, 232, 245, 297, 298, 306 progressive taxation, 47, 48–49, 98, 133, 200, 214, 301 property taxes, 77–79 public interest groups, 120–21, 126–27, 139, 144–46, 147 Putnam, Robert, 143 Quayle, Dan, 339n Rand, Ayn, 254 Ratigan, Dylan, 106 Rattner, Steven, 225 Raynes, Burt, 116 Reagan, Ronald, 17, 19, 49, 58–59, 99, 133, 134, 163–66, 172, 174, 175, 180, 184, 186–88, 189, 191, 196, 199, 200, 202, 203, 208, 212, 217, 233, 236, 267, 269, 282, 293 real estate, 2, 27, 32–33, 77–79, 88, 133, 197, 216, 240, 253, 271–72, 274 recessions in, 3, 12–13, 101, 127–28, 133, 165, 195, 212, 292 redistricting, congressional, 175, 258 “red states,” 101–2, 147–48, 272, 281 Reed, John, 249–50 Reed, Ralph, 203, 204 Rehnquist, William, 109 Reid, Harry, 159 Religious Right, 139, 146–49, 160, 201–4, 205, 234–35 “Renewing the American Economy,” 256–57 Republican Eagles, 173 Republican National Committee (RNC), 166, 172–76, 178, 250–51 Republican Party, 163–93 agenda of, 95–96, 97, 168–70, 199–204, 208–15, 221–22, 234–39, 262–73, 283–85, 293–95 business support for, 34, 49, 53, 65, 86, 121–26, 129–32, 140, 157, 170, 174–88, 189, 194–222, 230–31, 244–46, 267 campaign spending by, 163–64, 166, 167, 170–84, 207, 209–10, 219, 223, 230–31, 238–39, 250–51, 275, 276 congressional majority of, 34, 89–90, 97–98, 109, 130–32, 157–58, 175–76, 178, 188, 189–93, 199, 210–15, 220, 230–31, 236–37, 238, 243–44, 262–73, 278–88 conservative wing of, 95–96, 115, 122–24, 130–32, 140, 146–49, 159–60, 163–66, 172–73, 179–80, 183, 188, 189–93, 194–95, 199–204, 206, 208–15, 221–22, 228, 233, 234–39, 255, 262–73, 283–85, 293–95, 296, 302 Democratic cooperation with, 186–93, 199–200, 210–15, 230–31, 233–34, 236–44, 247–48, 262–73, 278–88, 294–95, 302, 303 economic policies of, 17, 34, 41–42, 49, 65, 95–100, 109, 157, 207–15, 235, 240–41, 244–48, 255, 262–73 generational change in, 130, 189–93, 210–11, 265 incumbent members of, 209–10 labor unions opposed by, 58–59, 129–32, 186–87 leadership of, 130–32, 188, 189–93, 200–201, 210–15, 283 lower class support for, 98, 146–49, 165 middle class support for, 97–98, 111–12, 146–49 moderates in, 140, 163, 189–95, 199, 200–201, 209–11, 217, 232, 238–39, 240, 244, 263, 264, 267, 280, 281, 293–94 obstructionist tactics of, 188, 189–93, 199–200, 210–15, 237–44, 262–73, 278–88, 294–95, 302, 303 organizational basis of, 163–64, 166–68, 172–76, 199–200, 210–11, 230–31, 263, 271–73 populism in, 95–96, 97 presidency controlled by, 91, 95, 96–98, 140, 175, 199 religious evangelical support for, 139, 146–49, 160, 201–4, 234–35 Southern wing of, 190–91, 200–201, 210–11, 234–35 tax cuts policy of, 34, 49, 157, 207–15, 244–46, 267 upper class support for, 110–11, 147–49 winner-take-all politics supported by, 8, 182, 185–86, 194–95, 221–22, 224–25, 228–30, 235, 236–37, 255, 257, 261, 268, 278, 289–306 Republican Senate Campaign Committee, 178 “Republicans for a Day,” 239–41, 244, 267, 305 “Republicans in name only” (RINOs), 210 Reshef, Ariell, 69–70 retirement benefits, 29–30, 31, 57, 60, 64, 86, 89, 220 revenue, 188, 203, 208, 212, 213, 245–46 Richistan, 15, 17, 24–25, 25, 26, 194, 290 Riddell, W.

 

pages: 376 words: 121,254

Cocaine Nation: How the White Trade Took Over the World by Thomas Feiling

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anti-communist, barriers to entry, crack epidemic, deindustrialization, illegal immigration, informal economy, inventory management, land reform, Lao Tzu, offshore financial centre, RAND corporation, Ronald Reagan, trade route, upwardly mobile

Francisco Thoumi has pointed out that if it were true that the illegal drugs business contributed to economic growth in the United States, canny economists would recommend that Colombia declare tobacco illegal, thereby raising cigarette prices and increasing smuggling, which would then generate revenue to buoy the country’s national income. Corporations pay taxes to governments; cocaine dealers do not. Corrupt people and tax havens benefit from the trade in illegal drugs, but a country’s economic system does not. Thankfully, there are trustworthy sources of information on the size of the drugs economy. Whatever its size, the economics of the drugs business clearly favours its practitioners. There are thought to be about 300 major drug importers into Britain, 3,000 wholesalers and 70,000 street dealers. Approximately one in 500 Britons works in the business of buying and selling illegal drugs.14 Between them, they turn over sales of £7–8 billion a year, which is about a third of the size of Britain’s tobacco market and two fifths of its trade in alcohol.

The control regime has extended from banks to car dealers, casinos, corner-shop money-transmission businesses, jewellers, pawnbrokers and insurance companies. Policing the international financial system has become harder because free trade zones, extra-territorial banking, electronic money transfers and smart cards have made the movement of capital much easier over the past twenty years. Every day, there are 70,000 international money transfers, shunting £1 trillion to and from accounts around the world. In 1979, there were seventy-five offshore tax havens. Today, there are more than 3,000, and nearly half of the world’s money supply passes through them. These havens have institutionalized tax evasion by the world’s greatest fortunes. They have also given money-launderers many more options. The neo-liberal economic reforms that have been foisted on the Third World also favour the international drugs trade. The logic of neo-liberalism is to reduce governments’ ability to withstand external market pressures, thereby forcing them to conform to the dictates of the international marketplace.

 

pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

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airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K

One study measured how much people cheat on tests, given three different scenarios that changed their likelihood of getting caught. The rate of cheating did not increase with the probability that their cheating would remain undetected. (14) The trick with this pair of loopholes is to establish two Irish subsidiaries: one based in a tax haven that holds the rights to its intellectual property outside the U.S., and another based in Ireland that receives the income gained from that property. In order to avoid Irish taxes, a third subsidiary—a Dutch corporation—serves as a transfer for royalties flowing from the subsidiary in Ireland to the tax haven. This byzantine arrangement is legal, even if those three corporations exist on paper only, and allows the parent company to avoid the IRS, even if it is entirely located in the United States. (15) That loophole closed after a year, but a bigger one opened up—and it's retroactive.

 

pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

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3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

Until the mid-1990s, most advanced European economies were catching up with the US, but since then progress has stalled. Living standards in Europe fall well short of those in America. In 2012 Britons were 28 per cent poorer than Americans – as measured by gross domestic product per person, adjusted for differences in purchasing power – while people in the eurozone were 30 per cent worse off. Except for Luxembourg and Switzerland, both tax havens, and oil-rich Norway, all European countries were poorer than America. The best performers otherwise were Austria (15 per cent poorer) and Sweden (16 per cent); figures for a selection of other countries are in the footnotes.91 The gap between average incomes in the US and Europe can be broken down into three factors. In some cases a smaller share of the European population is employed; they tend to work fewer hours; and they generally produce less per hour.

The holy grail of higher employment and higher wages for the low-paid could thus be achieved – a key plank of a decent society. If people on lower incomes were exempt from taxes on work altogether, this would make society much fairer. At a time of high unemployment, it ought to be a no-brainer. The shortfall in tax revenues would be filled by taxing land values. This wouldn’t reduce the supply of land, which is fixed and immovable: Mayfair can’t be spirited away to a tax haven. Nor would it push up rents, which depend on what tenants are prepared to pay rather than landlords’ expenses.725 Thus, unlike most taxes, it wouldn’t crimp economic activity, as Adam Smith explained in The Wealth of Nations. On the contrary, a land tax would encourage development. Since it would be payable irrespective of how land is used, it would stimulate the regeneration of derelict and unused sites.

 

pages: 466 words: 127,728

The Death of Money: The Coming Collapse of the International Monetary System by James Rickards

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Affordable Care Act / Obamacare, Asian financial crisis, asset allocation, Ayatollah Khomeini, bank run, banking crisis, Ben Bernanke: helicopter money, bitcoin, Black Swan, Bretton Woods, BRICs, business climate, capital controls, Carmen Reinhart, central bank independence, centre right, collateralized debt obligation, collective bargaining, complexity theory, computer age, credit crunch, currency peg, David Graeber, debt deflation, Deng Xiaoping, diversification, Edward Snowden, eurozone crisis, fiat currency, financial innovation, financial intermediation, financial repression, Flash crash, floating exchange rates, forward guidance, George Akerlof, global reserve currency, global supply chain, Growth in a Time of Debt, income inequality, inflation targeting, invisible hand, jitney, Kenneth Rogoff, labor-force participation, labour mobility, Lao Tzu, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market clearing, market design, money: store of value / unit of account / medium of exchange, mutually assured destruction, obamacare, offshore financial centre, oil shale / tar sands, open economy, Plutocrats, plutocrats, Ponzi scheme, price stability, quantitative easing, RAND corporation, reserve currency, risk-adjusted returns, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, special drawing rights, Stuxnet, The Market for Lemons, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, trade route, uranium enrichment, Washington Consensus, working-age population, yield curve

Skeptics claim that an intelligence or military covert operation in hedge fund form would be easy to detect because of detailed anti-money-laundering and know-your-customer rules, strictly enforced by the brokers. This objection does not withstand scrutiny. The necessary techniques for operating with cover include front companies, so-called cutouts, secret agents, cover stories, and entities layered on top of each other so that the unwitting points of contact cannot see the controlling parties. A covert hedge fund structure involves layers of legal entities in tax-haven countries offering the enemy sponsor a deep cover. Professional assistance is needed from corrupt lawyers or bankers who retain innocent professionals to handle detailed work such as fund administration. Directors are recruited from the advisory companies in offshore jurisdictions that offer administration services to investors. Having innocent parties in the food chain throws counterintelligence agents off the scent.

This transfer is not counted against the annual ceiling on capital exports because it is viewed as payment of a legitimate debt. The “unlucky” gambler later recovers the cash from the corrupt casino operator, minus a commission for the money-laundering service rendered. Even larger amounts are moved offshore through the mis-invoicing of exports and imports. For example, a Chinese furniture manufacturer can create a shell distribution company in a tax haven jurisdiction such as Panama. Assuming the normal export price of each piece of furniture is $200, the Chinese manufacturer can underinvoice the Panamanian company and charge only $100 for each piece. The Panamanian company can then resell into normal distribution channels for the usual price of $200 per piece. The $100 “profit” per piece resulting from the underinvoicing is then left to accumulate in Panama.

 

pages: 190 words: 53,970

Eastern standard tribe by Cory Doctorow

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airport security, call centre, forensic accounting, high net worth, offshore financial centre, pirate software, Silicon Valley, the payments system

Art and Linda drank ginger beer in the observation car, spiking it with rum from a flask that Linda carried in a garter that she wore for the express purpose of being able to reach naughtily up her little sundress and produce a bottle of body-temperature liquor in a nickel-plated vessel whose shiny sides were dulled by the soft oil of her thigh. Canada Customs and Immigration separated them at the border, sending Art for a full inspection -- a privilege of being a Canadian citizen and hence perennially under suspicion of smuggling goods from the tax havens of the US into the country -- and leaving Linda in their little Pullman cabin. When Art popped free of the bureaucracy, his life thoroughly peered into, he found Linda standing on the platform, leaning against a pillar, back arched, one foot flat against the bricks, corresponding dimpled knee exposed to the restless winds of the trainyard. From Art's point of view, she was a gleaming vision skewered on a beam of late day sunlight that made her hair gleam like licorice.

 

pages: 147 words: 45,890

Aftershock: The Next Economy and America's Future by Robert B. Reich

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Berlin Wall, declining real wages, delayed gratification, Doha Development Round, endowment effect, full employment, George Akerlof, Home mortgage interest deduction, Hyman Minsky, illegal immigration, income inequality, invisible hand, job automation, labor-force participation, Long Term Capital Management, loss aversion, mortgage debt, new economy, offshore financial centre, Ralph Nader, Ronald Reagan, school vouchers, sovereign wealth fund, Thorstein Veblen, too big to fail, World Values Survey

Regulators could have prohibited big, profitable companies from laying off a large number of workers all at once and required them to pay severance—say, a year of wages—to anyone they let go, and train them for new jobs. The minimum wage could have been linked to inflation. Why did we fail to raise taxes on the rich and fail to cut them for poorer Americans? Why did we fail to attack overseas tax havens by threatening loss of U.S. citizenship to anyone who keeps his money abroad in order to escape U.S. taxes? America could have expanded public investments in research and development, and required any corporation that commercialized such investments to create the resulting new jobs in the United States. And we could have insisted that foreign nations we trade with establish a minimum wage that’s half their median wage.

 

pages: 204 words: 60,319

Finding Zero: A Mathematician's Odyssey to Uncover the Origins of Numbers by Amir D. Aczel

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colonial rule, double entry bookkeeping, Georg Cantor, offshore financial centre, Y2K

The woman laughed knowingly, and he walked over from the living room to the adjacent kitchen and opened a large refrigerator, just so I could see what was inside: many more jars of Caspian caviar. And the bar was stocked with a lot of expensive liquor: scotch whisky, Calvados, Drambuie, Grand Marnier, sake. I looked at him a little puzzled. “Well,” he said after a moment, “you saw the French customs checkpoint just up the road, right? You couldn’t have missed it.” I didn’t understand. “You know that Andorra is one of the last tax havens in the world, don’t you?” I nodded. A vague notion began to surface in my mind. There was a moment’s silence. He looked at me, and then he said, “You know, late at night, there is nobody there at the checkpoint. And this house is at exactly the right place—” “Just like my mother’s suitcase,” I interrupted. The thinnest of smiles spread across those old lips. “Just like your mother’s suitcase,” he said.

 

Masters of Mankind by Noam Chomsky

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affirmative action, Berlin Wall, failed state, income inequality, land reform, Martin Wolf, means of production, nuremberg principles, offshore financial centre, oil shale / tar sands, Plutocrats, plutocrats, profit maximization, Ralph Waldo Emerson, Silicon Valley, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, union organizing, urban renewal, War on Poverty, Washington Consensus

Or to discuss the suffering caused across the board by “downsizing” when the Bureau of Labor Statistics estimates that the category of “executives, managers, and administrative personnel” for US companies grew almost 30 percent from 1983 to 1993,53 while compensation for executives skyrocketed (and easily retains its international lead, relative to labor costs)—apparently with little or no correlation to performance.54 Similarly, some caution seems necessary in lauding the marvels of the “emerging markets” when the leading recipient of US Foreign Direct Investment in the hemisphere (Canada aside) is Bermuda, with about one-quarter, another 20 percent going to other tax havens, much of the rest to such “economic miracles” as Mexico, which followed the dictates of the “Washington consensus” with unusual obedience, and less than glorious consequences for the overwhelming majority.55 In fact, the very notions of “capitalism” and “markets” seem to be disappearing from consciousness, much like the concept of democracy. A few examples may serve to illustrate. A lead story in the Wall Street Journal, discussing the “fateful choices” that states are making to attract business, compares two cases: Maryland, with its “antibusiness image,” and “more Republican” Virginia, which is “more gung-ho about corporate growth” and more sympathetic to “the choices made by entrepreneurs.”

 

Imperial Ambitions: Conversations on the Post-9/11 World by Noam Chomsky, David Barsamian

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British Empire, collective bargaining, cuban missile crisis, declining real wages, failed state, feminist movement, Howard Zinn, invisible hand, Joseph Schumpeter, Monroe Doctrine, offshore financial centre, Ronald Reagan, The Wealth of Nations by Adam Smith, Thomas L Friedman, Upton Sinclair, uranium enrichment

It turns out that foreign direct investment in Latin America did surge during the mid-1990s, but the composition of it was extremely interesting. Consistently about 25 percent of FDI was going to Bermuda, around 15 percent was going to the British Cayman Islands, and about 10 percent to Panama. That’s roughly 50 percent of what they’re calling foreign direct investment, and it certainly was not going to build steel plants. This was just money flowing into various tax havens. Most of the rest was going for mergers and acquisitions and so on. These are huge sums. The scale of sheer robbery by corporate power is enormous. In any event, corporations and rich people barely pay taxes, so they’re doing fine. But the general population has gone through thirty years of either stagnation or decline in real wages, with people working longer hours with fewer benefits. I don’t think there’s been a period like this in American history.

 

pages: 275 words: 77,017

The End of Money: Counterfeiters, Preachers, Techies, Dreamers--And the Coming Cashless Society by David Wolman

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Bay Area Rapid Transit, Berlin Wall, Bernie Madoff, bitcoin, Bretton Woods, carbon footprint, cashless society, central bank independence, collateralized debt obligation, corporate social responsibility, credit crunch, cross-subsidies, Diane Coyle, fiat currency, financial innovation, floating exchange rates, German hyperinflation, greed is good, Isaac Newton, M-Pesa, Mahatma Gandhi, mental accounting, mobile money, money: store of value / unit of account / medium of exchange, offshore financial centre, Peter Thiel, place-making, placebo effect, Ponzi scheme, Ronald Reagan, seigniorage, Silicon Valley, special drawing rights, Steven Levy, the payments system, transaction costs

Sinha, Mas, and other mobile-money enthusiasts aren’t nonchalant about these concerns, but they warn against creating unwarranted paranoia and against thinking too narrowly about what constitutes security. For example, limiting transfer amounts is an easy first step for deterring widespread abuse of these systems. Remember, target customers are people like Kumar, the electronics repairman, not millionaires who already have plenty of access to financial services, tax havens, and sophisticated methods of laundering their money. Enterprising terrorists could easily end-run this transfer maximum, though, by having many people direct funds to a single operative. To prevent that from happening, the system could also have a maximum amount that can be received into a single account in a given time. The software could also have tripwires that alert authorities about suspicious activity, just like when your credit card company contacts you to be sure you really did buy that $20,000 necklace yesterday in Macau.

 

pages: 249 words: 77,027

Glock: The Rise of America's Gun by Paul M. Barrett

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airport security, forensic accounting, hiring and firing, interchangeable parts, offshore financial centre, Ralph Nader, Ronald Reagan, union organizing

This was accomplished by having pistols manufactured in Austria sold first to the Latin American and Hong Kong units and then resold for higher prices to Glock, Inc., in Smyrna. By inflating costs to the American subsidiary, this practice decreased the profits the subsidiary was required to report to the US Internal Revenue Service. The court in Luxembourg did not show any interest in enforcing the tax laws of other countries—hardly surprising, given that Luxembourg’s economy rests on its reputation as a tax haven. The court was trying to sort out whether Ewert had a legitimate claim to Unipatent and half of Glock’s lucrative US unit. Once the Luxembourg judiciary concluded that, on the contrary, Ewert was an embezzler and failed murderer, it left the propriety of Glock’s tax-minimization strategies to others. As part of his effort to clarify ownership of his companies, Glock hired a team of American investigators based in Atlanta.

 

pages: 373 words: 80,248

Empire of Illusion: The End of Literacy and the Triumph of Spectacle by Chris Hedges

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Albert Einstein, Ayatollah Khomeini, Cal Newport, clean water, collective bargaining, corporate governance, Credit Default Swap, haute couture, Honoré de Balzac, Howard Zinn, illegal immigration, income inequality, Joseph Schumpeter, Naomi Klein, offshore financial centre, Ralph Nader, Ronald Reagan, single-payer health, statistical model, uranium enrichment

And flush with taxpayer dollars, what has Halliburton done? It has made sure only thirty-six of its 143 subsidiaries are incorporated in the United States and 107 subsidiaries (or 75 percent) are incorporated in thirty different countries. This arrangement allows Halliburton to lower its tax liability on foreign income by establishing a “controlled foreign corporation” and subsidiaries inside low-tax, or no-tax, countries used as tax havens. Thus the corporations take our money. They squander it. They cleverly evade taxation. And our corporate government not only funds them but protects them. The financial and political disparities between our oligarchy and the working class have created a new global serfdom. Credit Suisse analysts estimate that the number of subprime foreclosures in the United States by the end of 2012 will total 1,390,000.

 

pages: 288 words: 76,343

The Plundered Planet: Why We Must--And How We Can--Manage Nature for Global Prosperity by Paul Collier

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agricultural Revolution, Berlin Wall, business climate, Doha Development Round, energy security, food miles, megacity, new economy, offshore financial centre, oil shock, profit maximization, rent-seeking, Ronald Coase, Scramble for Africa, sovereign wealth fund, stem cell, Stewart Brand

To date Indian governments have been a little reluctant to step up to the responsibility implied by their country’s size, but they will likely come to terms with its global role and responsibilities. In any event, beyond the G5, it gets harder because each of the other countries in the world could reasonably adopt a strategy of free-riding, and if they all did so the consequences would be dire. Worse, these countries have an incentive not simply to free-ride, but actively to undermine the efforts of others. Analogous to tax havens, it is to their individual advantage to provide carbon havens in which emissions are unrestricted. If this happens, the carbon-emitting industries would simply shift to these locations. The G5 would have reduced their emissions, but not global emissions. And as this happened the political will to incur the costs of reducing emissions might easily evaporate even among the G5. The world would fry because of the plunder by the G163.

 

pages: 252 words: 72,473

Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy by Cathy O'Neil

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Affordable Care Act / Obamacare, Bernie Madoff, big data - Walmart - Pop Tarts, call centre, carried interest, cloud computing, collateralized debt obligation, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, crowdsourcing, Emanuel Derman, housing crisis, illegal immigration, Internet of things, late fees, medical bankruptcy, Moneyball by Michael Lewis explains big data, new economy, obamacare, Occupy movement, offshore financial centre, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price discrimination, quantitative hedge fund, Ralph Nader, RAND corporation, recommendation engine, Sharpe ratio, statistical model, Tim Cook: Apple, too big to fail, Unsafe at Any Speed, Upton Sinclair, Watson beat the top human players on Jeopardy!, working poor

Other publicly held corporations, including Google, Apple, Microsoft, Amazon, and cell phone providers like Verizon and AT&T, have vast information on much of humanity—and the means to steer us in any way they choose. Usually, as we’ve seen, they’re focused on making money. However, their profits are tightly linked to government policies. The government regulates them, or chooses not to, approves or blocks their mergers and acquisitions, and sets their tax policies (often turning a blind eye to the billions parked in offshore tax havens). This is why tech companies, like the rest of corporate America, inundate Washington with lobbyists and quietly pour hundreds of millions of dollars in contributions into the political system. Now they’re gaining the wherewithal to fine-tune our political behavior—and with it the shape of American government—just by tweaking their algorithms. The Facebook campaign started out with a constructive and seemingly innocent goal: to encourage people to vote.

 

pages: 268 words: 74,724

Who Needs the Fed?: What Taylor Swift, Uber, and Robots Tell Us About Money, Credit, and Why We Should Abolish America's Central Bank by John Tamny

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Airbnb, bank run, banks create money, Bernie Madoff, bitcoin, Bretton Woods, Carmen Reinhart, correlation does not imply causation, Credit Default Swap, crony capitalism, crowdsourcing, Donald Trump, Downton Abbey, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, Home mortgage interest deduction, Jeff Bezos, job automation, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, liquidity trap, Mark Zuckerberg, market bubble, moral hazard, mortgage tax deduction, NetJets, offshore financial centre, oil shock, peak oil, Peter Thiel, price stability, profit motive, quantitative easing, race to the bottom, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, Uber for X, War on Poverty, yield curve

Indeed, as top Kennedy advisor Walter Heller explained (and it was as if revenue-obsessed supply-siders were whispering to him as early as the 1960s), economy-boosting tax cuts generate “a better economic setting for financing a more generous program of federal expenditures.”12 Supply-side has unwittingly paired aspects of itself with government-expanding Keynesianism. The late Nobel Laureate Milton Friedman didn’t get everything right on the economic front, as future chapters will reveal. However, he was quite correct in asserting that when tax cuts lead to higher federal revenues, taxes haven’t been cut enough.13 The Laffer curve, which correctly asserts that a lower rate of taxation leads to greater growth and higher federal revenues, is a tautological reality, as the 1920s, 1960s, and 1980s make plain. At the same time, it’s well past time to consign the Laffer curve to the proverbial dustbin of history. While the fiscal focus should always and everywhere be on reducing the tax burden, it should be on reducing it so much that revenues actually decline.

 

pages: 251 words: 76,868

How to Run the World: Charting a Course to the Next Renaissance by Parag Khanna

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Albert Einstein, Asian financial crisis, back-to-the-land, bank run, blood diamonds, borderless world, BRICs, British Empire, call centre, carbon footprint, charter city, clean water, cleantech, cloud computing, corporate governance, corporate social responsibility, Deng Xiaoping, Doha Development Round, don't be evil, double entry bookkeeping, energy security, European colonialism, facts on the ground, failed state, friendly fire, global village, Google Earth, high net worth, index fund, informal economy, invisible hand, labour mobility, laissez-faire capitalism, Masdar, megacity, microcredit, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, oil shock, open economy, out of africa, private military company, Productivity paradox, race to the bottom, RAND corporation, reserve currency, Silicon Valley, smart grid, South China Sea, sovereign wealth fund, special economic zone, sustainable-tourism, The Fortune at the Bottom of the Pyramid, The Wisdom of Crowds, too big to fail, trade liberalization, trickle-down economics, UNCLOS, uranium enrichment, Washington Consensus, X Prize

But ever since, diplomacy has become unintentionally ambiguous as technology and power allow anyone to penetrate borders and pursue their own agendas. The early 1990s was a thriving period for such shadow elites crossing public, private, and international networks. Privatization con artists flourished, such as Viktor Kozeny, a Czech émigré who fleeced thousands of his native citizens of their stock vouchers promising 1,000 percent returns, only to hide the money in offshore tax havens. Around the same time, the United States Agency for International Development (USAID) effectively outsourced its Russia policy to the Harvard Institute of International Development, which brokered loans as if it were a U.S. government agency. From Bruce Jackson, the Lockheed Martin vice president who as head of the U.S. Committee to Expand NATO seemed to make official security guarantees to countries such as Georgia (which learned the hard way in the summer of 2008 that it has no protection from Russian intrusions), to Ahmed Chalabi, the head of the Iraqi National Congress who teamed with U.S. neoconservative Richard Perle to make the case for a falsely premised Iraq war in 2003, the line between diplomacy and lobbying has blurred to the point where foreign governments now use lobbyists as much as their own embassies to influence American policy toward Turkey, India, Taiwan, and many other places, especially targeting congressmen whose districts may benefit from business deals with their nations.

 

pages: 613 words: 200,826

Unreal Estate: Money, Ambition, and the Lust for Land in Los Angeles by Michael Gross

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Albert Einstein, Ayatollah Khomeini, bank run, Bernie Madoff, California gold rush, clean water, Donald Trump, estate planning, family office, financial independence, Maui Hawaii, McMansion, mortgage debt, offshore financial centre, oil rush, passive investing, pension reform, Ponzi scheme, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Steve Wozniak, The Predators' Ball, transcontinental railway

“My grandmother would not have approved” of the next owner of 141 South Carolwood, says a granddaughter of Edwin Janss. Ghazi Aita “was a very elusive dude,” said Greg Hagins, who ran the estate for him and lived there for twenty-one years. Indeed, Aita didn’t buy the house from Chase and Ralph Mishkin himself; it was purchased in July 1978 by Magdalenian Investment NV, an investment advisory firm based in the Caribbean tax haven, the Netherlands Antilles. Though he lived in Holmby Hills for fourteen years, few who encountered him there are sure who Ghazi Aita was or how he made his fortune. His mark on the public record is similarly mysterious: One of the few places his name comes up is on the website of the tiny Republic of San Marino, where he is listed as one of its ambassadors-at-large, appointed in 1998. But a spokesperson for its Foreign Affairs Department says it has “had no official contacts with him in the last few years.”

Then, the Resnicks were attacked on another front. Despite their claims and a program announced in 2008 to go carbon negative, environmentalists were taking aim at FIJI’s squat, square bottles. Mother Jones, the anticorporate investigative magazine, blasted FIJI and the Resnicks for “typhoid outbreaks that plague Fijians because of the island’s faulty water supplies,” the company’s tax-free status on Fiji, its alleged sheltering of assets in tax havens like the Cayman Islands where its trademarks are registered, its Luxembourg corporate headquarters, and “the fact that its signature bottle is made from Chinese plastic in a diesel-fueled plant and hauled thousands of miles to its eco-conscious consumers. And, of course, you won’t find mention of the military junta for which FIJI Water is a major source of global recognition and legitimacy.” The Resnicks’ response noted that Fiji was democratic when they bought the company and that they used 1.5 percent of FIJI Water’s gross revenues to improve life on Fiji and had set up a foundation to do more.

 

pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

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3D printing, agricultural Revolution, back-to-the-land, banking crisis, banks create money, Bretton Woods, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, global village, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, invisible hand, Isaac Newton, Kenneth Rogoff, late fees, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, post-oil, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, working poor

According to Bill Black, writing in Business Insider on December 13, 2010, The EU, taking its lead from Germany, has allowed the Euro to appreciate against many currencies. Germany’s high-tech exports can survive a strong Euro, but Greece, Spain, and Portugal cannot export successfully under a strong Euro and their already severe economic crises can become much worse. The Irish will have serious problems, and their export problems would have been crippling if they were not a corporate income tax haven. Italy’s, particularly southern Italy’s, ability to export successfully is dubious.23 If the US dollar tumbles, that hurts China and other countries with fixed exchange rates; they feel pressured to drop their peg or revalue their currencies higher. Countries whose currencies are pegged to the dollar have had to resort to currency interventions and a massive buildup of foreign reserves to stop their currencies from appreciating.

 

pages: 358 words: 106,729

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, barriers to entry, Bernie Madoff, Bretton Woods, business climate, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, diversification, Edward Glaeser, financial innovation, floating exchange rates, full employment, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, market bubble, Martin Wolf, medical malpractice, microcredit, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, price stability, profit motive, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, school vouchers, short selling, sovereign wealth fund, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

The very poor can be protected from the effects of these taxes on their consumption through higher earned-income tax credits. However, the notion that only the rich need be taxed to restore government finances to health has to be set against the fact that the incentive effects on dulling the desire to work may well be higher for the rich (because they do not work to live), and they are also probably better able to avoid taxes by moving to tax havens or through tax planning. In all likelihood, all of us will have to tighten our belts. Summary and Conclusion American overconsumption is driven by policies that were framed in reaction to growing public perceptions of inequality and insecurity, and these policies have contributed to financial-sector excess. The remedies are not easy and will require further government intervention. Given the propensity for government action to go wrong, we should approach interventions with care and some skepticism.

 

pages: 322 words: 99,066

The End of Secrecy: The Rise and Fall of WikiLeaks by The "Guardian", David Leigh, Luke Harding

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4chan, banking crisis, centre right, Chelsea Manning, citizen journalism, Climategate, cloud computing, credit crunch, crowdsourcing, Downton Abbey, eurozone crisis, friendly fire, global village, Hacker Ethic, impulse control, Jacob Appelbaum, Julian Assange, knowledge economy, Mohammed Bouazizi, offshore financial centre, rolodex, Silicon Valley, Skype, Steven Levy, uranium enrichment, WikiLeaks

The proposal was stitched together by Assange, his Dutch hacker-businessman friend Rop Gonggrijp, and three Icelanders: Jónsdóttir, McCarthy and Herbert Snorrason. They called for laws to enshrine source protection, free speech and freedom of information. Jónsdóttir, 43, is an anti-capitalist activist, poet and artist – an unexpectedly romantic figure to find in the Reykjavik legislature. “They were presenting this idea they called the ‘Switzerland of bytes’,” she explains, “which was basically to take the tax haven model and transform it into the transparency haven model.” Assange decided to publish some Icelandic tidbits from his newly acquired secret cache of military material to coincide with the MMI campaign: one was a very recent cable from the US embassy in Reykjavik, dated 13 January 2010, describing Icelandic officials’ views about the banking crisis. The deputy chief of mission at the embassy, Sam Watson, had reported that those he met “painted a very gloomy picture for Iceland’s future”.

 

pages: 385 words: 99,985

Pattern Recognition by William Gibson

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carbon-based life, Frank Gehry, Mars Rover, Maui Hawaii, offshore financial centre, pattern recognition

She gets out of bed, fumbles with the zip on her bag. "Hello?" "It's Boone. Where are you?" "Just waking up. Where are you." "Still in Ohio. Getting somewhere, though." "Where's that?" She sits on the edge of the bed. Checks her watch. "A domain name. Armaz-dot-ru." She can't think of anything to say. "Nazran," he says. "What's that?" "Capital of the Republic of Ingushetia. It's an ofshornaya zona." "A what?" "An offshore tax haven. For Russia. They liked Cyprus so much, for that, they decided to grow their own. Set it up in Ingush. The guy the domain is registered to is in Cyprus, but he works for some ofshornaya outfit in Ingush. That's probably where Dorotea's Russian flavor is coming from." "How do you know he's from… Ingush?" "Google." She hadn't thought of that. "And this is…" She hesitates, on the brink of lying.

 

pages: 309 words: 86,909

The Spirit Level: Why Greater Equality Makes Societies Stronger by Richard Wilkinson; Kate Pickett

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Berlin Wall, clean water, Diane Coyle, epigenetics, experimental economics, experimental subject, Fall of the Berlin Wall, full employment, germ theory of disease, Gini coefficient, impulse control, income inequality, knowledge economy, labor-force participation, land reform, Louis Pasteur, meta analysis, meta-analysis, Milgram experiment, offshore financial centre, phenotype, Plutocrats, plutocrats, profit maximization, profit motive, Ralph Waldo Emerson, statistical model, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, upwardly mobile, World Values Survey

The role of this book is to point out that greater equality is the material foundation on which better social relations are built. Appendix HOW WE CHOSE COUNTRIES FOR OUR INTERNATIONAL COMPARISONS First, we obtained a list of the 50 richest countries in the world from the World Bank. The report we used was published in 2004 and is based on data from 2002. Then we excluded countries with populations below 3 million, because we didn’t want to include tax havens like the Cayman Islands and Monaco. And we excluded countries without good information on income inequality, such as Iceland. That left us with 23 rich countries: CALCULATING THE INDEX OF HEALTH AND SOCIAL PROBLEMS Not all of the countries in our data set had data for all the health and social problems listed on p. 19, but 21 of them had data on at least 8 of the 9. We include all these countries in our Index of Health and Social Problems (IHSP).

 

pages: 350 words: 103,270

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again by Nicholas Dunbar

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asset-backed security, bank run, banking crisis, Basel III, Black Swan, Black-Scholes formula, bonus culture, capital asset pricing model, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, delayed gratification, diversification, Edmond Halley, facts on the ground, financial innovation, fixed income, George Akerlof, implied volatility, index fund, interest rate derivative, interest rate swap, Isaac Newton, Kenneth Rogoff, Long Term Capital Management, margin call, market bubble, Nick Leeson, Northern Rock, offshore financial centre, price mechanism, regulatory arbitrage, rent-seeking, Richard Thaler, risk tolerance, risk/return, Ronald Reagan, shareholder value, short selling, statistical model, The Chicago School, time value of money, too big to fail, transaction costs, value at risk, Vanguard fund, yield curve

In the brave new world of securitization, that human element gets replaced with an engineered financial machine or structure, and for this reason is often known as structured finance. Unlike in a real company, where assets, revenues, and debt payments all involve real people and endless debate, the SPV doppelganger is an android, programmed by a lawyer-crafted set of rules to mechanically transfer cash between various Cayman Islands mailboxes (in this world, the taxman is just another unpredictable creditor, best kept at bay by using a tax haven). To bring Barclays Capital and cautious investors like LB Kiel together, it was not enough for Usi to simply transfer risky assets such as Mexican loans to an SPV and ask hate-to-lose investors to lend it money. After all, they would only have to take a peek at the assets inside and ask for the same compensation they would have demanded if they had bought the assets separately. The solution depends on taking the bondholder–equity holder pecking order in a real-world company and wiring it into the heart of an SPV android.

 

pages: 364 words: 104,697

Were You Born on the Wrong Continent? by Thomas Geoghegan

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Albert Einstein, American Society of Civil Engineers: Report Card, banking crisis, Berlin Wall, collective bargaining, corporate governance, cross-subsidies, dark matter, David Brooks, declining real wages, deindustrialization, ending welfare as we know it, facts on the ground, Gini coefficient, haute cuisine, income inequality, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labour market flexibility, laissez-faire capitalism, low skilled workers, Martin Wolf, McJob, minimum wage unemployment, mittelstand, offshore financial centre, payday loans, pensions crisis, Plutocrats, plutocrats, purchasing power parity, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan: Tear down this wall, Saturday Night Live, Silicon Valley, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Wolfgang Streeck, women in the workforce

U.S. 21.9 Germany 9.0 Denmark 8.7 France 7.9 Netherlands 9.8 Aside from ducking child poverty, look at the other things kids get: no college debt! In some of the German federal states, there’s no tuition at all. Imagine. Even in the German states that do charge, the cost is a few hundred euros a year—about the cost of a day of class at some private American schools. Yes, but what about the higher taxes? Well, it’s odd: I think of Europe as a tax haven. After all, we pay up to four-fifths of what they pay in taxes. But we hardly get back four-fifths of a European-type welfare state. Still, I went for years waiting for an explanation as to where I’d be better off. It seems the bookstores should groan with tomes that compare Europe v. the U.S. to tell me where I’m better off. “Why are there no books like that?” I asked. “Maybe,” said a friend, “it’s impossible to write such a book.”

 

pages: 465 words: 109,653