362 results back to index
Capital Without Borders by Brooke Harrington
banking crisis, Big bang: deregulation of the City of London, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, complexity theory, corporate governance, corporate social responsibility, diversified portfolio, estate planning, eurozone crisis, family office, financial innovation, ghettoisation, haute couture, high net worth, income inequality, information asymmetry, Joan Didion, job satisfaction, joint-stock company, Joseph Schumpeter, liberal capitalism, mega-rich, mobile money, offshore financial centre, race to the bottom, regulatory arbitrage, Robert Shiller, Robert Shiller, South Sea Bubble, the market place, Thorstein Veblen, transaction costs, upwardly mobile, wealth creators, web of trust, Westphalian system, Wolfgang Streeck, zero-sum game
See wealth Neville (Guernsey-based wealth manager), 115–16 Nick (Panama-based wealth manager), 104, 136, 234, 257, 287 Nigel (Singapore-based wealth manager), 92 Nigeria, 259 noblesse oblige, 275, 292 nominee shareholders, 183–84, 185 North, Douglass, 212 Northern Trust Company, 52, 52, 127, 191 notaries, 57–58 oaths, 40–41 Occupy Wall Street, 224–25 OECD (Organisation for Economic Co-operation and Development): elites seek autonomy from institutions such as, 43; financial secrecy and opacity opposed by, 298; hypocrisy regarding tax avoidance, 239; Seoul Declaration on tax avoidance, 12–13; on slowing economic inequality, 202–3; tax havens opposed by, 55, 256, 257, 261; wealth managers seen as under attack by, 23 offshore finance, 128–35; characteristic features of offshore financial centers, 129–33; competition between jurisdictions, 134–35; corporations, 12, 182–84, 185; counterlegislation by offshore financial centers, 171; for debt avoidance, 156–58; in defining bounds of family, 277; diverse characters involved in, 136; “divide-and-conquer” strategy for, 135; divorce-protection trusts, 162–64; economic development reduced by, 219–20; in economic inequality, 194, 196, 219–20, 275; economic prosperity results from, 268; for family-business protection, 168–71; as Faustian bargain for offshore financial centers, 268; “feudal remnants” in, 37–38; the finance curse for offshore financial centers, 247; flee clauses in trusts, 175, 176, 177; foundations, 180–81; Gates’ failure to use, 123–24; in global capital flows, 21; increase in wealth held offshore, 207; lawless zones created by, 295–97; as parasitic on traditional state system, 296–97; as permissive environment for financial-legal creativity, 173; political climate of offshore financial centers, 261; political instability and corruption as reason for using, 140–49; private investment opportunities, 212; scattering assets in, 133–35; in secrecy jurisdictions, 260; seen as scam, 131–32; sovereignty of offshore nations, 296–97; special-purpose vehicles in, 19; states in development of, 239; for tax avoidance, 133, 134, 135, 136, 174–75, 219; for tax sheltering, 47; for trade-restriction avoidance, 159–60; transporting cash to offshore banks, 138–40; trusts, 75, 125, 167–68, 176–77, 185, 191; ultra-freedom in offshore financial centers, 259; wealth management and development of, 5–6; Westphalian state system threatened by, 293–97 Olympic Games, 285 1 percent, 200–201; average annual income of, 200; growth in wealth of, 200; renewed interest in, 195–96; wealth of global, 201 opinion letters, 210 Organisation for Economic Co-operation and Development.
See also inheritance taxes; tax avoidance; tax evasion; tax havens; tax shelters tax evasion: British Virgin Islands refuses to respond to evasions of, 264; European Union’s Savings Tax Directive for combating, 299; Israel co-opts wealth managers in crack down on, 270; tax avoidance distinguished from, 150; wealth managers associated with, 12, 23 tax havens: African and Russian wealth held in, 203; British Virgin Islands as, 262; client-facing jobs in, 265–66; economic effects on former colonies, 258–59; in former British empire, 264; Jersey as, 24; OECD opposition to, 55, 256, 257, 261; sovereignty in, 256–57, 259–62; the wealthy move to, 137. See also offshore finance tax shelters: colonies as, 254; complexity of, 53; corporate, 151; offshore financial centers as, 47; trust-corporation configuration as, 188; in United Kingdom, 241–42 TEP (Trust and Estate Planning) certification, 26; in advertisement for wealth manager, 60; as industry standard, 30, 55–56; on offshore financial centers, 129, 130; on the state, 236–37; on taxes, 226 testamentary freedom, 166 Thyssen-Bornemisza, Baroness Carmen, 160 tiered entities, 189–92 Tocqueville, Alexis de, 204, 209 trade: free, 239, 254, 293; sanctions, 295; trade-restriction avoidance, 159–60; wealth from global, 5, 51 training programs, 97–98, 103 transaction costs: continuity of wealth reduces, 214; for corporations, 181, 182; for foundations, 180; increased cost of borrowing, 221; minimizing, 209, 212; for private investment opportunities, 212; succession planning reduces, 215 treaties, 133, 256, 264 Treaty of Westphalia (1684), 133, 234, 235, 290, 293–97 Trevor (Panama-based wealth manager), 83, 229, 255 Trudeau, Kevin, 157–58 trust: in client relations, 20, 81–105, 120–21, 287; culture and, 108–16; in institutions, 75; pricing related to, 107, 108; rule of law as basis of, 109; similarity as basis for, 95; social identity and, 119–20 trust and estate planning: American College of Trust and Estate Counsel, 30; bar association special-interest groups for, 29; becomes an industry, 126; Chartered Trust and Estate Planner certification, 30; disparate professions in, 55; professionalization of, 4, 5–6; transformation of capitalism and emergence of, 51; university degrees in, 56.
See STEP (Society of Trust and Estate Practitioners) sole practitioners, 70–72, 73 South Africa: political instability in, 141–42; trust failure in, 58; white male expats in wealth management, 265, 266 South Sea Bubble (1720), 49, 181, 314n44 sovereignty: elites “hack,” 259–62, 267, 269; impaired system of state, 293; of Jersey, 294; of offshore nations, 296–97; popular, 18, 268–69, 289; strategic uses of, 289; in tax havens, 256–57, 259–62; who benefits from, 267 special-purpose vehicles, 19 spendthrift trusts, 155, 157, 216 Stan (Chicago-based wealth manager), 69 standardization, 61–62, 280, 282 Stanford, R. Allen, 159, 260–61, 268 STAR (Special Trusts Alternative Regime) structure, 168, 169, 170–71, 177, 185, 276 state, the: assets seized by, 148; authority of, 21, 25, 76, 236, 240, 243–52, 253, 268, 269, 289, 292; balance of power between the wealthy and, 244, 291; “big government,” 252; as bugbear of offshore-finance clients, 136; in building of offshore finance, 255–56; captured states, 260, 262–67; development and the postcolonial conundrum, 253–67; dynastic wealth as challenge to, 243–52, 268–69; elites assert their autonomy from the, 43, 128, 314n29; family institutions that rival those of, 250–51; a new state system, 293–97; parallel system for the wealthy, 296; perceived governance gap, 252, 272; the professions’ relationship to, 233; purpose of, 236–43; stateless super-rich, 289, 290–93; STEP on, 236–37; supersession of nation-state, 235, 267; taxes fund, 237–38; vulnerability of the nation-state, 133–34; wealth confiscated by, 146; wealth management’s independence from, 233–34, 297, 303; wealth management strategies in countries with functional government and rule of law, 149–60; wealth managers and confiscatory, 12; wealth managers’ conflicted position regarding, 17–18, 21–22, 25, 233–70, 272, 289, 297; Westphalian system, 133, 234, 235, 290, 293–97.
Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens by Nicholas Shaxson
Asian financial crisis, asset-backed security, bank run, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, British Empire, business climate, call centre, capital controls, collapse of Lehman Brothers, computerized trading, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, Double Irish / Dutch Sandwich, failed state, financial deregulation, financial innovation, Fractional reserve banking, full employment, high net worth, income inequality, Kenneth Rogoff, laissez-faire capitalism, land reform, land value tax, light touch regulation, Long Term Capital Management, Martin Wolf, money market fund, New Journalism, Northern Rock, offshore financial centre, oil shock, old-boy network, out of africa, passive income, plutocrats, Plutocrats, Ponzi scheme, race to the bottom, regulatory arbitrage, reserve currency, Ronald Reagan, shareholder value, The Spirit Level, too big to fail, transfer pricing, Washington Consensus
Other measures of offshore, in various tables in the book, show explosive recent growth (interrupted by the financial crisis). Also see Luca Errico and Alberto Musalem, “Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues,” IMF, January 1999, pp. 17–19. This study cites a figure of 54 percent in 1999, which is based on a relatively restrictive definition of offshore; subsequent measurements are affected, according to the IMF, because “the distinction between onshore and offshore banking has become progressively blurred.” 3.Data from Palan et al., Tax Havens; from “IMF Finds ‘Trillions’ in Undeclared Wealth,” Wealth Bulletin, March 15, 2010; and from M. K. Lewis, “International Banking and Offshore Finance: London and the Major Centres,” in Mark P. Hampton and Jason P. Abbott, eds., Offshore Finance Centres and Tax Havens: The Rise of Global Capital (London: Macmillan Business, 1999). 4.The U.S.
CHAPTER 1 WELCOME TO NOWHERE 1.These figures should be taken as very rough estimates, not least because there is no agreement as to what a tax haven is, and estimates can vary widely. Once we understand that the United States and United Kingdom are major tax havens, the eye-catch figure is quite reasonable, if vague. This particular statistic is from French finance minister Dominique Strauss-Kahn in a speech to the Paris Group of Experts in March 1999; quoted in J. Christensen and M. Hampton, “All Good Things Come to an End,” The World Today (Royal Institute of International Affairs) 55, nos. 8–9 (1999). The share has grown substantially since then, because offshore financial services have been growing at substantially faster rates than the growth in trade. 2.See Ronen Palan, Richard Murphy, and Christian Chavagneux, Tax Havens: How Globalization Really Works (Ithaca, NY: Cornell University Press, 2010), p. 51.
There is only space here briefly to sketch a few important ones. In 2009 the IMF published a detailed report explaining how tax havens, combined with distortions in onshore tax systems, cranked up the global debt engine by encouraging firms to borrow rather than finance themselves out of equity.46 These effects, it said, “are pervasive, often large—and hard to justify given the potential impact on financial stability.” Amid all the noise from G20 leaders about tax havens in 2008 and 2009, the IMF concluded, this dangerous offshore aspect went entirely unnoticed. The core principles the IMF outlined are simple. A corporation borrows money from offshore, then pays interest on that loan back to the offshore financing company. It then uses the old transfer pricing trick: the profits are offshore, where they avoid tax, and the costs (the interest payments) are onshore, where they are deducted against tax.
The Hidden Wealth of Nations: The Scourge of Tax Havens by Gabriel Zucman, Teresa Lavender Fagan, Thomas Piketty
Berlin Wall, Bretton Woods, British Empire, Capital in the Twenty-First Century by Thomas Piketty, dematerialisation, Fall of the Berlin Wall, financial innovation, financial intermediation, high net worth, income inequality, means of production, new economy, offshore financial centre, transfer pricing
The same approach would lead to the cooperation of other large centers. In all cases, the large countries can legally make the giants of offshore banking bend, using relatively small coalitions. The Case of Luxembourg One country poses a problem, however, because it is protected from trade tariffs through European treaties: Luxembourg. Should it be excluded from the EU? The question deserves to be asked, because the Luxembourg that cofounded the Union in 1957 has nothing to do with the Luxembourg of today. Steel was everything back then; finance was nothing. Today, without its financial industry, the Grand Duchy would be nothing; tomorrow, offshore finance may be everything (see fig. 6). It is the tax haven of all tax havens, present in all stages of the circuit of international wealth management, used by all other financial centers.
Printed in the United States of America 24 23 22 21 20 19 18 17 16 15 1 2 3 4 5 ISBN-13: 978-0-226-24542-3 (cloth) ISBN-13: 978-0-226-24556-0 (e-book) DOI: 10.7208/chicago/9780226245560.001.0001 Originally published as La richesse cachée des nations: Enquête sur les paradis fiscaux © Editions du Seuil et la République des Idées, 2013 Library of Congress Cataloging-in-Publication Data Zucman, Gabriel, author. [Richesse cachée des nations. English] The hidden wealth of nations: the scourge of tax havens / Gabriel Zucman; translated by Teresa Lavender Fagan; with a foreword by Thomas Piketty. pages; cm Includes bibliographical references and index. ISBN 978-0-226-24542-3 (cloth: alk. paper) — ISBN 978-0-226-24556-0 (e-book) 1. Tax havens. 2. Tax evasion. I. Fagan, Teresa Lavender, translator. II. Piketty, Thomas, 1971–, writer of foreword. III. Title. HJ2336.Z8313 2015 336.24'16—dc23 2015019946 ♾ This paper meets the requirements of ANSI/NISO Z39.48-1992 (Permanence of Paper). Contents FOREWORD by Thomas Piketty INTRODUCTION Acting against Tax Havens ONE A Century of Offshore Finance TWO The Missing Wealth of Nations THREE Mistakes FOUR What to Do?: A New Approach FIVE The Tax Avoidance of Multinational Corporations CONCLUSION NOTES INDEX FOREWORD Thomas Piketty If you are interested in inequality, global justice, and the future of democracy, then you should definitely read this book.
What Is to Be Done? For some, the battle against tax havens has been viewed as lost from the start. From London to Delaware, from Hong Kong to Zurich, offshore banking centers are essential cogs in the financial machine of capitalism, used by the rich and powerful throughout the world. We can’t do anything about them, we’re told: some countries will always impose less tax and fewer rules than their neighbors. Money will always find a safe haven: strike here, it will go over there. Capitalism without tax havens is a utopia, and a progressive taxation of income and fortunes is destined to fail, unless we choose the path of protectionism. For others, the battle has almost been won. Thanks to the determination of governments and to multiple scandals and revelations, tax havens will soon die out. From the harsh words of large countries seeking new solutions ever since the financial crisis, they have all promised to abandon banking secrecy, and multinationals will finally be forced to open their books and pay what they owe.
A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins
addicted to oil, airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bob Geldof, 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, liberal capitalism, 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.
The Finance Curse: How Global Finance Is Making Us All Poorer by Nicholas Shaxson
activist fund / activist shareholder / activist investor, Airbnb, airline deregulation, anti-communist, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, British Empire, business climate, business cycle, capital controls, carried interest, Cass Sunstein, Celtic Tiger, central bank independence, centre right, Clayton Christensen, cloud computing, corporate governance, corporate raider, creative destruction, Credit Default Swap, cross-subsidies, David Ricardo: comparative advantage, demographic dividend, Deng Xiaoping, desegregation, Donald Trump, Etonian, failed state, falling living standards, family office, financial deregulation, financial innovation, forensic accounting, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global supply chain, high net worth, income inequality, index fund, invisible hand, Jeff Bezos, Kickstarter, land value tax, late capitalism, light touch regulation, London Whale, Long Term Capital Management, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mont Pelerin Society, moral hazard, neoliberal agenda, Network effects, new economy, Northern Rock, offshore financial centre, old-boy network, out of africa, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, price mechanism, purchasing power parity, pushing on a string, race to the bottom, regulatory arbitrage, rent-seeking, road to serfdom, Robert Bork, Ronald Coase, Ronald Reagan, shareholder value, sharing economy, Silicon Valley, Skype, smart grid, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, special economic zone, Steve Ballmer, Steve Jobs, The Chicago School, Thorstein Veblen, too big to fail, transfer pricing, wealth creators, white picket fence, women in the workforce, zero-sum game
The place is suffused by an attitude that characterises every tax haven I’ve visited or studied: don’t rock the boat, don’t ask questions, and don’t do anything to threaten the offshore financial sector. Bend over backwards, bend the law, look the other way, and do everything possible to keep your financial centre ‘competitive’. Meanwhile, tell outsiders that it is clean, responsible and well regulated – and that it is not a tax haven. This consensus pervades Luxembourg; all the main newspapers follow it, and most Luxembourgers believe it.7 Usually the mechanisms to control financial dissidents in a tax haven are subtle: an invisible melting away of job chances, a bias in the courts, family disapproval or social scorn. People who protest publicly against offshore finance in Luxembourg are sometimes called Nestbeschmützer – nest polluters, the dirtiest kind of traitor.
For a lobbying document in favour of tax havens, see ‘Memorandum from the Society of Trust and Estate Practitioners (STEP), Treasury – written evidence: Offshore Financial Centres’, parliament.uk, 17 March 2009. This contains statements such as, ‘The overwhelming consensus among economists who have examined this area is that low-tax finance centres provide significant economic benefits to higher-tax economies,’ when in fact no such consensus exists except perhaps among economists who have been commissioned by tax havens to provide such analyses. For an example of these, see ‘The (-ve) Value of Jersey to the UK Economy’, Tax Justice Network, 14 October 2014, responding to a report commissioned by Jersey portraying tax havens as beneficial. 10. Tax havens are often about wealth protection rather than wealth appreciation.
A tax haven’s purposefully constructed loopholes are not designed to help locals escape laws and rules, but to help foreigners do so, elsewhere, offshore – and they carefully write their laws to ensure that any resulting damage is inflicted elsewhere, ring-fencing the tax haven against self-harm. This ‘offshore’ element means that the people who make the tax haven laws are always separated from those people, elsewhere, who are affected by those laws. So there is never democratic consultation between lawmakers in tax havens and the people elsewhere affected by their laws. That is the whole point of offshore. And it means that offshore is, almost by definition, the equivalent of the smoke-filled room, where business always gets done outside of, and indeed in opposition to, the democratic process. They operate according to the Golden Rule: whoever has the gold, makes the rules. In such places deference to offshore financial interests becomes reinforced by a ferocious social consensus to make sure everyone does the right thing to keep bringing in the money.
The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman
activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Berlin Wall, business cycle, Cass Sunstein, collective bargaining, corporate governance, Donald Trump, financial deregulation, income inequality, income per capita, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%
Available at https://itep.org/whopays/. International Consortium of Investigative Journalists. The Panama Papers: Exposing the Rogue Offshore Finance Industry. Available at www.icij.org/investigations/panama-papers/. International Monetary Fund. “Corporate Taxation in the Global Economy,” IMF Policy Paper no. 19/007, March 2019. Jakobsen, Katrine, Kristian Jakobsen, Henrik Kleven, and Gabriel Zucman. “Wealth Taxation and Wealth Accumulation: Theory and Evidence from Denmark.” National Bureau of Economic Research Working Paper no. 24371, 2018, forthcoming in Quarterly Journal of Economics. Johannesen, Niels, and Gabriel Zucman. “The End of Bank Secrecy? An Evaluation of the G20 Tax Haven Crackdown.” American Economic Journal: Economic Policy 6, no. 1 (2014): 65–91. Johnston, David Cay. Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else.
That’s why the audited returns are, for the purpose of this research program, selected at random.26 Random audits are a powerful tool that can uncover unreported self-employment income, abuses of tax credits, and more broadly all relatively simple forms of tax evasion. But they have one main limitation: they do not capture the tax evasion of the ultra-rich well. It is almost impossible in the context of a random audit to detect the use of offshore bank accounts, exotic trusts, hidden shell corporations, and other sophisticated forms of tax evasion. Most of these forms of tax dodging occur via legal and financial intermediaries, many of which operate in countries with a great deal of financial opacity. To supplement random audits, one needs to use other sources of information that can capture these complex forms of tax evasion. These sources include leaks from offshore financial institutions—like the 2016 “Panama Papers,” a leak of internal documents from the Panamanian firm Mossack Fonseca—and tax amnesties—government programs where tax evaders are encouraged to come clean in exchange for reduced penalties.
At the time of the leak in 2016, Mossack Fonseca alone had created 210,000 companies in twenty-one offshore financial centers, most prominently the British Virgin Islands and Panama.30 There are no reliable estimates of the total number of active shell companies globally, but it’s likely to be in the hundreds of thousands, and possibly in the millions. In the United States, shell companies have gained new notoriety thanks to the fraud of Paul Manafort. In August 2018, jurors in Virginia found that President Trump’s former campaign chairman had forgotten to report on his tax returns millions paid by Ukrainian oligarchs to his bank accounts in Cyprus. Just like the vast majority of the offshore bank accounts used by tax evaders throughout the world, his Cypriot accounts belonged on paper to shell companies incorporated in zero-tax places.
The Great Tax Robbery: How Britain Became a Tax Haven for Fat Cats and Big Business by Richard Brooks
accounting loophole / creative accounting, bank run, Big bang: deregulation of the City of London, bonus culture, Bretton Woods, carried interest, Celtic Tiger, collateralized debt obligation, commoditize, Corn Laws, corporate social responsibility, crony capitalism, Double Irish / Dutch Sandwich, financial deregulation, haute couture, intangible asset, interest rate swap, Jarndyce and Jarndyce, mega-rich, Northern Rock, offshore financial centre, race to the bottom, shareholder value, short selling, supply-chain management, The Chicago School, The Wealth of Nations by Adam Smith, transfer pricing
‘Tax policy development offers the company a chance to create a new environment in which it can achieve its objective,’ runs the pitch, ‘and where there has been considerable media coverage on particular “tax avoiders”, policy development offers a low risk alternative.’52 If you don’t fancy scheming round the tax law, we’ll get it changed for you. The implications go beyond immediate tax loss. Tax breaks available only to the largest multinationals hamper the competiveness of smaller ones that can’t cut their tax bills with an offshore finance company or by shifting their brand names into a tax haven. What’s more, tax concessions for diverting profits into tax havens will take jobs out of the country. In simple terms, if a company can easily send its foreign profits into a tax haven using the standard tax tools of interest, royalties and other payments, but has more trouble doing so with its UK ones, it has an incentive to locate real activity, such as a factory, outside the UK. The Tories, who nearly thirty years ago brought in the controlled foreign companies laws that their successors were now discarding, certainly understood that tolerating offshore tax dodging made no economic sense.
By limiting offshore movements of funds, exchange controls had prevented companies simply moving large amounts of capital into the world’s tax havens where it could turn a quick tax-free buck. With large offshore financial flows restricted to payments for goods, services and genuine investment, cross-border tax avoidance had been restricted to ‘transfer pricing’ schemes. These involved the manipulation of prices of transactions between companies in different countries and against which laws, albeit imperfect ones, had existed for thirty years. But with the shackles removed from international finance, a simple trick became easier and, for many companies, irresistible. Money could be placed in a tax haven subsidiary company in return for share capital in that company, and then either invested or even lent back to the British company from which it came in the first place.
A 2011 study by Christian Aid and the Tax Justice Network found that ‘despite [the] G20 commitment two years ago to curtail the activities of tax havens … the level of secrecy in international financial services is intensifying’.22 Data from the Bank of International Settlements showed that two years after the financial crisis, deposits in tax haven accounts had remained stubbornly consistent at $2.7 trillion. The academics who crunched the numbers concluded categorically that ‘the era of bank secrecy is not over’.23 Since 2011 the tax information exchange programme has gathered momentum through European Union directives and OECD agreements insisting on automatic exchange of information between member countries and their overseas territories, spurred on by action taken in the US to force offshore banks to hand over details of US citizens’ income under its Foreign Account Tax Compliance Act.
Freedom Without Borders by Hoyt L. Barber
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, money market fund, obamacare, offshore financial centre, passive income, quantitative easing, reserve currency, road to serfdom, selective serotonin reuptake inhibitor (SSRI), 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.
Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World by Tom Wright, Bradley Hope
Asian financial crisis, Bernie Madoff, collapse of Lehman Brothers, colonial rule, corporate social responsibility, Credit Default Swap, Donald Trump, failed state, family office, forensic accounting, Frank Gehry, high net worth, Nick Leeson, offshore financial centre, Ponzi scheme, Right to Buy, risk tolerance, Snapchat, South China Sea, sovereign wealth fund
Instead of receiving a broker fee, Low became a co-investor. He then set about creating a fiction that major Middle Eastern sovereign wealth funds also were involved in the purchase of the construction companies. If Low could make it appear as if his personal ventures were backed by powerful Middle Eastern funds, he could attract even more money. To create the illusion, he turned to the opaque world of offshore finance. Low knew about offshore financial centers from his father, Larry, who had a myriad of overseas accounts. It was normal for rich Asians, fearing instability at home, or just to evade taxes, to set up offshore accounts in secretive jurisdictions like the British Virgin Islands and the Cayman Islands. The “offshore” designation typically refers to jurisdictions whose financial systems are much larger than their domestic economies; in other words, the banking system exists purely for nonresidents to stash cash, unlike international financial centers in London and New York that also service local citizens and companies.
A few weeks earlier he had flown to London for the high school graduation party of Nooryana Najib, Najib and Rosmah’s daughter, who was leaving the exclusive Sevenoaks School to study at Georgetown in the United States. But there was a problem. Low had expected to make serious money for himself from the deal, and he was incensed when Khazanah turned down his request to be paid a broker fee. Run by professionals, the fund was too clean for Low’s purposes. Going forward, he really needed to control his own pot of investment money. To do so, Low prepared to dive deeply into the world of offshore finance. Chapter 5 A Nice Toy Washington, DC, August 2008 In the fall of 2008, Otaiba’s business partner, a Jordanian named Shaher Awartani, wrote him an email containing some very welcome news. The pair was about to make around $10 million through a deal that Low had set up in Malaysia. Perhaps worried about too many direct interactions with this Malaysian broker, Otaiba relied on Awartani to communicate with Low.
The “offshore” designation typically refers to jurisdictions whose financial systems are much larger than their domestic economies; in other words, the banking system exists purely for nonresidents to stash cash, unlike international financial centers in London and New York that also service local citizens and companies. In recent years, offshore centers have come under pressure to share information on their clients. But many of these centers, reliant on annual fees from the thousands of companies seeking a cloak of secrecy, remain safe harbors for money launderers and other criminals to wash cash and avoid taxes. One recent estimate puts the money stashed in offshore financial centers since 1970 at $32 trillion—a figure equal to the combined economies of the United States and China—with hundreds of billions lost in tax revenues. The now twenty-six-year-old Low was already mastering this hidden realm of the global economy. He would have known that the Cayman Islands, home to branches of U.S. banks and hedge funds, had improved its information sharing with Washington.
Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back by Oliver Bullough
banking crisis, Bernie Madoff, bitcoin, blood diamonds, Bretton Woods, BRICs, British Empire, capital controls, central bank independence, corporate governance, cryptocurrency, cuban missile crisis, dark matter, diversification, Donald Trump, energy security, failed state, Flash crash, Francis Fukuyama: the end of history, full employment, high net worth, if you see hoof prints, think horses—not zebras, income inequality, joint-stock company, liberal capitalism, liberal world order, mass immigration, medical malpractice, offshore financial centre, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rent-seeking, Richard Feynman, risk tolerance, Sloane Ranger, sovereign wealth fund, WikiLeaks
I found the transcript of the 1990 witness seminar that Kathleen Burk chaired for the Institute of Contemporary British History invaluable. Ronen Palan is a crucial authority on the development of offshore, and I am grateful to him for chatting to me, as well as for writing so many excellent papers. His books Tax Havens: How Globalization Really Works (co-written with Richard Murphy) (Ithaca, NY: Cornell University Press, 2009) and The Offshore World: Sovereign Markets, Virtual Places, and Nomad Millionaires (Ithaca, NY: Cornell University Press, 2003) are excellent. Nicholas Shaxson’s Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens (Basingstoke: Palgrave Macmillan, 2011) is very good as well. The quote from Bradley Birkenfeld comes from Lucifer’s Banker: The Untold Story of How I Destroyed Swiss Bank Secrecy (Austin, TX: Greenleaf Book Group Press, 2016).
According to some recent research from Gabriel Zucman (the French economist at Berkeley), Swiss institutions’ share of the world’s offshore wealth has dipped from around 50 per cent to barely a quarter over the last decade. Asian tax havens are creeping up to join them. But is ‘offshore’ even a useful concept any more? If the best tax haven is now the United States, we may need a whole new term for the places that adapt their laws to accommodate the needs and whims of the nomadic Moneylanders. Curiously, perhaps the person I met who best appreciated what was happening was Mark Brantley, prime minister of the little Caribbean tax haven of Nevis, who spent fully ten minutes responding to a question about the importance of financial services to his island with a full-blooded condemnation of the United States. He is a fluent and convincing speaker, and his passion was genuine, particularly when he described how Nevis had been obliged to sign up to FATCA and CRS, yet Washington had done nothing in return.
Once upon a time, if an official stole money in his home country, there wasn’t much he could do with it. He could buy himself a new car, or build himself a nice house, or give it to his friends and relatives, but that was more or less it. His appetites were limited by the fact that the local market could not absorb endless sums of money. If he kept stealing after that, the money would just build up in his house until he had no rooms left to put it in, or it was eaten by mice. Offshore finance changes that. Some people call shell companies getaway cars for dodgy money, but – when combined with the modern financial system – they’re more like magical teleporter boxes. If you steal money, you no longer have to hide it in a safe where the mice can get at it. Instead, you stash it in your magic box, which spirits it away at the touch of a button, out of the country, to any destination you choose.
Dirty Secrets How Tax Havens Destroy the Economy by Richard Murphy
banking crisis, barriers to entry, Bernie Sanders, centre right, corporate governance, Donald Trump, Double Irish / Dutch Sandwich, en.wikipedia.org, high net worth, income inequality, intangible asset, light touch regulation, moral hazard, Occupy movement, offshore financial centre, race to the bottom, Social Responsibility of Business Is to Increase Its Profits, The Wealth of Nations by Adam Smith, transfer pricing, Washington Consensus
The destination may be different in the case of other tax havens, but the principle will be the same. In each case, the offshore bank account is just a conduit. It offers a record of money in the tax haven that is not there. That money will have come from outside the tax haven in the first place, and will have departed for a major banking centre within hours of its arrival. The claim that the cash is in the tax haven is simply a sham: it is no more there than the owner of the account is. All the account does is provide what has been, at least to date, a secretive mechanism to obscure the ownership of money whose economic impact is most definitely felt elsewhere. The situation is little different with other so-called tax haven investments. So, for example, shares registered in tax haven companies or funds are almost never those of local companies, but will be the shares of companies registered in New York, Hong Kong, Frankfurt or London.
A glance at the list of banks in Guernsey, for example, does reveal some names that will not be readily familiar to those outside the financial services sector, but also discloses the Bank of Cyprus (from another tax haven), Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, Lloyds, RBS, Rothschild’s, SG Hambros, and Skipton International, which is a branch of a UK building society. The same pattern can be found in almost any tax haven. There is little point in thinking of these offshore banks as different operations: the reality is that they are, to a very great extent, one and the same thing as their onshore operations. The final component that makes up the offshore world is wealth managers. These are a much harder group to nail down than the others, because they are a more recent development – albeit one with a decidedly offshore flavour. An outgrowth of the old professional trustee class that once existed in London, New York and their satellites, wealth managers might be accountants or lawyers, and even bankers on occasion, but always have a particular focus on the preservation of their clients’ wealth.
See also trusts France 18, 24–5 free markets market conditions 29–30 tax havens effect on 30–2 and trust 37 free riders 11, 12, 164 Friedman, Milton 41, 42 FTSE 100 companies 25–6 G8 summit, 2013 26, 46–7 G20 summit, London, April 2009 9–10, 19–20 gambling 3, 77–8 GDP 172 General Electric 74, 76 Germany 68, 69, 97–8 Gibraltar 77–8 Glass–Steagall Act (US) 45 global financial architecture 10–11 global financial crisis, 2008 9, 74–5, 90, 125 Global Forum on Transparency and Exchange of Information (OECD) 19–20 globalisation 71–2, 84, 137–8, 161 Google 26, 46, 57, 78 governance 36 government post–tax haven 166–9 role of 42–3 greed 84 Green, Lady Christina 141 Greenland 18 growth 3 Guernsey 14–15, 53, 77, 90, 93–4 harmful tax competition 11–14 Harrington, Brooke 5, 90–1 headline tax rates 75–6 Henry, James 40, 109–11 Heritage Foundation 20–1 Hidden Wealth of Nations, The (Zucman) 112–14, 113 history and development 5, 54–6, 84–5 holding structures 34–8 Hong Kong 77, 100 hot money 74–6, 172 House of Commons Public Accounts Committee (UK) 26, 73, 78 House of Commons Treasury Select Committee (UK) 22 HSBC 60, 103 human rights 144 Iceland 46 India 18 inequality 2, 177 information exchange 12, 15, 17, 32–3, 125–6, 152, 157, 175, 177 inheritance and inheritance tax 3, 64–5 Institute of Economic Affairs 41–2 intent 56 International Consortium of Investigative Journalists 101 International Monetary Fund (IMF) 2, 4, 44, 114, 115, 116–17 investment markets 165–6 Ireland 56, 57, 71, 75 Isle of Man 15, 53, 102, 175–6 Israel 158 Japan 68, 97 Jersey 14–15, 16, 19, 20, 21, 53–4, 54, 57, 58–9, 62–3, 69, 71, 83, 86–7, 92, 93–4, 102, 126, 134, 135, 170, 173 Jersey Finance 86 Juncker, Jean-Claude 16 Keen, Michael 114 knock-on effects 116–17 KPMG 25–6, 73, 75, 87, 152 Labour Party (UK) 46 land-value taxation 177 lawyers 89, 154–5 Le Pen, Marine 45 Levin, Carl 22 Liberia 87 Liberian shipping register 77 limited companies 35, 38, 39–40 limited liability 145 abuse of 36–40 literature 21 locations 8, 68–9, 78, 87–8 London 171 Anti-Corruption Summit, 2016 7, 11, 28, 48, 87 G20 summit, April 2009 9–10, 19–20 Lord Mayor of London 52 Luxembourg 15–16, 57, 94, 97, 124, 134, 135 Macau 101 McLaughlin, Alden 86 macro-economic control 167 Malta 56–7, 77, 93–4 Maples and Calder 89 market efficiency 30–1, 118, 120, 165–6 markets 162–3 conditions 29–30 success criteria 3 supremacy 84 tax havens effect on 30–2 trends 137 and trust 37 Marshall Islands 77 Marshall Plan 51–2 Mauritius 57 Meacher, Michael 145 Meluah, Katy 66 Microsoft 74 Mitchell, Dan 40–1 mixed economies 2–3, 162, 164–5 Monaco 8 money laundering 60 money transfers 58–9 Monte Carlo casino 8 Montserrat 87 Mooij, Ruud De 114 Mossack Fonseca 25, 66, 89, 101–2 motivations 60 Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCMAA) 158 multinational corporations 147, 150 Mutual Assistance Agreement (OECD) 49 neoliberalism 43–4, 84, 161 Netherlands, the 45, 57, 156, 171 New Jersey 55 New York 171 New Zealand 171 Niue 94 non-dom rule (UK) 54–5 non-residents, tax benefits 13 non-trading companies 143 Obama, Barack 17, 89, 125 Occupy movement 25 offshore 8 definition 21, 51 emergence 51–4 offshore bank accounts 59 offshore companies 79–81 numbers 7, 101–2 offshore economy, size 105–15, 113 O’Neil, Paul 13 onshore companies 81 onshore trusts 81–2 opacity 3, 27, 28, 31, 48 Organisation for Economic Cooperation and Development (OECD) 2, 4, 47, 71, 95, 114 Base Erosion and Profits Shifting programme 73, 126–7, 146–7, 148 blacklisting scheme 17–18, 157–8 country-by-country reporting 129, 129–32, 133, 134–8 Double Tax Agreements 18 Global Forum on Transparency and Exchange of Information 19–20, 157 Mutual Assistance Agreement 49 report on Harmful Tax Competition 9, 11–13, 14 revenue loss estimates 107–8 tax haven initiatives 17–21, 23, 24, 26, 27–8, 48, 123–4, 125–6, 126–8, 157–8 Tax Information Exchange Agreements (TIEAs) 18–19, 20 unitary taxation formula 149 Osborne, George 60 ownership disclosure 140–2 Oxfam 111–12 ‘Tax Havens: Releasing the Hidden Billions for Poverty Eradication’ 105–6, 107 Oxford Centre for Business Taxation 108 Pak, Simon 108 Palan, Ronen 5, 10, 21, 23, 51–2, 59 Panama 77, 93–4, 99 Panama Papers 5, 7, 8, 25, 28, 35, 46, 66, 89, 101, 102, 162 Parmalat 39 patent box schemes 76 peer reviews 20 penalty regimes 154–5 Pfizer 74 Picciotto, Sol 21, 106 political stability, threat to 2 political stereotype 8 political will 155–9, 175–6 politicians and politics, role of 84–6 practices 12–13 Price of Offshore, The (Tax Justice Network) 107 ‘Price of Offshore Revisited, The’ (Tax Justice Network) 109–11 PricewaterhouseCoopers 25–6, 73, 87, 152 privacy 32–5, 66–7, 144, 162 Private Eye (magazine) 25 products 79–84 profit determination 13 profit shifting 70–1, 148 property 3, 59–60 prices 174 rights 179 prosecutions 103 Public and Commercial Services Union 25 public and private partnerships 165 public opinion 103, 145, 175 purposes 1 Reagan, Ronald 44 reforms 4, 145–51, 176–8 regulation 3, 29 revenue loss 2, 105–15, 113 implications 115–21 scale 40 risk 10, 36–7, 38, 135–7, 164 rule of law 3, 161, 178–9 sales patterns 136–7 Sanders, Bernie 45, 117 San Marino–Andorra TIEA 18 Savings Tax Directive (EU) 9, 15–17, 48, 94 secrecy 10, 12, 49, 58, 70–1, 161 assessment 93–103 banking 24, 55–6 becomes key issue 25, 27 British challenge to 46–8 collective denial of 28 comparison with privacy 32–5 definition 34 effects on free markets 30–2 financial costs 40 implications 117–21, 138 importance of 22, 23 and risk 36–7, 38 secrecy jurisdictions 29, 44, 87, 178–9 definition 22–3, 57 layering 23–5 pernicious role 23 post–tax haven 171 secrecy laws 36–7 secrecy space 23–4 separateness, supposed 10–11 service industry 84–93 Sharman, Jason 142 Shaxson, Nicholas 5, 52 shipping registrations 77 side letters 82 Sikka, Prem 21, 87 silence, conspiracy of 43 Singapore 77, 100 Smith, Adam 38–9 social impacts, post–tax haven 176–80 social media 65 Society of Trusts and Estate Practitioners 83, 91–2 South Africa 94 Spain 18 special purpose vehicles 80–1 specific jurisdictions 23 Starbucks 26, 46, 163 STAR trust legislation, Cayman Islands 83, 91–2 states, sovereign rights 151 status 10 Suez Crisis, 1956 51–2 Sweden 32, 156 Switzerland 55–6, 57, 68, 100, 112 tax abuse 2 tax administrations 156–7 tax advisers 63 tax avoidance 41–2, 69, 120 definition 61–2 developing countries 28 personal liability 154–5 schemes 62–7, 76 United Kingdom 26 tax benefits, non-residents 13 tax competition 11–14, 43–9, 74–6, 85, 92, 93, 123, 167, 179 tax compliance 61, 63, 119–20, 144–5, 167 tax evasion 61–2, 103, 109, 113 tax gaps 2, 113, 155–6 tax haven companies 67 tax haven investments 59 tax havens activities 58–60 definition 54, 123 ‘Tax Havens: Releasing the Hidden Billions for Poverty Eradication’ (Oxfam) 105–6, 107 tax incentives 13 Tax Information Exchange Agreements (TIEAs) (OECD) 18–19, 20 tax justice activists 7 Tax Justice Network 21–2, 25, 40, 92, 105, 106, 142, 158, 171 Financial Secrecy Index 22–4, 57, 87, 93–6, 96–103, 184–9, 191–2, 193–7 The Price of Offshore 107 ‘The Price of Offshore Revisited’ 109–11 tax law 3, 154–5 tax-neutral regimes 86 tax obligations 34, 41 tax rates corporate 71, 75, 94 headline 75–6 reform 176–8 tax reform 176–7 tax risk 135–7 tax transparency 19 tax war 179 tax withholding, European Union 16 terrorist financing 14 Thatcher, Margaret 44 threat 1–2, 4, 7, 9 Tonga 94 Trade Union Congress 25, 25–6 transfer pricing 71–4 transparency 12, 13, 39, 48, 127, 161–2, 163, 166 Trump, Donald 45, 46, 117 trust 37, 119, 164–5 trust laws 83 trusts 35, 81–4, 139–40, 176 Turkey 158 Turks and Caicos Islands 93, 96 Uncut movement 25 unitary taxation 147–9 United Kingdom 24–5, 68 100 largest companies 69 Barclays data 134, 135 Brexit vote 117 challenge to tax haven secrecy 46–8 companies documentation 38 company growth 102 corporate tax 75 Crown Dependencies 14–15, 48, 53, 96, 124 Department for International Development 108–9 disclosure regime 153 domicile rule 54 draft legislation, 2013 145 hot money 75 House of Commons Public Accounts Committee 26, 73, 78 House of Commons Treasury Select Committee 22 Labour Party 46 non-trading companies 143 Overseas Territories 15, 48, 56, 96 penalty regime 154–5 prosecutions 103 revenue loss 115, 120 secrecy score 96–7, 193, 196 tax administration 157 tax avoidance 26 tax gap 113, 156 tax haven activity cost 113 tax havens 14–15, 16, 48, 53–4, 54, 56, 84, 86–7, 96, 170, 171 Tax Information Exchange Agreements (TIEAs) 19 tax resident people 55 Uncut movement 25 and unitary taxation 149 United States of America 9, 24–5, 60, 68, 69 corporate tax rates 71 corporate tax system 74 corporation tax 40 disclosure regimes 142, 167 failure 13 Federal Trade Commission 29–30 Foreign Accounts Tax Compliance Act (FATCA) 17, 99, 126, 158 Glass–Steagall Act 45 headline tax rates 75–6 hot money 74–5 hypocrisy 158 Internal Revenue Service 156 Occupy movement 25 secrecy score 97, 98–9, 193, 196 tax gap estimates 156 tax havens 8, 17, 55, 142, 171 Vanuatu 87 Verizon 76 virtual world, the 21–2 VISTA trust 24 Vodafone 26 voter participation, decline in 3 Washington Consensus, the 43–5, 46 Watson, Emma 66 wealth concentration of ownership 3, 111, 117, 161, 167–9, 176 under-taxation of 178 wealth-management professionals 84, 90–2, 155 wealth taxes 177 World Bank 2, 44, 108–9, 109 Zucman, Gabriel 40, 102 The Hidden Wealth of Nations 112–14, 113
Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History by Liam Vaughan
algorithmic trading, backtesting, bank run, barriers to entry, Bernie Madoff, Black Swan, Bob Geldof, centre right, collapse of Lehman Brothers, Donald Trump, Elliott wave, eurozone crisis, family office, Flash crash, high net worth, High speed trading, information asymmetry, Jeff Bezos, Kickstarter, margin call, market design, market microstructure, Nick Leeson, offshore financial centre, pattern recognition, Ponzi scheme, Ralph Nelson Elliott, Ronald Reagan, sovereign wealth fund, spectrum auction, Stephen Hawking, the market place, Tobin tax, tulip mania, yield curve, zero-sum game
As Nav’s assets had soared, the trader had expressed an interest in finding new ways to make money, and James lined him up with his contacts, including his younger companion that day, Miles MacKinnon. Once inside, the three men were taken to a meeting room filled with legal tomes where they were met by Andrew Thornhill, one of the country’s preeminent tax barristers, as well as a fifth individual, who specialized in offshore finance and who had organized the meeting. On the agenda, a subject close to all their hearts: what to do with Nav’s large and rapidly expanding fortune. Since 1969, Thornhill had been advising aristocrats and business magnates on how to structure their affairs to minimize tax without falling foul of the perennial foe, Her Majesty’s Revenue & Customs. Not many of them had shown up to his meetings eating a Filet-O-Fish, but Thornhill took an instant liking to his new client.
After listening to Nav and his advisers explain the problem in a hotel lobby off the Strand, he suggested tearing down the entire Nevis edifice and starting again. A few weeks later, in October 2011, he wrote to Nav laying out the proposal in detail. Harvey’s plan, which Nav approved, was even more complicated than Thornhill’s. Based around what’s known as a “personal portfolio bond,” it encapsulates why many people regard the offshore financial system with disdain. First, Harvey appointed a small, friendly offshore insurer named Atlas Insurance Management to establish a new company in Anguilla with the name International Guarantee Corporation, or IGC. Next, Atlas established a bond whose only investment was ownership of IGC. Finally, the roughly $30 million in cash sitting in one of the Nevis trusts was transferred into the entity.
Back at McDonald’s, the prosecutors waited for confirmation Sarao had been arrested, then called Jeff Le Riche, an attorney with the Commodity Futures Trading Commission, who was waiting in his house in Kansas City, where it was 3 a.m. The CFTC, the designated regulator for the futures industry, had begun investigating Sarao on a tip-off back in 2012. But as a civil body it has limited powers, so it referred the matter to the DOJ in 2014. Now they were working together. After getting the go-ahead, Le Riche, the head of the CFTC’s investigation, fired off a series of prewritten emails instructing Sarao’s brokers and offshore banks to freeze his accounts. Sometime before noon, Nav was handcuffed and led outside. As they were leaving, he said to one of the officers, “Wait a minute, bruv.” There was a football match on television that night, and Nav wanted to run upstairs and record it. “I’m not sure you’ll have time to watch that, son,” came the reply. The officer was right. Sarao wouldn’t set foot back in his home for another four months.
Poisoned Wells: The Dirty Politics of African Oil by Nicholas Shaxson
Asian financial crisis, Berlin Wall, blood diamonds, business climate, clean water, colonial rule, energy security, Exxon Valdez, failed state, Fall of the Berlin Wall, Hernando de Soto, income per capita, inflation targeting, Kickstarter, Martin Wolf, mobile money, Nelson Mandela, offshore financial centre, old-boy network, Ronald Reagan, Scramble for Africa, Yom Kippur War, zero-sum game
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.
Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar
accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, business cycle, buy and hold, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, 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, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Kickstarter, knowledge economy, labor-force participation, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, 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, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, 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, zero-sum game
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.
Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition by Kindleberger, Charles P., Robert Z., Aliber
active measures, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Black Swan, Bonfire of the Vanities, break the buck, Bretton Woods, British Empire, business cycle, buy and hold, Carmen Reinhart, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, Corn Laws, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, death of newspapers, debt deflation, Deng Xiaoping, disintermediation, diversification, diversified portfolio, edge city, financial deregulation, financial innovation, Financial Instability Hypothesis, financial repression, fixed income, floating exchange rates, George Akerlof, German hyperinflation, Honoré de Balzac, Hyman Minsky, index fund, inflation targeting, information asymmetry, invisible hand, Isaac Newton, joint-stock company, large denomination, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, new economy, Nick Leeson, Northern Rock, offshore financial centre, Ponzi scheme, price stability, railway mania, Richard Thaler, riskless arbitrage, Robert Shiller, Robert Shiller, short selling, Silicon Valley, South Sea Bubble, special drawing rights, telemarketer, The Chicago School, the market place, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, very high income, Washington Consensus, Y2K, Yogi Berra, Yom Kippur War
Consider the rapid growth of US dollar deposits in London and other offshore banking centers in the 1960s, the 1970s, and the 1980s, which was a response to the increases in interest rates on these deposits relative to interest rates on bank deposits in New York and Chicago and Los Angeles that were subject to regulatory ceilings. The banks that sold these offshore deposits used the funds to make US dollar loans to American and non-American firms that they might otherwise have made from one of their US offices. The firms that borrowed US dollar funds from the offshore banks in London were as likely to spend these funds in the United States as if they had borrowed the US dollar funds in New York or some other US city. Should the US dollar deposits produced in London and other offshore banking centers be included in the US money supply?
Legislation and custom limited the amounts of deposit money that could be issued against primary bank reserves, starting shortly after the Bank Act of 1844 and continuing through the application by the Federal Reserve System of reserve requirements on both demand and time deposits (as embodied in the Federal Reserve Act of 1913) and then on certificates of deposit and subsequently on the borrowings by US banks from their branches in offshore financial centers including London. The process is Sisyphean, a perpetuum mobile; the history of money is a story of continuing innovations so that the existing supply of money can be used more efficiently and the development of close substitutes for money that circumvent the regulatory requirements applied to the creation of money. The Eurocurrency deposit market surged in the 1960s as an end-run around the regulations imposed on US banks by the Federal Reserve and the Federal Deposit Insurance Corporation; the US dollar deposits produced by the branches of US banks in London and other offshore centers were not subject to interest rate ceilings, reserve requirements, and deposit insurance premiums.
Interest rates on US dollar securities increased as the US inflation rate climbed; however interest rates on US dollar demand deposits were subject to ceilings that the Federal Reserve had adopted to limit competition among banks. These ceilings did not apply to interest rates on US dollar deposits in London and other foreign financial centers, which increased and induced investors to move funds from domestic to offshore financial centers. The rapid increases in money supply growth in the United States and other industrial countries in the early 1970s contributed to sharp increases in demand for primary products, and in the prices of oil, wheat, and other commodities. The rates of growth of GDP in the countries that produced these primary products increased. The Saudi Arabian embargo on oil shipments to the United States and the Netherlands following the Yom Kippur War of October 1973 triggered a sharp increase in the demand for petroleum and the oil price surged.
Londongrad: From Russia With Cash; The Inside Story of the Oligarchs by Mark Hollingsworth, Stewart Lansley
Berlin Wall, Big bang: deregulation of the City of London, Bob Geldof, business intelligence, corporate governance, corporate raider, credit crunch, crony capitalism, Donald Trump, energy security, Etonian, F. W. de Klerk, income inequality, kremlinology, mass immigration, mega-rich, Mikhail Gorbachev, offshore financial centre, paper trading, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, rent-seeking, Ronald Reagan, Skype, Sloane Ranger
The study concluded: ‘Ownership concentration in modern Russia is much higher than in any country in continental Europe and higher than any country for which data is available.’5 Little of this unprecedented accumulation of wealth has been invested in Russia in business or charity. Rather, most of the money has been secreted abroad, with billions of dollars hidden in a labyrinth of offshore bank accounts in an array of tax havens, from Switzerland and Jersey to the British Virgin Islands and Gibraltar. Much has ended up being deposited in and managed by British banks. Stashed away, it has been almost impossible to trace. Despite attempts by Russian and British law enforcement agencies, little of it has been recovered and requisitioned back to Russia. Russia is where the money originated, but it has not been a comfortable place to spend it - too many people pointing fingers in Moscow restaurants, too much scrutiny by the tax police, and the constant fear of assassination.
‘Tokyo’s gone through a period of depression, Singapore is relatively new, and Germany was until recently a tax-heavy jurisdiction. If you’re looking to avoid tax legally, you’re as well going to London as anywhere else.’4 The UK boasts an unrivalled tax-avoidance industry - and an abundance of highly paid accountants able to devise complex ways of hiding an individual’s wealth. In 2007 the International Monetary Fund ranked London alongside Switzerland, Bermuda, and the Cayman Islands as ‘an offshore financial centre’. Most countries have required their residents - including wealthy foreigners - to pay domestic taxes on their worldwide income and capital gains. In the UK foreigners can claim they are ‘domiciled’ abroad even though they may have lived in Britain for years and have British passports. Under this rule, ‘non-domiciles’ would only pay tax on their UK income and not on overseas income, usually the bulk of their earnings.
But he also admitted making ‘billions’ out of privatization and that Yeltsin ‘gave us the chance to be rich’.34 Inevitable or desirable, the social cost to Russia was immense. The broad consensus is that the privatization process was one of the most flawed economic reforms in modern history. Industrial production declined by some 60 per cent during the 1990s, vast swathes of the economy were wiped out, and much of the population was plunged into poverty. The vast amount of money that poured out of Russia to be hidden away in offshore bank accounts accentuated the dramatic economic crisis of 1998. During the 1990s, what was known as ‘capital flight’ became one of the country’s most debilitating economic problems. According to economists at Florida International University, ‘It erodes the country’s tax base, increases the public deficit, reduces domestic investment and destabilises financial markets.’35 The investment fund Hermitage Capital has estimated that between 1998 and 2004, £56 billion in capital flowed out of Russia, most ending up offshore.
God's Bankers: A History of Money and Power at the Vatican by Gerald Posner
Albert Einstein, anti-communist, Ayatollah Khomeini, bank run, banking crisis, Bretton Woods, central bank independence, centralized clearinghouse, centre right, credit crunch, dividend-yielding stocks, European colonialism, forensic accounting, God and Mammon, Index librorum prohibitorum, Kickstarter, liberation theology, 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.
The Bin Ladens: An Arabian Family in the American Century by Steve Coll
American ideology, anti-communist, Berlin Wall, borderless world, Boycotts of Israel, British Empire, business climate, colonial rule, Donald Trump, European colonialism, Fall of the Berlin Wall, financial independence, forensic accounting, global village, haute couture, intangible asset, Iridium satellite, Khyber Pass, low earth orbit, margin call, new economy, offshore financial centre, oil shock, RAND corporation, Ronald Reagan, Saturday Night Live, Silicon Valley, Silicon Valley startup, urban planning, Yogi Berra
They dropped so many hand grenades into the tunnels during this phase of the assault, said the Bin Laden employee, that up on the surface “we were slipping on the rings of the hand grenades.”23 Salem seemed thrilled to be involved, but he was also worried. It did not require an advanced degree in political science to see that the Al-Saud was vulnerable to forces of Islamic revolution similar to those that had just toppled the shah of Iran across the Persian Gulf—and if the Saudi royal family fell, so would the Bin Ladens. The brothers moved quickly—and in secret—to create an offshore financial haven. On November 27, 1979, just one week after the Mecca uprising began, lawyers halfway around the world, in Panama City, filed a Notaría Primera del Circuito establishing a new company under Panamanian law: Binladin International Inc. They soon changed its name to the less conspicuous Binar, Inc. Its directors would eventually include the most influential brothers around Salem—Bakr, Omar, Yeslam, Tareq, Hassan, and Khalid.
Blessed Relief, a charity Al-Qadi cofounded, which operated in Bosnia, Sudan, Pakistan, and other countries between 1992 and 1997, was described in a Treasury citation as a “front” for Bin Laden, one that had been used to pass money to him from wealthy Saudis. Al-Qadi denied these accusations, too. He said that he had met Osama at religious gatherings in Saudi Arabia during the 1980s but that these meetings had been casual and inconsequential, and he adamantly denied providing any support to Al Qaeda or other terrorists at any time.26 Taken together, these offshore financial connections, while far from offering proof that some members of the Bin Laden family might have found ways to quietly pass funds to Osama after he had been forced to sell his family shareholdings, nonetheless offered fragments of intriguing evidence—strands that certainly demanded further and more rigorous investigation than the American government had yet managed to undertake, at least in the opinion of Michael Scheuer, the CIA’s lead analyst.
Also, Osama specifically assigned all his divested shares to Ghalib Bin Laden, the younger full brother of Bakr and Salem. It was Ghalib who had visited Peshawar, Pakistan, during Ramadan in 1989, at a time when Osama was fighting in the battle for Jalalabad. There is evidence that Ghalib retained an interest in Islamic financial institutions at the time he agreed to accept Osama’s divested shares: in late 1993, Ghalib transferred $1 million to a new investment account at Bank Al-Taqwa, in the Bahamas, an offshore bank founded in 1988 with backing from the Egyptian Muslim Brotherhood. Al-Taqwa funded HAMAS in Israel and other Brotherhood-influenced radical groups in Algeria and Tunisia, according to a written assessment by the U.S. Treasury Department. What involvement Bakr Bin Laden had in the Al-Taqwa investment is not known, but Bakr did have signature authority over Ghalib’s account, which remained active until at least the late 1990s, according to bank documents filed in a U.S. court.
Outposts: Journeys to the Surviving Relics of the British Empire by Simon Winchester
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.
The New Economics: A Bigger Picture by David Boyle, Andrew Simms
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 raider, 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 exclusion, financial innovation, full employment, garden city movement, happiness index / gross national happiness, if you build it, they will come, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, Kickstarter, land reform, light touch regulation, loss aversion, mega-rich, 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, Vilfredo Pareto, Washington Consensus, wealth creators, 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.
Bean Counters: The Triumph of the Accountants and How They Broke Capitalism by Richard Brooks
accounting loophole / creative accounting, asset-backed security, banking crisis, Big bang: deregulation of the City of London, blockchain, BRICs, British Empire, business process, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Strachan, Deng Xiaoping, Donald Trump, double entry bookkeeping, Double Irish / Dutch Sandwich, energy security, Etonian, eurozone crisis, financial deregulation, forensic accounting, Frederick Winslow Taylor, G4S, intangible asset, Internet of things, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, light touch regulation, Long Term Capital Management, low cost airline, new economy, Northern Rock, offshore financial centre, oil shale / tar sands, On the Economy of Machinery and Manufactures, Ponzi scheme, post-oil, principal–agent problem, profit motive, race to the bottom, railway mania, regulatory arbitrage, risk/return, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, statistical model, supply-chain management, The Chicago School, too big to fail, transaction costs, transfer pricing, Upton Sinclair, WikiLeaks
According to the United Nations, such international tax avoidance costs developing countries as much as £100bn a year – around the same amount as they receive in aid – and makes a ‘significant negative impact on their prospects for sustainable development’.39 The richest individuals get a similar tax-saving service thanks to the Big Four’s global coverage. Expertise in the laws of a client’s home country and those of the world’s tax havens, with a permanent physical presence in each, enables their accountants to find just the right tax structure. The Big Four are particularly well qualified for the task because they help the tax havens frame their tax- and regulation-dodging laws in the first place. The Cayman Islands government’s private sector consultative committee, for example, includes representatives from every Big Four firm.40 As Nicholas Shaxson, author of the acclaimed tax haven exposé Treasure Islands told me: ‘The Big Four have done more than any other group to sustain the global system of offshore tax havens.’ The Panama Papers leak of documents from inside law firm Mossack Fonseca in 2016 revealed thousands of examples of the Big Four’s offices around the world advising clients on using offshore companies and trusts to own private and business assets.
Edward Simpkins, ‘Don’t Play Fast and Loose with the IRS’, Sunday Telegraph, 6 September 2005. 26. Sunday Times, 4 September 2005. 27. $1.2bn out of $3.2bn. US Senate Permanent Subcommittee on Investigations report, November 2003. 28. Lynnley Browning, ‘Defendants File a Flurry of Motions Challenging the KPMG Tax Shelter Case’, New York Times, 13 January 2006. 29. Nick Shaxson, ‘How Ireland Became an Offshore Financial Centre’, Tax Justice Network, 11 November 2015, http://www.taxjustice.net/2015/11/11/how-ireland-became-an-offshore-financial-centre/. 30. Fiona Reddan, ‘Scion of a Prominent Political Dynasty who Gave his Vote to Accountancy’, Irish Times, 8 May 2015. 31. O’Rourke’s role in Ireland’s tax avoidance activities was first exposed by Bloomberg reporter Jesse Drucker in a 28 October 2013 article, ‘Man Making Ireland Tax Avoidance Hub Proves Local Hero’. 32.
Under arrangements sanctioned by KPMG, around $400m of the public company’s profits were stripped out between 1997 and 2003 into tax haven companies controlled by Black and his associates. These companies, claimed the Canadian press baron, owned his uniquely valuable management expertise and deserved the hundreds of millions of dollars they received. So-called ‘transfer pricing’ rules dictate that payments for goods or services by related companies should be at levels that would be agreed between independent parties operating at ‘arm’s length’ from each other. This is to prevent profits being artificially shifted into lower tax areas by, for example, overpaying fees to a tax haven company. Yet KPMG, doubling up as Hollinger’s tax adviser as well as auditor, chose to compare Hollinger’s fees ‘with the venture capital business because it was the one industry against which [its] fee structure would favorably compare’.
Daemon by Daniel Suarez
Berlin Wall, Burning Man, call centre, digital map, disruptive innovation, double helix, failed state, Fall of the Berlin Wall, game design, high net worth, invisible hand, McMansion, offshore financial centre, optical character recognition, peer-to-peer, plutocrats, Plutocrats, RFID, Stewart Brand, telemarketer, web application
Judging from the private jets at the airport and the forest of satellite dishes, the latter was Nauru’s future. The community of nations officially took a dim view of money-laundering centers with lax banking and incorporation laws and powerful privacy regulations—but then again, at some point every government had need of such things. The Daemon had directed Anderson to an informative Web page prior to her whirlwind tour of offshore tax havens, and it opened her eyes. Tax havens were tolerated—and in some cases facilitated—by powerful nations and global corporations. Intelligence agencies needed to wire untraceable money to informants or to fund operations in various troubled or soon-to-be-troubled regions. Corporations needed to incentivize key people without interference from investment groups and regulators. All of this was possible in areas far from the public eye.
Her specialty was neuromarketing research—examining the brain activity of people viewing various consumer products.” NSA: “You didn’t answer the question.” CIA: “Where does Sebeck come in?” FBI: “We’re not sure yet, but credit card records show Lanthrop staying at the same hotels where Sebeck attended law-enforcement seminars. They also traveled to Grand Cayman together. Lanthrop set up an offshore bank account there for a holding company that later held short positions in CyberStorm Entertainment stock. We have video of Lanthrop and Sebeck sitting at a bank manager’s desk. Sebeck’s wife had no knowledge of this trip.” NSA: “How do Sebeck and Lanthrop build an automated Hummer or an electrocution trap in the CyberStorm server farm? I mean, how would they get access to CyberStorm?” FBI: “We’re still putting the pieces together.
For godsakes, Detective Sebeck had a safe deposit box in a Los Angeles bank where we found twenty thousand dollars in cash and a forged passport with his picture on it.” NSA: “That’s quite interesting.” He paused for effect. “I also find it interesting that there were several other Ventura County detectives besides Peter Sebeck who might have been assigned this case. And all of them had not one, but multiple offshore bank accounts. About which they claim ignorance.” This produced frowns around the table. CIA: “I don’t understand.” NSA motioned for a nearby aide to hit the lights. The room dimmed. NSA: “Look at this map.” He pulled out a remote and a map of the U.S. appeared, via PowerPoint, on a wall screen. “Here, we see cities where these same detectives incurred credit card charges in the last two years.”
How Asia Works by Joe Studwell
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, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, 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.
Big Business: A Love Letter to an American Anti-Hero by Tyler Cowen
23andMe, Affordable Care Act / Obamacare, augmented reality, barriers to entry, Bernie Sanders, bitcoin, blockchain, Bretton Woods, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, correlation coefficient, creative destruction, crony capitalism, cryptocurrency, dark matter, David Brooks, David Graeber, don't be evil, Donald Trump, Elon Musk, employer provided health coverage, experimental economics, Filter Bubble, financial innovation, financial intermediation, global reserve currency, global supply chain, Google Glasses, income inequality, Internet of things, invisible hand, Jeff Bezos, late fees, Mark Zuckerberg, mobile money, money market fund, mortgage debt, Network effects, new economy, Nicholas Carr, obamacare, offshore financial centre, passive investing, payday loans, peer-to-peer lending, Peter Thiel, pre–internet, price discrimination, profit maximization, profit motive, RAND corporation, rent-seeking, reserve currency, ride hailing / ride sharing, risk tolerance, Ronald Coase, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Nature of the Firm, Tim Cook: Apple, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, ultimatum game, WikiLeaks, women in the workforce, World Values Survey, Y Combinator
That involves some risks, but it has made us a much wealthier nation.18 AMERICA AS TAX HAVEN AND BANKING HAVEN Americans typically think of Switzerland, Liechtenstein, or maybe Monaco or Andorra as the tax and banking havens of our time. Those with Asian connections will know about Singapore and Hong Kong in this capacity, or maybe Chinese private banking. But in recent times the United States has proven to be one of the most significant financial havens in the entire world. David Wilson, a partner in a Swiss law firm, stated: “America is the new Switzerland.” Hard data are difficult to come by because of the very nature of this enterprise, but possibly the United States is the world’s largest offshore financial center.19 Without much explicit debate or discussion, American laws evolved to produce an especially high degree of secrecy for some asset holdings in this country.
If you look at who is sending money out of China, Russia, or Venezuela, very often it is the good guys, not the villains. Do you remember when in 2017 the ruling prince of Saudi Arabia locked Saudi millionaires and billionaires in the Ritz-Carlton and demanded billions of their wealth, refusing to release them until they had paid up? Whichever side of the Saudi dispute you might be on, it shouldn’t be much of a surprise to learn that Saudis are major users of confidential offshore financial institutions. America’s status as a tax, bank, and trust haven is definitely good for the United States, and from a broader point of view it might be good for the rest of the globe too. That would be yet another benefit of the American financial system, although we don’t know the entire net calculus on this one. IS THE FINANCIAL SECTOR OUT OF CONTROL AND TOO BIG? You might think that all of these gains come at some enormous cost.
It is also estimated that there are hundreds of billions of foreign dollars held in American banks—about $800 billion, according to one estimate from Boston Consulting Group.20 This is because of the privileged status of the dollar, the presence of many liquid markets in America, and the relative safety and secrecy of American banks and other financial institutions. It is believed that about half of these deposits come from Latin America. Again, that is the American financial sector at work. Think of it as America being open to refugee money. You might be wondering how beneficial these institutions really are. Critics portray a heartless, corrupt tax world where tax havens prevent local governments around the world from reaping their fair share of tax revenue, thereby undercutting good governance. But the reality is not so simple. A lot of countries have inadequate civil liberties and highly corrupt regimes, and protecting private money from the depredations of foreign powers is often the right thing to do. It is a pretty common tactic for bad governments to investigate the finances of political opponents and then bring charges as a means of reprisal, with no fair trial at the end of the process.
Cities Under Siege: The New Military Urbanism by Stephen Graham
addicted to oil, airport security, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean water, congestion charging, creative destruction, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, digital map, 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, mass incarceration, McMansion, megacity, moral panic, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, one-state solution, pattern recognition, peak oil, planetary scale, private military company, Project for a New American Century, 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, white picket fence
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.
Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz
Airbnb, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, hiring and firing, housing crisis, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, patent troll, pension reform, price mechanism, price stability, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, zero-sum game
During this time, countries realized that they were losing massive amounts of money from evasion and avoidance through tax havens and profit shifting. A recent study puts the global extent of international profit shifting at more than 5 percent of total corporate profits, or about $620 billion.14 Estimates of tax losses due to profit shifting vary between 4 percent and 10 percent of corporate income tax revenues for the advanced OECD industrial economies.15 A recent simulation study finds corporate tax losses of 7.7 percent of total corporate tax revenues in the EU.16 Investigations reported in the “Panama Papers” and “Paradise Papers” uncovered the extent of this tax evasion and avoidance. As a result, the G-20 put increased pressure on the offshore financial centers to increase their transparency, and to participate in systems of automatic exchange of tax information.
The main exception is that one can give tariff-free access to a country that is part of a free-trade agreement, without granting it to others. # The reason is that increased imports destroy jobs as exports increase them, and the imports destroyed are more labor-intensive than the exports created; if Europe maintains (roughly) trade balance, then net, jobs are destroyed. ** As we noted in Chapter 6, though we often think of these as “offshore financial centers,” some jurisdictions in the United States (Nevada, Delaware) and the City of London have also profited from these nefarious activities. †† According to a 2015 report by the United Nations Conference on Trade and Development, around 60 percent of completed ISDS cases favored investors while only 40 percent favored governments. ‡‡ While similar provisions existed in some 1,400 bilateral investment treaties, the new agreements mark the first time these provisions fall under an EU-level trade deal with application to all economic sectors.
We now know that the benefits of trade agreements were exaggerated, and the costs underestimated. The benefits of further trade agreements, beyond those already in existence, such as the WTO, are likely to be smaller than those of the past, and in some cases, even questionable. At the very least, we need to be attentive to the resulting consequences for workers, the environment, and health. 6. Taxation. Managing globalization requires that we eliminate tax havens and create a fair system of multinational taxation. 7. Investment agreements. Current investment agreements are particularly problematic, and Europe should work with other countries to revise these agreements. It should not sign any further agreements until there is a broader consensus on what they should entail. 8. Intellectual property rights. The governance of global knowledge is an important part of the governance of international economic relations in our modern, knowledge-based economy.
Lying for Money: How Fraud Makes the World Go Round by Daniel Davies
bank run, banking crisis, Bernie Madoff, bitcoin, Black Swan, Bretton Woods, business cycle, business process, collapse of Lehman Brothers, compound rate of return, cryptocurrency, financial deregulation, fixed income, Frederick Winslow Taylor, Gordon Gekko, high net worth, illegal immigration, index arbitrage, Nick Leeson, offshore financial centre, Peter Thiel, Ponzi scheme, price mechanism, principal–agent problem, railway mania, Ronald Coase, Ronald Reagan, short selling, social web, South Sea Bubble, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, time value of money, web of trust
Completely fake assets Although it is more usual for the accounting faker to take an existing asset and overvalue it, it is by no means unknown to create a complete fiction. Gowex’s network of European municipal WiFi hot spots would be one example, although the biggest fake asset frauds tend to involve offshore bank accounts. There are legitimate reasons* why a company might want to have a lot of cash sitting in an offshore account – it might be the proceeds of a large asset sale which need to be reinvested, or be money raised through a loan or bond issue from an offshore bank. But offshore accounts by their nature tend not to be very transparent, and it occasionally happens that the account gets emptied by an embezzler, or that the ownership of the account turns out to belong to a corporate entity other than the one that is reporting it in its accounts.
Since over the course of ninety days, this syndicate is making a 100 per cent return on their initial investment of £1m, they have plenty of scope to make a loss on their SIM-card trading business if it incorporates a few more ‘buffers’ into the system, clouding the trail by offering attractive prices to entice honest traders to insert themselves into the chain. You can also (this is called a ‘countertrading’ fraud), send another packet of SIM cards round the system in the other direction, so that some of the stages in the middle have no net liability to report and therefore no automatic reports to the taxman are made. And it helps for everyone to have bank accounts with an offshore bank that isn’t very reliable in responding to inquiries from the tax authorities. In other words, all of the obfuscatory arsenal of the fraudster is available to conceal the bad intentions of the party who is planning to carry out a classic long firm fraud against the government – to build up a big trading debt and then not pay it. The reason why VAT fraud has been so difficult to stamp out, though, is the one that we stressed to begin with – most of the defences that private companies use to defend themselves against fraudsters are not available, or only available in very restricted form, to the taxman.
The Cold War itself created many situations in which the diplomatic and intelligence communities were glad of the existence of a world of secret money and unaccountable transactions. And the gradual decolonisation of places like the Dutch Antilles and the Cayman Islands left many small countries with few natural economic advantages other than a set of tax treaties and a legal structure familiar to First World bankers. It was only in 2003 that the Organisation for Economic Co-operation and Development made it any sort of priority at all to do something about tax havens. Over the following years, the US authorities had got tougher and tougher on tax crime (in particular, Swiss-regulated bankers like Birkenfeld were absolutely not meant to be touting for business in the USA, and they were instructed to tell immigration authorities that they were only on pleasure trips). But bank secrecy was still a core principle of Swiss law, and that distinction between ‘evasion’ and ‘fraud’ made all the difference.
Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan
algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Gordon Gekko, high net worth, Hyman Minsky, information asymmetry, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail
Her publications include Financial Alchemy in Crisis: The Great Liquidity Illusion (2010) and Shadow Banking Scope, Origins Theories (2017). She is based in London. UDI SALMANOVICH RONEN PALAN is an Israeli-born economist and professor of international political economy at City, University of London. His work focuses on offshore financial centers and tax havens. He is the author or editor of a number of books, including The Imagined Economies of Globalisation (with Angus Cameron, Sage, 2004) and Tax Havens: How Globalization Really Works (with Richard Murphy and Christian Chavagneux, Cornell University Press, 2010). He is based in London. BIBLIOGRAPHY Amadeo, K., ‘Bearn Stearns, Its Collapse, and Bailout’, The Balance, 8 October 2018 (updated), www.thebalance.com/bearn-stearns-collapse-and-bailout-3305613.
Overall corporation tax has fallen as a proportion of the total tax paid by the financial services sector in the UK from 40.8 per cent in 2007 to only 19.8 per cent in 2015 (M. Arnold et al., ‘Banks pay lowest proportion of tax since before financial crisis’, Financial Times, 4 December 2015, www.ft.com/content/1414b394-99dc-11e5-987b-d6cdef1b205c). 31. M. Aubrey, and T. Dauphin, ‘Opening the Vaults: The Use of Tax Havens by Europe’s Biggest Banks.’ Oxfam, 2017. 32. Jessica Fino, ‘UK Banks Make £9bn in Profits in Tax Havens’, Economia, 27 March 2017, https://economia.icaew.com/news/march-2017/uk-banks-hold-9bn-in-profits-in-tax-havens. Chapter 14. So What? 1. Senate Committee on Banking and Currency, ‘The Pecora Report: The 1934 Report on the Practices of Stock Exchanges from the Pecora Commission’, US Senate, Report No. 1455, June 2009 , p. 31, www.senate.gov/artandhistory/history/common/…/pdf/Pecora_FinalReport.pdf.
Together with Goldman Sachs and UBS, which did pay some corporate tax in the UK that year, the seven banks employed 33,000 staff in the UK, reported revenues of £20bn in the UK and profits of £3.5bn, but ended up paying a combined total of £21m in corporation tax.30 Meanwhile, the twenty biggest European banks posted profits of at least £18bn in global tax havens in 2016.31 Collectively, these institutions made €4.9bn (£4.2bn) in profits in Luxembourg, more than they made in the UK, Sweden and Germany combined. Country-by-country data suggests that European banks did not pay a single euro in tax on €383m in profits made in tax havens in 2015.32 Like many crises before it, the global financial meltdown has been an educating experience. For instance, we know more today about how a bank may be ‘wound down’, or how many derivatives are traded on organized platforms, or what securitization entails.
Caribbean Islands by Lonely Planet
Bartolomé de las Casas, big-box store, British Empire, buttonwood tree, call centre, car-free, carbon footprint, clean water, colonial rule, cuban missile crisis, discovery of the americas, Donald Trump, glass ceiling, haute cuisine, income inequality, intermodal, jitney, Kickstarter, microcredit, offshore financial centre, place-making, Ronald Reagan, Rubik’s Cube, Search for Extraterrestrial Intelligence, sustainable-tourism, urban planning, urban sprawl, white picket fence
Today finance, tourism and fishing generate most of the income, but the islands could not survive without British aid. The tax-free offshore finance industry is a mere minnow compared with that of the Bahamas, and many would be astonished to discover that Grand Turk, the much-hyped financial center, is really just a dusty backwater in the sun. Illegal drug trafficking, a major problem in the 1980s, has also been a source of significant revenue for a few islanders. Relations between islanders and Britishappointed governors have been strained since 1996, when the incumbent governor's comments suggesting that government and police corruption had turned the islands into a haven for drug trafficking appeared in the Offshore Finance Annual, and opponents accused him of harming investment. Growing opposition threatened to spill over into civil unrest.
And it’s been luring high-energy hustlers for centuries. From the 17th-century pirates who blew their doubloons on women and wine to the dashing blockade runners who smuggled cargo from the Confederacy during the American Civil War, the city has a history of accommodating the young and the reckless. The trend continues today, with bankers dodging between downtown’s international banks as they manipulate millions on this offshore banking haven. But Nassau’s not just for those wanting to earn or burn a quick buck. Banished royalty and camera-fleeing celebs have found refuge in Nassau too, with the disgraced Duke and Duchess of Windsor keeping tongues wagging in the 1940s and the ultimately tragic Anna Nicole Smith hiding out here in 2006. Today, duty-free shops on Bay St jostle for attention with jewelry, coins, perfumes and rum cakes.
In a campaign that saw ‘change’ as the popular theme, David Thompson and the left-leaning Democratic Labour Party won the election. But in late 2010 he died suddenly, which was a traumatic event for a nation used to political stability. He was succeeded by Deputy Prime Minister Freundel Stewart. A general election must be held by January 2013. Unlike other Caribbean islands, Barbados maintains its sugar industry, although the majority of the economy is now based on tourism and offshore banking. Condos are being built as fast as the concrete dries. Culture Bajan culture displays some trappings of English life: cricket, polo and horse racing are popular pastimes, business is performed in a highly organized fashion, gardens are lovingly tended, older women often wear prim little hats and special events are carried out with a great deal of pomp and ceremony. However, on closer examination, Barbados is very deeply rooted in Afro-Caribbean tradition.
The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg
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, creative destruction, 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, Norman Macrae, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, Sam Peltzman, 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, Vilfredo Pareto
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.
Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze
Affordable Care Act / Obamacare, Apple's 1984 Super Bowl advert, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Bernie Sanders, Big bang: deregulation of the City of London, Boris Johnson, break the buck, Bretton Woods, BRICs, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, dark matter, deindustrialization, desegregation, Detroit bankruptcy, Dissolution of the Soviet Union, diversification, Doha Development Round, Donald Trump, Edward Glaeser, Edward Snowden, en.wikipedia.org, energy security, eurozone crisis, Fall of the Berlin Wall, family office, financial intermediation, fixed income, Flash crash, forward guidance, friendly fire, full employment, global reserve currency, global supply chain, global value chain, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, Hyman Minsky, illegal immigration, immigration reform, income inequality, interest rate derivative, interest rate swap, Kenneth Rogoff, large denomination, light touch regulation, Long Term Capital Management, margin call, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, mittelstand, money market fund, moral hazard, mortgage debt, mutually assured destruction, negative equity, new economy, Northern Rock, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, old-boy network, open economy, paradox of thrift, Peter Thiel, Ponzi scheme, predatory finance, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, reserve currency, risk tolerance, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, structural adjustment programs, The Great Moderation, Tim Cook: Apple, too big to fail, trade liberalization, upwardly mobile, Washington Consensus, We are the 99%, white flight, WikiLeaks, women in the workforce, Works Progress Administration, yield curve, éminence grise
Shin, “Global Banking Glut and Loan Risk Premium,” Jacques Polak Annual Research Conference, November 10–11, 2011. 16. Bertaut et al., “ABS Inflows to the United States and the Global Financial Crisis.” 17. T. Norfield, The City: London and the Global Power of Finance (London: Verso, 2017); D. Kynaston, City of London: The History, vol. 4 (London: Penguin, 2002); and N. Shaxson, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens (New York: St. Martin’s Press, 2012). 18. E. Helleiner, States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Ithaca, NY: Cornell University Press, 1996). 19. J. Green, “Anglo-American Development, the Euromarkets, and the Deeper Origins of Neoliberal Deregulation,” Review of International Studies 42 (2016), 425–449. 20. P. Augar, The Death of Gentlemanly Capitalism: The Rise and Fall of London’s Investment Banks (London: Penguin, 2000). 21.
Russia could thus seem the very model of a national economic powerhouse, with a huge trade surplus, surging foreign reserves and a strong state. But the paradox of Russia’s position was that its new prosperity was associated not with independence from the world economy but with entanglement with it.30 And this entanglement extended beyond the export of oil and gas. Money was even more liquid and the pipelines connecting the offshore banking system were ready laid. Tens of billions of dollars in oil and gas export earnings never returned to Russia. Russia’s oligarchs behaved like the masters of a 1970s petrostate, harboring their wealth in offshore havens like Cyprus, from where it cycled back to London and its convenient eurodollar accounts. From the early 2000s the pattern was further complicated by a large flow of funds back to Russia.
A year later they were reduced to calling on the IMF to help not just Greece but the eurozone as a whole. And it was not enough. Two years later the eurozone crisis was still menacing global financial stability. I Viewed against the wider canvas of the global crisis stretching from Wall Street to Seoul, the troubles of Greece and Ireland were not unusual and we do not need to refer to idiosyncratic features of eurozone governance to explain them.1 Ireland was an overgrown offshore banking hub. The costs of the bailout that Dublin saddled itself with were enough to have put even the most fiscally sound state in danger. It was Lagarde’s nightmare of October 2008 made real: a crisis in Europe’s highly integrated financial system too big for a host country to resolve alone. The politicians in Dublin were driven by panic and their intimate ties to the local banking community, but Merkel’s veto on any collective European solution made Ireland’s situation untenable.
Stolen: How to Save the World From Financialisation by Grace Blakeley
"Robert Solow", activist fund / activist shareholder / activist investor, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, basic income, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, bitcoin, Bretton Woods, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, credit crunch, Credit Default Swap, cryptocurrency, currency peg, David Graeber, debt deflation, decarbonisation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, fixed income, full employment, G4S, gender pay gap, gig economy, Gini coefficient, global reserve currency, global supply chain, housing crisis, Hyman Minsky, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Kenneth Rogoff, Kickstarter, land value tax, light touch regulation, low skilled workers, market clearing, means of production, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, Northern Rock, offshore financial centre, paradox of thrift, payday loans, pensions crisis, Ponzi scheme, price mechanism, principal–agent problem, profit motive, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Right to Buy, rising living standards, risk-adjusted returns, road to serfdom, savings glut, secular stagnation, shareholder value, Social Responsibility of Business Is to Increase Its Profits, sovereign wealth fund, the built environment, The Great Moderation, too big to fail, transfer pricing, universal basic income, Winter of Discontent, working-age population, yield curve, zero-sum game
Washington DC, November 14 20 Rogoff (2015) 21 Gordon, B. (2015) “The Turtle’s Progress: Secular Stagnation Meets the Headwinds”, in Baldwin and Teulings (2015) 22 Baldwin and Teulings (2015) 23 Milanovic, B. (2015) “Bob Solow on Rents and Decoupling of Productivity and Wages”, globalinequality, 2 May. https://glineq.blogspot.com/2015/05/bob-solow-on-rents-and-decoupling-of.html 24 This account draws on: Marx (1867); Mandel (1976); Harvey (2018) 25 This account draws on: Duménil and Lévy (2004; 2005); Palley (2007); Hein (2012). 26 This account draws on: Lapavitsas (2013); Stockhammer (2004); Aglietta and Breton (2001); Clark (2009); Foster (2010); Hein (2012); Dutt (2005); Palley (2007). 27 This account draws on: Lapavitsas (2013); Panitch and Gindin (2012); Blakeley (2018a); Norfield, T. (2016) The City: London and the Power of Global Finance, London: Verso; Amin, S. (2018) Modern Imperialism, Monopoly Finance Capital, and Marx’s Law of Value: Monopoly Capital and Marx’s Law of Value, USA: Monthly Review Press 28 United Nations Conference on Trade and Development (2008) Trade and Development Report 2008: Commodity Prices, Capital Flows and the Financing of Investment. 29 Shaxson (2012); Garcia-Barnardo, J., Fichtner, J., Takes, F. and Heemskerk, E. (2017) “Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network”, Scientific Reports, vol. 7 30 United Nations Economic Commission for Africa (Uneca) (2012) “Illicit Financial Flows REPORT OF THE HIGH LEVEL PANEL ON ILLICIT FINANCIAL FLOWS FROM AFRICA”, Uneca. 31 See, e.g., Krugman, P. (2015) “The Case for Cuts Was a Lie. Why Does Britain Still Believe It?”, Guardian, 29 April. https://www.theguardian.com/business/ng-interactive/2015/apr/29/the-austerity-delusion; Portes, J. and Holland, D. (2012) “Self-Defeating Austerity?”
By providing capital gains to a large swathe of the population, the Conservatives would be creating a class of people who had a material interest in the economy remaining as it was, even if most of the gains from growth were going to the top 1%. Blowing Bubbles In October 2018, the record for the most expensive UK home was broken when the penthouse at One Hyde Park was sold for £160m.34 Initially, the identity of the buyer was shrouded in mystery. The property had been purchased through a shell corporation located in the tax haven of Guernsey, where companies aren’t required to disclose their beneficial owners. But a few days later the buyer’s identity was revealed. As it turns out, the developer, multi-millionaire property tycoon Nick Candy, sold the penthouse to himself via Project Grande (Guernsey) Limited — a joint venture between his brother Christian Candy and the former Prime Minister of Qatar — so he could release the equity with a £80m loan from Credit Suisse.
At the same time, financialisation has allowed Anglo-America to play an extractive neo-colonial role in the international system, to the detriment of workers in the global North and the rest of the world.27 Forced to open up their markets to international investment in the 1970s and 1980s, many states in the global South have seen capital flee their domestic economies in search of higher returns in the booming asset markets in the US and the UK.28 This has left these states starved of domestic capital and relying on foreign domestic investment, leaving them stuck in a position of permanent dependence and underdevelopment. A significant chunk of the capital flight out of the global South took the form of illicit financial flows into tax havens, often with the City of London acting as a key conduit.29 The global South lost more than $1trn in illicit financial outflows in 2012, with the majority coming from Africa.30 But the Anglo-American economies have also suffered from the imbalances this situation has brought about. Capital flows pushed up the value of their exchange rates, suppressing domestic demand by reducing the value of the last item in Keynes’ equation: net exports.
The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley
"Robert Solow", 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 cycle, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, Everybody Ought to Be Rich, 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, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, 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.
McMafia: A Journey Through the Global Criminal Underworld by Misha Glenny
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, Nelson Mandela, Nick Leeson, offshore financial centre, Pearl River Delta, 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.
The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money by Frederik Obermaier
banking crisis, blood diamonds, credit crunch, crony capitalism, Deng Xiaoping, Edward Snowden, family office, high net worth, income inequality, Kickstarter, liquidationism / Banker’s doctrine / the Treasury view, mega-rich, Mikhail Gorbachev, mortgage debt, Nelson Mandela, 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.
The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis
Airbus A320, 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, Nelson Mandela, 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, zero-sum game
‘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.
The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge by Faisal Islam
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, Boris Johnson, 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, G4S, ghettoisation, global rebalancing, global reserve currency, hiring and firing, inflation targeting, Irish property bubble, Just-in-time delivery, labour market flexibility, light touch regulation, 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, Myron Scholes, negative equity, North Sea oil, Northern Rock, offshore financial centre, open economy, paradox of thrift, Pearl River Delta, pension reform, price mechanism, price stability, profit motive, quantitative easing, quantitative trading / quantitative ﬁnance, race to the bottom, regulatory arbitrage, reserve currency, reshoring, Right to Buy, 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, WikiLeaks, working-age population, zero-sum game
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.
The Divide: A Brief Guide to Global Inequality and Its Solutions by Jason Hickel
Andrei Shleifer, Asian financial crisis, Atahualpa, Bartolomé de las Casas, Bernie Sanders, Bob Geldof, Bretton Woods, British Empire, Cape to Cairo, capital controls, carbon footprint, clean water, collective bargaining, colonial rule, David Attenborough, David Graeber, David Ricardo: comparative advantage, declining real wages, dematerialisation, Doha Development Round, Elon Musk, European colonialism, falling living standards, financial deregulation, Fractional reserve banking, Francisco Pizarro, full employment, Hans Rosling, happiness index / gross national happiness, Howard Zinn, income inequality, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Watt: steam engine, laissez-faire capitalism, land reform, land value tax, liberal capitalism, Live Aid, Mahatma Gandhi, Monroe Doctrine, Mont Pelerin Society, moral hazard, Naomi Klein, Nelson Mandela, offshore financial centre, oil shale / tar sands, out of africa, plutocrats, Plutocrats, purchasing power parity, race to the bottom, rent control, road to serfdom, Ronald Reagan, Scramble for Africa, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, structural adjustment programs, The Chicago School, The Spirit Level, trade route, transatlantic slave trade, transfer pricing, trickle-down economics, Washington Consensus, WikiLeaks, women in the workforce, Works Progress Administration
Given this, secrecy jurisdictions afford robust protections not just for tax evaders but for all kinds of criminals – including money launderers, arms smugglers and even terrorists. It is impossible to know how much money is stashed in the world’s tax havens, but a lowball estimate in 2010 suggested the figure was at least $21 trillion, and probably closer to $32 trillion – about $9 trillion of which is from poor countries. The money stashed away in tax havens amounts to more than one-sixth of all the world’s private wealth. Today, at least 30 per cent of all foreign direct investment flows through tax havens, and about 50 per cent of all trade.23 There are three main categories of tax havens.24 There are tax havens in Europe, like Luxembourg, Switzerland and the Netherlands, which are probably the best known, as well as Belgium, Austria, Monaco and Lichtenstein. Then there are the tax havens in the United States, such as Manhattan, Florida and Delaware, as well as US-linked territories like the Virgin Islands, the Marshall Islands, Liberia and Panama.
For example, imagine that a South African firm has agreed to buy $1 million of steel from a British firm. The South African firm requests that the British firm send the invoice for $1 million to a tax haven. The tax haven then rein-voices the South African firm at more than the agreed value of the goods – say $1.5 million. The South African firm pays the $1.5 million to the tax haven. The tax haven then pays $1 million to the British firm and diverts the rest to an offshore account. As far as the tax authorities in South Africa can tell, the transaction appears legitimate – but the South African firm has successfully spirited $500,000 into an offshore account where it will never be taxed. While this practice amounts to a serious crime, tax havens nonetheless openly advertise their reinvoicing services and offer to assist firms in setting up shell companies to launder money and evade taxes.
As a result, corporations have free rein to write out their invoices however they please, with little risk of being called out. This is why mispricing has grown at such a rapid rate since the mid-1990s. Still, none of this theft would be possible without the tax havens. Altogether, there are around fifty to sixty tax havens in the world. They function as tax havens not only because they offer low or zero tax rates, but because they have very little financial regulation and, most importantly, they shroud financial information behind a veil of secrecy. Indeed, the technical term for a tax haven is secrecy jurisdiction. In most cases, banks and corporations operating out of secrecy jurisdictions are not required to disclose anything about where money comes from and where it goes – and in some cases it is actually illegal to disclose such information.
Drugs Without the Hot Air by David Nutt
British Empire, double helix, en.wikipedia.org, Kickstarter, knowledge economy, longitudinal study, meta analysis, meta-analysis, moral panic, offshore financial centre, randomized controlled trial, risk tolerance, Robert Gordon, selective serotonin reuptake inhibitor (SSRI), 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.
How to Stop Brexit (And Make Britain Great Again) by Nick Clegg
Berlin Wall, Boris Johnson, collapse of Lehman Brothers, Dominic Cummings, Donald Trump, eurozone crisis, Fall of the Berlin Wall, Francis Fukuyama: the end of history, offshore financial centre, sceptred isle, Snapchat
The democratic process, the judiciary and the views of the 48 per cent of people who did not vote to leave the EU are not, it seems, of any concern to some parts of the Brexit elite. Perhaps most strikingly of all, the Brexit elite stretches well beyond Britain itself. Some of the key players neither live nor pay taxes in the UK. The Legatum Institute – a think tank driven by a libertarian, low-regulation philosophy and amateur ideas about Britain’s future trade policy – has deep pockets linked to offshore finance, and is so well connected to the heart of Whitehall that it was invited, inexplicably, to join a cast of top corporate chief executives in a meeting with David Davis in his country residence, Chevening, in the summer of 2017.62 Dizzyingly wealthy individuals in the US have lent their financial clout to support libertarian US think tanks, in their promotion of small government, low tax and in some cases environmentally questionable policies – an ideological outlook that overlaps with anti-EU thinking across Europe.
Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity by Paul Ely Beckerman, Andrés Solimano
banking crisis, banks create money, barriers to entry, business cycle, capital controls, Carmen Reinhart, carried interest, central bank independence, centre right, clean water, currency peg, declining real wages, disintermediation, financial intermediation, fixed income, 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, old-boy network, 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).
The Establishment: And How They Get Away With It by Owen Jones
anti-communist, Asian financial crisis, bank run, battle of ideas, Big bang: deregulation of the City of London, bonus culture, Boris Johnson, 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, G4S, glass ceiling, hiring and firing, housing crisis, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, James Dyson, laissez-faire capitalism, light touch regulation, market fundamentalism, mass immigration, Monroe Doctrine, Mont Pelerin Society, moral hazard, Neil Kinnock, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, old-boy network, open borders, plutocrats, Plutocrats, popular capitalism, 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, wealth creators, 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.
Leading From the Emerging Future: From Ego-System to Eco-System Economies by Otto Scharmer, Katrin Kaufer
Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, Asian financial crisis, Basel III, Berlin Wall, Branko Milanovic, cloud computing, collaborative consumption, collapse of Lehman Brothers, colonial rule, Community Supported Agriculture, creative destruction, crowdsourcing, dematerialisation, Deng Xiaoping, en.wikipedia.org, European colonialism, Fractional reserve banking, global supply chain, happiness index / gross national happiness, high net worth, housing crisis, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Johann Wolfgang von Goethe, Joseph Schumpeter, Kickstarter, market bubble, mass immigration, Mikhail Gorbachev, Mohammed Bouazizi, mutually assured destruction, Naomi Klein, new economy, offshore financial centre, peak oil, ride hailing / ride sharing, Ronald Reagan, Silicon Valley, smart grid, Steve Jobs, technology bubble, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Washington Consensus, working poor, Zipcar
Banks also hold a competitive advantage over nonbanks through what is called fractional-reserve banking, which allows banks to invest more than they hold as deposits. 26. See www.gabv.org/ (accessed December 10, 2012). 27. On the distinction among purchase, lending, and gift money, see Rudolf Steiner, Rethinking Economics: Lectures and Seminars on World Economics (Great Barrington, MA: SteinerBooks, 2013). 28. Matthew Valencia, “Storm Survivors,” Economist, special report on offshore finance (February 16–22, 2013): 4. 29. Fritz Andres, “Alterndes Geld im Mittelalter,” Info 3 (June 1994): 17. Chapter 8. Leading from the Emerging Future 1. Bill Torbert, “The Practice of Action Inquiry,” in Peter Reason and Hilary Bradbury, eds., Handbook of Action Research: Participative Inquiry and Practice (Thousand Oaks, CA: Sage, 2001), 250. 2. For more information on edX, see https://www.edx.org (accessed February 3, 2013). 3.
It’s big. Remember the $1.5 trillion in foreign transactions, not even 5 percent of which is connected to anything in the real economy? That’s how big it is. It’s a huge problem—and there is a lot of money at stake for very tiny but powerful special-interest groups that feed themselves from the oversized extractive bubble in the outer sphere. Estimates of how much private wealth is brought to offshore tax havens in order to (often illegally, but in some cases legally) avoid taxes that should have been paid are US$20 trillion (US$20,000 billion!).28 Redirecting the flow of this money to serving the global commons would have an amazing instant impact globally. It’s possible. But it takes common will. The path to the future, to Economy 4.0, requires a shift at the gravitational center of our economy from primarily 1.0 and 2.0 communications (the outer two spheres) to 3.0 and 4.0 conversations and relationships (the inner two spheres).
Boomerang: Travels in the New Third World by Michael Lewis
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, financial thriller, 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, the new new thing, 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.
Kleptopia: How Dirty Money Is Conquering the World by Tom Burgis
active measures, Anton Chekhov, banking crisis, Bernie Madoff, Big bang: deregulation of the City of London, Boris Johnson, British Empire, collapse of Lehman Brothers, coronavirus, corporate governance, COVID-19, Covid-19, credit crunch, Credit Default Swap, cryptocurrency, do-ocracy, Donald Trump, energy security, Etonian, failed state, Gordon Gekko, high net worth, Honoré de Balzac, illegal immigration, invisible hand, Julian Assange, liberal capitalism, light touch regulation, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Mohammed Bouazizi, Northern Rock, offshore financial centre, Right to Buy, Ronald Reagan, Skype, sovereign wealth fund, trade route, WikiLeaks
The spokesperson for the Russian Office of the Prosecutor General told the author that Aleksanyan’s account of these offers ‘cannot be considered truthful’, without elaborating ‘even the doctors’: Aleksanyan Supreme Court testimony captors decided otherwise: Judgment of the European Court of Human Rights, par 132 ‘our country is perishing’: R. Pevear and L. Volokhonsky, trans, Dead Souls, Random House, 1996, pp.392–3, quoted in Peter Sahlas, ‘The Dual State Takes Hold in Russia: A Challenge for the West’ Chapter 5: Silhouette the silhouette: ‘Tax Haven Banks and US Tax Compliance (Day One)’, Permanent Subcommittee on Investigations, July 17, 2008, hsgac.senate.gov/subcommittees/investigations/hearings/tax-haven-banks-and-u-s-tax-compliance transporting diamonds: Lynnley Browning, ‘Ex-UBS Banker Pleads Guilty in Tax Evasion’, New York Times, June 20, 2008, nytimes.com/2008/06/20/business/20tax.html slipped him a note: Interview with Elise Bean, then staff director of and chief counsel to Levin’s committee American prosecutors: Joanna Chung and Haig Simonian, ‘Ex-UBS employee charged over US tax fraud’, Financial Times, May 14, 2008, ft.com/content/e3dba448-212b-11dd-a0e6-000077b07658 sensed what was coming: Bradley C.
Forbes of Health Management Ltd, June 18, 2014 Chapter 27: Doubles still earning less: Chris Belfield, Jonathan Cribb, Andrew Hood, Robert Joyce, Living Standards, Poverty and Inequality in the UK: 2014, Institute for Fiscal Studies, July 2014, ifs.org.uk/uploads/publications/comms/r96.pdf ‘We’ve got to make more cuts’: Rowena Mason, ‘Chancellor says more cuts on way in “year of hard truths”’, Guardian, January 6, 2014, theguardian.com/politics/2014/jan/06/george-osborne-more-cuts-year-hard-truths Sasha’s celebrations: Event Concept promotional video, eventconcept.co.uk/case-studies/projects/60th-birthday-party first time in ten years: William MacNamara and Alison Smith, ‘Tensions deepen for ENRC as two directors dismissed’, Financial Times, June 9, 2011 danger in that: Letter from Roger Ewart Smith, the Rothschild banker advising the Kazakh government on the buyout of ENRC, to Kairat Kelimbetov, June 14, 2013 Peter Mandelson . . . made that very point: Peter Mandelson email to Kairat Kelimbetov, May 19, 2013 moodily concluded: ‘Response of the Independent Committee of the Board of Eurasian Natural Resources Corporation plc to the Offer for ENRC by Eurasian Resources Group BV’, August 8, 2013, investegate.co.uk/eurasian-natural-res--enrc-/rns/response-to-offer/201308081504283057L business plan . . . appoint the management: Roger Ewart Smith letter to Kairat Kelimbetov and other officials, December 9, 2013 on the hook: Rothschild presentation for the Kazakh government, October 17, 2013 ‘Everybody understands’: Gil Shefler, ‘Kazakh tycoon plans pro-Israel TV network to rival Al-Jazeera’, Jerusalem Post, April 8, 2011 Chapter 28: The System surge of relief: ‘These issues have weighed heavily on my mind,’ Nigel wrote to his superiors at the FCA on August 18, 2014, while they were investigating his conduct moved to Monaco: The 2011–12 issue of Banking & Finance Monaco names Khofiz Shakhidi among the senior vice presidents of BSI Monaco, p.107, zyyne.com/pdf;6303 Bahamas: Shaxson, Treasure Islands, p.105; Nick Shaxson, ‘The Bahamas tax haven – a (re-)emerging global menace?’, Tax Justice Network, September 8, 2016, taxjustice.net/2016/09/08/bahamas-tax-haven-emerging-global-menace; interview with Bahamas private banker a mother of four in Margate: Paul Hooper, ‘Margate mum Emma Truscott jailed for receiving nearly £55,000 in illegal benefits’, Kent Online, November 18, 2014, kentonline.co.uk/thanet/news/mum-jailed-for-55k-benefit-27124 offered an amnesty: Richard Brooks, The Great Tax Robbery, Oneworld, 2014, pp.201–5; Tom Burgis and Vanessa Houlder, ‘HMRC: The taxman cometh’, Financial Times, August 20, 2015, ft.com/content/3fa2fd16-42bd-11e5-b98b-87c7270955cf James Bond: Nigel Wilkins email to intelligence officer at the Financial Services Authority, December 11, 2008 asleep at the wheel: Disciplinary Investigation Report, p.24 a $7 million reward: ‘Who’s the criminal?’
To another journalist – Glenn Simpson, an investigative reporter at the Wall Street Journal with an interest in post-Soviet kleptocrats – Sugar had imparted a bounty of dual-state secrets. Simpson wrote that Sugar ‘painted a picture of a Kazakh economy in which the president not only routinely takes illicit commissions but also holds hidden stakes in the copper, uranium and hydrocarbon industries, and maintains a network of offshore bank accounts’. But the worst thing Sugar had done had been his attempt, back when he was loyal, to incriminate his rivals in Nazarbayev’s court: the Trio and the former prime minister Kazhegeldin. Following his tip about dubious Kazakh money flowing through Europe, the Belgian police had alerted a magistrate in Geneva, who had found Nazarbayev’s Swiss bank accounts. Eighty-five million dollars they had in them.
Fodor's Caribbean 2012 by Fodor's Travel Publications Inc.
He called the islands Las Once Mil Virgines—the 11,000 Virgins—in honor of the 11,000 virgin companions of St. Ursula, martyred in the 4th century ad . Pirates and buccaneers followed, and then came the British, who farmed the islands until slavery was abolished in 1834. The BVI are still politically tied to Britain, so the queen appoints a royal governor, but residents elect a local Legislative Council. Offshore banking and tourism share top billing in the territory’s economy, but the majority of the islands’ jobs are tourism-related. Despite the growth, you can usually find a welcoming smile. TOP ATTRACTIONS With more than 60 islands in the chain, sailors can drop anchor at a different, perfect beach every day. Laid-back luxury resorts offer a full-scale retreat from your everyday life. Diving and snorkeling are great, and vibrant reefs are often just feet from the shore.
Legacy: Gangsters, Corruption and the London Olympics by Michael Gillard
He was planning to deposit the cash into the bank account of his offshore company, Winton Investments Limited. However, detectives raided his solicitor’s office before he had a chance to make the drop. They identified the offshore company from seized documents and spoke to the nominee directors in the Isle of Man, who immediately resigned. Holmes didn’t care too much; he simply used one of his aliases to replace them. Offshore banking secrecy laws did the rest, putting the company’s assets beyond the reach of the law. However, detectives finally caught a break from other seized paperwork. It turned out that Holmes was engaged in a complex mortgage fraud using false identities named after characters from One Flew Over the Cuckoo’s Nest to hide control of premises used for the harder end of the porn game. ‘The porn was heavy, never child porn, but anal, you got five years for that back then, and bestiality.
The property company that owned the building was still in trouble with its bank and needed a quick sale of the freehold.2 Oxley was told to start negotiations to buy it while pretending to be Holmes, who held the lease under a pseudonym. Meanwhile, Hunt turned to Chris Williams, a pudgy property lawyer, to complete the Soho coup. Williams got a court order freezing the NatWest bank account where Holmes had deposited the stolen £100,000.3 Hunt and Williams then flew from London to the offshore tax haven of Jersey to meet Peter Michel in his cramped office. Michel came highly recommended by the businessman who had recently sold Hunt the land for his new waste disposal and scrap metal business in Dagenham.4 A slight and polished man, 48-year-old Michel cut his teeth acting for Formula One racing teams and the owner of a well-known restaurant chain. As well as respectable clients, Michel washed dirty money and evaded tax for organised criminals and crooked businessmen through offshore companies with dummy owners and trusts that acted as corporate veils.
Michel received most of the purchase price in cash and hid Hunt’s ownership of the brothel from the taxman through a complex structure of trusts and bogus front men.7 Just before Christmas, Holmes quietly arrived back in the UK from California. He headed straight for his lockup in Brighton to recover more of the money from the drug deal that he had concluded before fleeing abroad in March. Holmes still had no idea that Gary Oxley was now working for his sworn enemy. On the contrary, he was assured that the Soho rents were being paid into a Midland Bank savings account in Jersey. However, when he flew to the tax haven the account was empty and Oxley nowhere to be found. Holmes rented a flat in Dublin as a base from where he could make hit and run strikes in Soho. He soon collared Oxley who confessed, claiming Hunt had threatened his life if he didn’t hand over the offshore company documents. Shortly thereafter, 2 Green’s Court was firebombed, the first message that guerrilla war had been declared in Soho. Meanwhile, at a gambling club in Victoria, Holmes and Bernie Silver devised a parallel strategy to use the courts to retake the Soho properties from Hunt’s control.
Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required by Kristy Shen, Bryce Leung
"side hustle", Affordable Care Act / Obamacare, Airbnb, asset allocation, barriers to entry, buy low sell high, call centre, car-free, Columbine, cuban missile crisis, Deng Xiaoping, Elon Musk, fear of failure, financial independence, fixed income, follow your passion, hedonic treadmill, income inequality, index fund, longitudinal study, low cost airline, Mark Zuckerberg, mortgage debt, obamacare, offshore financial centre, passive income, Ponzi scheme, risk tolerance, risk/return, Silicon Valley, single-payer health, Snapchat, Steve Jobs, supply-chain management, the rule of 72, working poor, Y2K, Zipcar
So many books have been written on the subject, I didn’t know where to begin. Was I supposed to set up an offshore company? An income trust? Buy a plane ticket to Switzerland and open up a bank account there? The more I read, the more confused I got, and quite frankly, the dirtier I felt. Many of these schemes were unabashedly sneaky and borderline illegal, and for every book or article that espoused the values of offshore banking, I saw a headline that read “Person arrested for evading taxes using shell company!” No, thanks. Whatever I was going to do, I wanted it to be 100 percent aboveboard. Everything had to be legal, with no sleazy tricks. Every strategy or tax break I employed needed to be an intentional one provided by the government. I did not want to escape my cubicle prison only to land in a real one. This “no sneaky tricks” restriction had the benefit of eliminating 90 percent of my reading material, and once the noise was gone, the answer was simple.
., 14 Mason, Charlotte, 242 matching contribution, 125, 130 “math shit up,” 86, 87 math vs. passion, 28, 28–33, 31–32 McCurry, Justin, 233, 234–35, 236–37, 237–38, 239, 245, 246, 257 median salaries, 256–66, 257–58, 261, 263, 265–66 “Medicaid gap,” 227 medical debt, 226 medical waste, digging in, 3–4, 9, 111, 157, 189 mediocre grades, 16, 47, 48 Melissa’s story, 50–51 mesolimbic pathway, 63–64, 65 Mexico, 195, 201, 211, 240, 264 the middle class, 53–170 Millennial Revolution (blog), xii millennials (“Me Me Me Generation”), 49 Miller, Hannah, 244 millionaires, types of, 269–75, 270–72 million to break free, not needed, 256–67, 303–8 missiles vs. bullets, 213–14, 214 mistakes, not dwelling on, 58–59, 60, 61, 168 Modern Portfolio Theory, 101–3, 101–4, 113–17, 114, 114–15, 116, 119 modified adjusted gross income (MAGI), 226 money appreciating money, 11–12 bleeding for money, 9, 157 debt distorting the value of money, 36–37 following first money, 32, 252–53 most important thing in the world, 9 NOT worth dying for, 157 running out of money, the fear of, 248–49 survival and money, 8–9 time link, 35, 37, 159, 161, 165, 165–69, 167–68, 267, 270 understanding money, 276 See also quitting like a millionaire Moody’s, 182 “more” as key to happiness, 18 “more dopamine = more happiness,” 64 mortgages, 44, 44, 45, 83–88, 84, 84 mother of author, 3, 4, 7, 8, 17, 26, 27, 49, 80, 250 MrMoneyMustache.com (blog), 229, 233, 234, 239, 246, 248, 251, 273 MSCI EAFE Index, 100, 106, 107, 110, 111, 111, 114, 114, 116, 178, 185–86 Musk, Elon, 270 mutual funds, 90–91, 92, 94, 108, 109, 110 National College Entrance Exam (NCEE), 23–24 New York, 32, 121, 227, 252 New York Stock Exchange (NYSE), 98 The New York Times, 63 Nick’s story, 51 Nielsen BookScan, 254 “non-lucrative visas” (wealth visas), 199 non-qualified dividends and taxes, 142 no one’s coming to save you, 46–52 North America, cost of traveling, 191–92 North Carolina, 234, 246, 257 “no sneaky tricks” restriction, 136–37, 154 nucleus accumbens, 64, 65, 66, 67, 71 Obamacare (ACA), 226–27, 228, 231, 237–38 offshore banking, 136, 144 oil crash (2015), 175, 203–4, 273 The 100 Startup (Guillebeau), 262 One More Year Syndrome, 248 One Red Paperclip (MacDonald), 160 Ontario, 153, 230, 244 open-loop vs. closed-loop, 213–16, 214, 216 Optimizers (millionaires), 272, 272–73, 274–75 outsourcing, 200 overconsumption (Western-style), 55 Pacioli, Luca, 36 panic attacks, 157, 273, 276 Partial FI, 259, 262–64, 263, 266, 267 part-time work, 213, 218 passion vs. financial considerations, 26–33, 252–53 passive income, 260, 262, 263, 265 the past doesn’t matter, 57–61 Pay as You Earn (PAYE), 40, 41 payment reduction of student debt, 39–41, 41, 45 Pay-over-Tuition (POT), 28, 28, 30–33, 31–32, 39, 59, 186, 253, 259 pensions, 50, 199, 208 percentages beating dollars, 91–92 Perpetual Re-retirement, 164, 216–17, 218 Perry, Katy, 24 perseverance, 16, 20 personal exemption, 153, 206 personal finance, 268–69, 269, 270–72 Pike, Christopher, 14 pleasure and dopamine, 64, 65 plumbers, 32, 32 poor people and taxes, 121–22 portfolio, designing a, 104–5, 104–10, 107–8, 110, 120 Portfolio Bucket, 204, 205, 206–7, 217 Portugal, 195, 197, 199, 211, 221 possessions vs. experiences, 66–69, 68–69 poverty, 1–52.
The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz
"Robert Solow", accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Asian financial crisis, banking crisis, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, Plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Ronald Reagan, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population
None of this is the outcome of inexorable economic forces, either; it’s the result of policies and politics—what we did and didn’t do. If our politics leads to preferential taxation of those who earn income from capital; to an education system in which the children of the rich have access to the best schools, but the children of the poor go to mediocre ones; to exclusive access by the wealthy to talented tax lawyers and offshore banking centers to avoid paying a fair share of taxes—then it is not surprising that there will be a high level of inequality and a low level of opportunity. And if these policies continue, these conditions will grow even worse. And now it’s also clear that the high level of economic inequality has translated into gross new forms of political inequality—to the point where we can more aptly be described as having a political system with “one dollar, one vote” than “one person, one vote.”
For instance, if we just imposed the same taxes on the returns to capital that we impose on those who work for a living, we could raise some $2 trillion over ten years. “Loopholes” does not adequately describe the flaws in our tax system; “gaps” might be better. Closing them might end the specter of the very rich almost proudly disclosing that they pay a tax rate on their disclosed income at half the rate of those with less income, and that they keep their money in tax havens like the Cayman Islands. No one can claim that the inhabitants of these small islands know how to manage money better than the wizards of Wall Street; but it seems as though that money grows better in the sunshine of these beach resorts! One of the few advantages of there being so much money at the top of the income ladder, with close to a quarter of all income going to the top 1 percent, is that slight increases in taxes at the top can now raise large amounts of money.
But there is a far better solution, and one that the individual U.S. states have discovered: have corporations pay taxes based on the economic activity they conduct in the United States, on the basis of a simple formula reflecting their sales, their production, and their research activities here, and tax corporations that invest in the United States at lower rates than those that don’t. In this way we could increase investment and employment here at home—a far cry from the current system, in which we in effect encourage even U.S. corporations to produce elsewhere. (Even if U.S. taxes are no higher than the average, there are some tax havens—like Ireland—that are engaged in a race to the bottom, trying to recruit companies to make their country their tax home.) Such a reform would end the corporate stampede toward “inversions,” changing a corporation’s tax home to avoid taxes. Where they claim their home office is would make little difference; only where they actually do business would. Other sources of revenue would benefit our economy and our society.
Fatal System Error: The Hunt for the New Crime Lords Who Are Bringing Down the Internet by Joseph Menn
Brian Krebs, dumpster diving, fault tolerance, Firefox, John Markoff, 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.
How Will Capitalism End? by Wolfgang Streeck
accounting loophole / creative accounting, Airbnb, basic income, Ben Bernanke: helicopter money, Bretton Woods, business cycle, 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, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal 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 Future of Employment, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, 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.
The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker
banking crisis, Big bang: deregulation of the City of London, Bob Geldof, Boris Johnson, 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, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labour market flexibility, market bubble, mass immigration, millennium bug, moral panic, North Sea oil, Northern Rock, offshore financial centre, pension reform, plutocrats, Plutocrats, Ponzi scheme, profit maximization, purchasing power parity, Right to Buy, 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.
The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna, Michael J. Casey
Airbnb, altcoin, bank run, banking crisis, bitcoin, blockchain, Bretton Woods, buy and hold, 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, ethereum blockchain, fiat currency, financial innovation, Firefox, Flash crash, Fractional reserve banking, hacker house, Hernando de Soto, high net worth, informal economy, intangible asset, Internet of things, inventory management, Joi Ito, Julian Assange, Kickstarter, Kuwabatake Sanjuro: assassination market, litecoin, Long Term Capital Management, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, money: store of value / unit of account / medium of exchange, Nelson Mandela, Network effects, new economy, new new economy, Nixon shock, offshore financial centre, payday loans, Pearl River Delta, peer-to-peer, peer-to-peer lending, pets.com, Ponzi scheme, prediction markets, price stability, profit motive, QR code, RAND corporation, regulatory arbitrage, rent-seeking, reserve currency, Robert Shiller, Robert Shiller, Ross Ulbricht, 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, uber lyft, underbanked, WikiLeaks, Y Combinator, Y2K, zero-sum game, 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.
Oil: Money, Politics, and Power in the 21st Century by Tom Bower
addicted to oil, 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, MITM: man-in-the-middle, Nelson Mandela, 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, zero-sum game, 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.
How an Economy Grows and Why It Crashes by Peter D. Schiff, Andrew J. Schiff
Limiting what could be charged for a product without doing anything to control the decreasing value of money simply meant that manufacturers and retailers couldn’t make a profit. As a result, they stopped selling and a black market of illegally high-priced merchandise arose. Sensing the trouble with Fish Reserve Notes, some citizens tried to protect the value of their remaining savings by depositing fish in an offshore bank, where their savings would be protected from senatorial slicing and dicing. But when the senators noticed this trend, they made it illegal to move savings off the island. The fear of shrinking fish became so prevalent that no deposits were left in the bank for long. Every fish caught was immediately sliced up and consumed. As had been the case before their economy grew, there were once again no savings, no credit, and no investment.
The Wisdom of Crowds by James Surowiecki
AltaVista, Andrei Shleifer, asset allocation, Cass Sunstein, coronavirus, 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, John Meriwether, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, Monkeys Reject Unequal Pay, moral hazard, Myron Scholes, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, 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, zero-sum game
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.
The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan
1960s counterculture, affirmative action, business cycle, corporate governance, corporate raider, creative destruction, David Brooks, deindustrialization, East Village, fixed income, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, mandatory minimum, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, old-boy network, plutocrats, Plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, Robert Bork, rolodex, Ronald Reagan, shareholder value, Shoshana Zuboff, 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, zero-sum game
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?
China into Africa: trade, aid, and influence by Robert I. Rotberg
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, land reform, megacity, microcredit, offshore financial centre, one-China policy, out of africa, Pearl River Delta, profit maximization, purchasing power parity, RAND corporation, Scramble for Africa, South China Sea, special economic zone, structural adjustment programs, trade route, Washington Consensus, zero-sum game
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.
Currency Wars: The Making of the Next Gobal Crisis by James Rickards
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, buy and hold, 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, John Meriwether, Kenneth Rogoff, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, 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, zero-sum game
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.
Rendezvous With Oblivion: Reports From a Sinking Society by Thomas Frank
Affordable Care Act / Obamacare, Bernie Sanders, big-box store, business climate, business cycle, call centre, crowdsourcing, David Brooks, deindustrialization, deskilling, Donald Trump, edge city, Frank Gehry, high net worth, income inequality, Jane Jacobs, Jeff Bezos, McMansion, new economy, New Urbanism, obamacare, offshore financial centre, plutocrats, Plutocrats, Ponzi scheme, profit maximization, Ralph Nader, Richard Florida, Ronald Reagan, Silicon Valley, single-payer health, The Death and Life of Great American Cities, too big to fail, urban planning, Washington Consensus, Works Progress Administration
Enrollment management consultants know the answer, just as they know what discounts to offer in order to maximize the institution’s revenue and boost its all-important rankings. Consider the sweetheart deals that are so commonplace between university administrations and the businessmen who happen to sit on the university’s board of directors. Consider universities’ real estate operations, which are often thuggish and nearly always tax-free. Consider their army of Washington lobbyists, angling for earmarks and fighting accountability measures. Consider their offshore financial holdings. Or their sleazy arrangements with tobacco companies and Big Pharma and high-tech start-ups. And last, consider the many universities that have raised their tuition to extravagant levels for no reason at all except to take advantage of the quaint American folk belief that price tags indicate quality. From this faith in price correctness the nation apparently cannot be moved—there is simply no amount of exposure or reporting that will do it—and so the university inevitably becomes a luxury good, like a big Armani label you get to wear through life that costs a fortune but that holds little intrinsic worth at all.
Broke: How to Survive the Middle Class Crisis by David Boyle
anti-communist, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, call centre, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, delayed gratification, Desert Island Discs, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial deregulation, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, housing crisis, income inequality, Jane Jacobs, job satisfaction, Kickstarter, knowledge economy, knowledge worker, market fundamentalism, Martin Wolf, mega-rich, mortgage debt, Neil Kinnock, Nelson Mandela, new economy, Nick Leeson, North Sea oil, Northern Rock, Occupy movement, off grid, offshore financial centre, pension reform, pensions crisis, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, positional goods, precariat, quantitative easing, school choice, Slavoj Žižek, social intelligence, too big to fail, trickle-down economics, Vanguard fund, Walter Mischel, wealth creators, Winter of Discontent, working poor
The real stuff of Big Bang, the electronic trading screens, in the form of SEAC (Stock Exchange Automated Quotations), was agreed that July. Barclays led the field, testing the new terminals out in the public, installing five of them in branches in London’s Piccadilly, Edinburgh, Cambridge, Eastbourne and St Helier in Jersey. It was another sign of the times: Jersey was rapidly emerging as the nearly respectable end of offshore banking. The old guard remained unhappy. One broker complained that their new owners ‘treat us like dirt’. The problem was that the merchant banks which had flooded into broking and jobbing were unfamiliar with the culture they had bought, sometimes even reluctant to be there. Brian Winterflood, leading the old Bisgood Bishop team at County NatWest, was particularly frustrated. He describes his life then as ‘hell’.
The middle classes are good at making institutions, but they have had it all done for them in recent decades. Not any more. 5. Shun the tax avoiders and semi-monopolies It is impossible to imagine a widespread, comfortable middle class if it takes on the task of paying for the infrastructure we all depend on with its taxes, while the corporate world and the global elite does not. The middle classes need to use their political muscle to close the tax havens, but also to use their economic muscle against the growing power of monopoly. There is no doubt that a Big Ten supermarkets would be more competitive, better for the economy, would spread wealth and encourage suppliers, better than our Big Four. The huge privileges we give the biggest retailers — three months to pay their bills, providing them with a rolling interest-free loan big enough to demolish any smaller competitor — are not compatible with a stable economy and a healthy middle class.
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
4chan, Affordable Care Act / Obamacare, Airbnb, Bernie Sanders, Burning Man, call centre, Cass Sunstein, Chelsea Manning, collective bargaining, creative destruction, crony capitalism, crowdsourcing, don't be evil, facts on the ground, Firefox, hive mind, immigration reform, informal economy, jimmy wales, Julian Assange, Kickstarter, liquidity trap, Mark Zuckerberg, obamacare, Occupy movement, offshore financial centre, peer-to-peer, 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. THE TEA PARTY ENTERS THE FRAY DAVID SEGAL 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
"Robert Solow", anti-communist, Bartolomé de las Casas, Berlin Wall, Bolshevik threat, Bretton Woods, British Empire, business cycle, 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, long peace, mass incarceration, 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.
The Retreat of Western Liberalism by Edward Luce
"Robert Solow", 3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, carried interest, centre right, Charles Lindbergh, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global pandemic, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, lateral thinking, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, plutocrats, Plutocrats, precariat, purchasing power parity, reserve currency, reshoring, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, telepresence, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra
But as Milanovic shows, that would be dramatically to understate the bonanza the global 1 per cent – who are still mostly to be found in the West – have reaped since the start of the Great Convergence. The top 1 per cent’s share of the global economy is 15.7 per cent. But if you measure their net wealth, and provide reasonable estimates of what they have salted away in hidden corners, such as the offshore financial havens of the Caribbean and elsewhere, their share jumps to almost a third of global wealth. The nearer the snout you get, the sharper the growth. The world’s wealthiest subset – the 1426 richest individuals on the planet – are worth $5.4 trillion, which is roughly twice the size of the entire British economy and more than the combined assets of the 250 million least wealthy Americans. The asset value of the world’s leading billionaires has risen fivefold since 1988.
Philanthrocapitalism by Matthew Bishop, Michael Green, Bill Clinton
Albert Einstein, anti-communist, barriers to entry, battle of ideas, Bernie Madoff, Bob Geldof, Bonfire of the Vanities, business process, business process outsourcing, Charles Lindbergh, clean water, cleantech, corporate governance, corporate social responsibility, Dava Sobel, David Ricardo: comparative advantage, don't be evil, family office, financial innovation, full employment, global pandemic, global village, God and Mammon, Hernando de Soto, high net worth, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Dyson, John Harrison: Longitude, joint-stock company, knowledge economy, knowledge worker, Live Aid, lone genius, Marc Andreessen, market bubble, mass affluent, microcredit, Mikhail Gorbachev, Nelson Mandela, new economy, offshore financial centre, old-boy network, peer-to-peer lending, performance metric, Peter Singer: altruism, plutocrats, Plutocrats, profit maximization, profit motive, Richard Feynman, risk tolerance, risk-adjusted returns, Ronald Coase, Ronald Reagan, shareholder value, Silicon Valley, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade liberalization, transaction costs, trickle-down economics, wealth creators, winner-take-all economy, working poor, World Values Survey, X Prize
It is also tougher to be an uncorrupt leader in Africa than elsewhere, Ibrahim argues: once you’re out of power there are no multimillion-dollar deals for your memoirs, no $100,000-a-speech lecture tours, and no one offering you nonexecutive directorships. Of course, even the largest prize in the world is not really going to do much to incentivize leaders who face the more immediate daily pressures of political survival. Five million dollars would be pocket change for the leader of an oil- or diamond-rich country who could potentially channel billions of dollars into a secure offshore bank account. Yet the prize has a more subversive purpose: to build a public debate within Africa about leadership and how to improve it. The first winner of the Mo Ibrahim Prize for Leadership, awarded in October 2007, was Joaquim Chissano, former president of Mozambique. The judges, chaired by the Ghanaian former U.N. secretary general Kofi Annan, did not simply announce the result; they explained in detail how they had reached their conclusion.
According to an interview in the Independent in 2006, after he sold his business for £252 million, his accountant advised him to shelter from the British taxman by moving to Monaco. When his wife, Marion, refused to leave their Scottish homeland, the accountant suggested philanthropy as the next most tax-efficient option, and so the Hunter Foundation was born. (Ironically, since then, Monaco and other “tax havens” such as Luxembourg have started to promote themselves as centers of philanthropy.) After that decision he found more positive reasons for philanthropy and has pledged to give away at least £1 billion over his lifetime. He says he is sticking to this goal despite being wiped out by the financial crisis. “Most philanthropy is tax-motivated,” argues William Zabel, an American tax lawyer and writer on related matters.
The Road to Unfreedom: Russia, Europe, America by Timothy Snyder
active measures, affirmative action, Affordable Care Act / Obamacare, American ideology, anti-globalists, Bernie Sanders, centre right, Charles Lindbergh, crony capitalism, Dissolution of the Soviet Union, Donald Trump, hiring and firing, income inequality, John Markoff, means of production, Mikhail Gorbachev, New Journalism, obamacare, offshore financial centre, Robert Mercer, sexual politics, Transnistria, WikiLeaks, women in the workforce, zero-sum game
Americans reacted in these ways when Russia’s candidate became president of the United States. In the 1990s and in the 2000s, influence flowed from west to east, in the transplant of economic and political models, the spread of the English language, and the enlargement of the European Union and the North Atlantic Treaty Organization (NATO). Meanwhile, unregulated spaces of American and European capitalism summoned wealthy Russians into a realm without an east-west geography, that of offshore bank accounts, shell companies, and anonymous deals, where wealth stolen from the Russian people was laundered clean. Partly for this reason, in the 2010s influence flowed from east to west, as the offshore exception became the rule, as Russian political fiction penetrated beyond Russia. In The Peloponnesian Wars, Thucydides defined “oligarchy” as rule by the few, and opposed it to “democracy.” For Aristotle “oligarchy” meant rule by the wealthy few; the word in this sense was revived in the Russian language in the 1990s, and then, with good reason, in English in the 2010s.
In the 2010s, some of the best of them, in revealing projects such as the Panama Papers and the Paradise Papers, showed how unregulated international capitalism was creating sinkholes for national wealth. Tyrants first hide and launder their money, then use it to enforce authoritarianism at home—or export it abroad. Money gravitates towards where it cannot be seen, which in the 2010s was in various offshore tax havens. This was a global problem: estimates of just how much money was parked offshore, beyond the reach of national tax authorities, ranged from $7 trillion to $21 trillion. The United States was an especially permissive environment for Russians who wished to steal and then launder money. Much of the Russian national wealth that was supposed to be building the Russian state in the 2000s and 2010s found its way to shell corporations in offshore havens.
Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe by Greg Ip
Affordable Care Act / Obamacare, Air France Flight 447, air freight, airport security, Asian financial crisis, asset-backed security, bank run, banking crisis, break the buck, Bretton Woods, business cycle, 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, lateral thinking, London Whale, Long Term Capital Management, market bubble, money market fund, moral hazard, Myron Scholes, Network effects, new economy, offshore financial centre, paradox of thrift, pets.com, Ponzi scheme, quantitative easing, Ralph Nader, Richard Thaler, risk tolerance, Ronald Reagan, Sam Peltzman, savings glut, technology bubble, The Great Moderation, too big to fail, transaction costs, union organizing, Unsafe at Any Speed, value at risk, William Langewiesche, zero-sum game
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.
Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky
"Robert Solow", bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, 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, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, 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 inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game
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.
China's Disruptors: How Alibaba, Xiaomi, Tencent, and Other Companies Are Changing the Rules of Business by Edward Tse
3D printing, Airbnb, Airbus A320, Asian financial crisis, barriers to entry, bilateral investment treaty, business process, capital controls, commoditize, conceptual framework, corporate governance, creative destruction, crowdsourcing, currency manipulation / currency intervention, David Graeber, Deng Xiaoping, disruptive innovation, experimental economics, global supply chain, global value chain, high net worth, industrial robot, Joseph Schumpeter, Lyft, money market fund, offshore financial centre, Pearl River Delta, reshoring, rising living standards, risk tolerance, Silicon Valley, Skype, Snapchat, sovereign wealth fund, special economic zone, speech recognition, Steve Jobs, thinkpad, trade route, wealth creators, working-age population
Official China could ultimately pick sides in these competitions, and thereby greatly increase the fortunes of the favored. To bypass rules banning foreign investment in China’s Internet, every one of China’s Internet companies which has listed overseas—including Alibaba, Tencent, and Baidu—has done so through a legal structure known as a variable-interest entity. These are companies, registered in offshore financial centers such as the Cayman Islands, with contracts to receive the profits of the Chinese companies, not ownership of their actual China-based assets. So far, despite existing in a regulatory gray area, these vehicles have withstood legal scrutiny. That could change, especially if the government decided it wanted to exercise greater control over a sector that has long had the habit of operating in areas beyond official oversight.
Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, Automated Insights, barriers to entry, Berlin Wall, business cycle, Cass Sunstein, citizen journalism, cloud computing, collaborative consumption, collective bargaining, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, Double Irish / Dutch Sandwich, Erik Brynjolfsson, failed state, Filter Bubble, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, offshore financial centre, patent troll, Peter Thiel, plutocrats, Plutocrats, post scarcity, price mechanism, profit maximization, profit motive, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, Telecommunications Act of 1996, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism
Because to do justice to the matter would require more space than I can justify in this chapter, I leave aside the issue of the Internet sales tax moratorium, whereby e-commerce businesses do not pay state sales taxes on deals with out-of-state customers. It costs state governments, conservatively, $12 billion annually in lost revenues. See Declan McCullagh, “Politicians, Retailers Push for New Internet Sales Taxes,” CNET, Apr. 17, 2012; and Deborah Swann, “Weekly Round-up: Another State Strikes a Deal with Amazon,” BNA.com, June 1, 2012. 95. Nicholas Shaxson, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens (New York: Palgrave Macmillan, 2011), 14–15. 96. See Charles Duhigg and David Kocieniewski, “How Apple Sidesteps Billions in Taxes,” New York Times, Apr. 29, 2012, A1, A20, A21. 97. Ibid. 98. Meinrath, Losey, and Pickard, “Digital Feudalism,” 426. 99. Robert W. McChesney, Rich Media, Poor Democracy: Communication Politics in Dubious Times (New York: The New Press, 2000), 237. 100.
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
accounting loophole / creative accounting, affirmative action, Andrei Shleifer, business climate, cognitive dissonance, corporate governance, corporate raider, Donald Trump, fear of failure, financial deregulation, friendly fire, George Akerlof, hiring and firing, margin call, market bubble, money market fund, 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.
Getting a Job in Hedge Funds: An Inside Look at How Funds Hire by Adam Zoia, Aaron Finkel
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, stocks for the long run, 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.
Connectography: Mapping the Future of Global Civilization by Parag Khanna
"Robert Solow", 1919 Motor Transport Corps convoy, 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 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, commoditize, complexity theory, continuation of politics by other means, 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, digital map, disruptive innovation, diversification, Doha Development Round, edge city, Edward Snowden, Elon Musk, energy security, Ethereum, ethereum blockchain, European colonialism, eurozone crisis, failed state, Fall of the Berlin Wall, family office, Ferguson, Missouri, financial innovation, financial repression, fixed income, 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 cluster, industrial robot, informal economy, Infrastructure as a Service, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, Jane Jacobs, Jaron Lanier, John von Neumann, Julian Assange, Just-in-time delivery, Kevin Kelly, Khyber Pass, Kibera, Kickstarter, LNG terminal, low cost airline, low cost carrier, low earth orbit, manufacturing employment, mass affluent, mass immigration, megacity, Mercator projection, Metcalfe’s law, microcredit, mittelstand, Monroe Doctrine, mutually assured destruction, New Economic Geography, new economy, New Urbanism, off grid, offshore financial centre, oil rush, oil shale / tar sands, oil shock, openstreetmap, out of africa, Panamax, Parag Khanna, Peace of Westphalia, peak oil, Pearl River Delta, Peter Thiel, Philip Mirowski, 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, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, 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.
The Longing for Less by Kyle Chayka
Airbnb, Frank Gehry, Guggenheim Bilbao, Jony Ive, Kickstarter, Lao Tzu, Mason jar, offshore financial centre, Ralph Waldo Emerson, Richard Florida, Silicon Valley, Steve Jobs, Stewart Brand, technoutopianism, undersea cable, Whole Earth Catalog
Little of this feels true today. The percentage of workers who are freelance instead of salaried grows annually. Real estate prices are prohibitive in any place with a strong labor market. Economic inequality is worse than ever in the modern era. To make matters worse, the greatest wealth now comes from the accumulation of invisible capital, not physical stuff: start-up equity, stock shares, and offshore bank accounts opened to avoid taxes. As the French economist Thomas Piketty points out, these immaterial possessions grow in value much faster than salaries do. That is, if you’re lucky enough to have a salary in the first place. Crisis following crisis; flexibility and mobility now feel safer than being static, another reason that owning less looks more and more attractive. Most of all, the minimalist attitude speaks to the sense that all aspects of life have become relentlessly commodified.
Great Britain by David Else, Fionn Davenport
active transport: walking or cycling, Albert Einstein, Beeching cuts, Boris Johnson, 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, Kickstarter, land reform, Livingstone, I presume, Mahatma Gandhi, mass immigration, mega-rich, negative equity, new economy, North Sea oil, Northern Rock, offshore financial centre, period drama, place-making, Skype, Sloane Ranger, South of Market, San Francisco, Stephen Hawking, the market place, trade route, 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).
The Long Twentieth Century: Money, Power, and the Origins of Our Times by Giovanni Arrighi
anti-communist, Asian financial crisis, barriers to entry, Bretton Woods, British Empire, business climate, business process, colonial rule, commoditize, Corn Laws, creative destruction, cuban missile crisis, David Ricardo: comparative advantage, declining real wages, deindustrialization, double entry bookkeeping, European colonialism, financial independence, financial intermediation, floating exchange rates, income inequality, informal economy, invisible hand, joint-stock company, Joseph Schumpeter, late capitalism, London Interbank Offered Rate, means of production, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, oil shock, Peace of Westphalia, profit maximization, Project for a New American Century, RAND corporation, reserve currency, spice trade, the market place, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, trade route, transaction costs, transatlantic slave trade, transcontinental railway, upwardly mobile, Yom Kippur War
Communist dollar balances were very small and Eurocurrency markets would never have become a dominant factor in world finance were it not for the massive migration of US corporate capital to Europe in the late 1950s and early 1960s. Large US multinationals were among the most important depositors in the New York money market. It was only natural, therefore, that the largest among New York’s banks would promptly enter the Eurodollar market, not just to take advantage of the lower costs and greater freedom of action afforded by offshore banking, but also to avoid major losses in deposits. And so they did, controlling a 50 per cent share of the Eurodollar business by 1961 (de Cecco 1982: 1 1). An organizational structure thus developed which for all practical purposes was beyond the control of the system of central banks that regulated the supply of world money in accordance with the regime of fixed exchange rates established at Bretton Woods.
.&”’ if” Ol1L11L1J1JL1L1L11111411l 1950 1955 1960 1965 1970 Year Source: Wa|ter(l99l: 167, 182). 4.2 US Gold Reserves and Short-term Liabilities, 1950-72 312 THE LONG TWENTIETH CENTURY putting restrictions on US foreign lending and investment. Total US liabilities to “foreigners” — a non-negligible but unknown share of which no doubt consisted of dollar balances held by US corporations in foreign and offshore banks — was already beginning to exceed US gold reserves in the late 1950s. But around 1963, as figure 4.2 Sl‘1OWS, US gold reserves began falling short even of what was due to foreign monetary authorities and governments — a more serious matter because it impinged directly on intergovernmental power relations. The Kennedy administration’s attempt to deal with the problem through a tighter regulation of US overseas private lending and investment backfired.
Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski
"Robert Solow", Alvin Roth, 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, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, do-ocracy, 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, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, 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, Vilfredo Pareto, 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.
Financial Market Meltdown: Everything You Need to Know to Understand and Survive the Global Credit Crisis by Kevin Mellyn
asset-backed security, bank run, banking crisis, Bernie Madoff, bonus culture, Bretton Woods, business cycle, 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, George Santayana, global reserve currency, Home mortgage interest deduction, Isaac Newton, joint-stock company, Kickstarter, liquidity trap, London Interbank Offered Rate, long peace, margin call, market clearing, mass immigration, money market fund, 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 new new thing, 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.
Spam Nation: The Inside Story of Organized Cybercrime-From Global Epidemic to Your Front Door by Brian Krebs
barriers to entry, bitcoin, Brian Krebs, cashless society, defense in depth, Donald Trump, employer provided health coverage, John Markoff, 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.
Thieves of State: Why Corruption Threatens Global Security by Sarah Chayes
Celtic Tiger, colonial rule, crony capitalism, drone strike, failed state, income inequality, microcredit, offshore financial centre, plutocrats, Plutocrats, structural adjustment programs, trade route, ultimatum game, WikiLeaks, winner-take-all economy, young professional
In patronage systems, as in healthy modern governments (p. 212), resources are drawn from the population to the center, but then are largely distributed back downward within the system, in the form of patronage, or else infrastructure, public services, decent salaries for public officials, and so on. In today’s Afghanistan, the money is moving upward within the system and is largely sent outside Afghanistan altogether. (“Dubai” is a placeholder for offshore financial havens.) The revenue streams captured are listed on the top left. In return, the government provides free rein (“permission” ) to extract resources, protection from repercussion, and punishment of officials with too much integrity. The bounceback arrow on the top right represents the contractors’ profits and other overhead spending that never reaches Afghanistan at all. (“USA” is a placeholder for the international community.)
Stigum's Money Market, 4E by Marcia Stigum, Anthony Crescenzi
accounting loophole / creative accounting, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Black-Scholes formula, Brownian motion, business climate, buy and hold, capital controls, central bank independence, centralized clearinghouse, corporate governance, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, disintermediation, distributed generation, diversification, diversified portfolio, financial innovation, financial intermediation, fixed income, full employment, high net worth, implied volatility, income per capita, intangible asset, interest rate derivative, interest rate swap, large denomination, locking in a profit, London Interbank Offered Rate, margin call, market bubble, market clearing, market fundamentalism, money market fund, mortgage debt, Myron Scholes, offshore financial centre, paper trading, pension reform, Ponzi scheme, price mechanism, price stability, profit motive, Real Time Gross Settlement, reserve currency, risk tolerance, risk/return, seigniorage, shareholder value, short selling, technology bubble, the payments system, too big to fail, transaction costs, two-sided market, value at risk, volatility smile, yield curve, zero-coupon bond, zero-sum game
FIGURE 20.4 In 2003–2004, offshore deposits surged and were invested with a lag in Japanese foreign exchange reserves, securities holdings, and offshore bank deposits (in billions of U.S. dollars) Discovery Process There have been times when rapid accumulations of dollars did not translate immediately into concomitant increases in holdings of domestic assets. One glaring example is the rapid accumulation of dollar reserves that Japan saw from 2003 to 2004. During this period, Japan was intervening heavily in the foreign exchange market, buying dollars in exchange for yen, in an effort to protect its export sector from the negative effects of the weakening of the value of the U.S. dollar. Initially, the intervention caused a spike in offshore bank deposits, but the funds were eventually withdrawn to purchase securities (Figure 20.4). When countries face rapid influxes of dollars, for a variety of reasons they may delay investing those assets.
U.S. sovereign risk won’t attract rogue depositors, but it should attract institutions that are loath to place funds in the shell branches that major U.S. banks have opened in the Caribbean banking centers and other tax havens because they don’t like the sovereign risk that they perceive attaches to deposits there. The origin of IBFs goes back to the days when New York City was tottering on the brink of bankruptcy. At the time, the state and the city zeroed in on the banks as the culprits. The city’s problems were the banks’ fault because the banks kept selling the city’s debt whereas they should have told the city it was bankrupt. To add injury to insult, the city and the state raised their tax rates on bank income earned within New York State, and the city topped off its tax hike with a tax surcharge. The imposition of punitive state and city taxes gave New York banks a tremendous incentive to book international business in offshore tax havens, aka shells, primarily Nassau and Grand Cayman, which are located in a time zone that permits New York banks to deal on the shell’s behalf during normal business hours.
Securities and Exchange Commission (SEC): Agency created by Congress to protect investors in securities transactions by administering securities legislation. sell a spread: Sell a nearby futures contract and buy a far one. serial bonds: A bond issue in which maturities are staggered over a number of years. settle: See clear. settlement date: The date on which a trade is cleared by delivery of securities against funds. The settlement date may be the trade date or a later date. shell branch: A foreign branch—usually in a tax haven—which engages in Eurodollar business but is run out of a head office. shop: In Street jargon, a money market or bond dealership. shopping: Seeking to obtain the best bid or offer available by calling a number of dealers and/or brokers. short: A market participant assumes a short position by selling a security he does not own. The seller makes delivery by borrowing the security sold or reversing it in.
Kingpin: How One Hacker Took Over the Billion-Dollar Cybercrime Underground by Kevin Poulsen
Apple II, Brian Krebs, Burning Man, corporate governance, dumpster diving, Exxon Valdez, Hacker Ethic, hive mind, index card, Kickstarter, 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.
Shortchanged: Life and Debt in the Fringe Economy by Howard Karger
big-box store, blue-collar work, corporate social responsibility, credit crunch, delayed gratification, financial deregulation, fixed income, illegal immigration, labor-force participation, late fees, London Interbank Offered Rate, low skilled workers, microcredit, mortgage debt, negative equity, 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.
Red Flags: Why Xi's China Is in Jeopardy by George Magnus
3D printing, 9 dash line, Admiral Zheng, Asian financial crisis, autonomous vehicles, balance sheet recession, banking crisis, Bretton Woods, BRICs, British Empire, business process, capital controls, carbon footprint, Carmen Reinhart, cloud computing, colonial exploitation, corporate governance, crony capitalism, currency manipulation / currency intervention, currency peg, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, financial deregulation, financial innovation, financial repression, fixed income, floating exchange rates, full employment, Gini coefficient, global reserve currency, high net worth, hiring and firing, Hyman Minsky, income inequality, industrial robot, Internet of things, invention of movable type, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, labour mobility, land reform, Malacca Straits, means of production, megacity, money market fund, moral hazard, non-tariff barriers, Northern Rock, offshore financial centre, old age dependency ratio, open economy, peer-to-peer lending, pension reform, price mechanism, purchasing power parity, regulatory arbitrage, rent-seeking, reserve currency, rising living standards, risk tolerance, smart cities, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, speech recognition, The Wealth of Nations by Adam Smith, total factor productivity, trade route, urban planning, Washington Consensus, women in the workforce, working-age population, zero-sum game
For the time being, the bulk of investment that China does abroad (excluding Hong Kong) is with countries that aren’t or will never be part of the BRI. The only major destinations for investment in the BRI neighbourhood are Russia, Indonesia and Kazakhstan. The other major destinations for Chinese investment abroad comprise OECD countries with large markets and sophisticated technologies, such as the US, Singapore, Australia, the Netherlands, the UK, Canada and also offshore financial centres in the Caribbean, used as financial and fiscal conduits. These aside, much Chinese direct investment abroad has been undertaken in search of raw materials and energy, in countries such as Venezuela, Angola and the Democratic Republic of Congo. As of the start of 2016, BRI countries accounted for 17 per cent of the stock of Chinese investment, and in 2016, China announced that 8.5 per cent of direct investment that year had gone to these states.9 Similarly, the lending abroad by China’s policy banks is overwhelmingly to non-BRI countries.
Rise of the Machines: A Cybernetic History by Thomas Rid
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, Charles Lindbergh, Claude Shannon: information theory, conceptual framework, connected car, domain-specific language, Douglas Engelbart, Douglas Engelbart, dumpster diving, Extropian, full employment, game design, global village, Haight Ashbury, Howard Rheingold, Jaron Lanier, job automation, John Markoff, John von Neumann, Kevin Kelly, Kubernetes, Marshall McLuhan, Menlo Park, Mitch Kapor, 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, The Hackers Conference, 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.
The Rise of the Network Society by Manuel Castells
"Robert Solow", Apple II, Asian financial crisis, barriers to entry, Big bang: deregulation of the City of London, Bob Noyce, borderless world, British Empire, business cycle, capital controls, complexity theory, computer age, computerized trading, creative destruction, Credit Default Swap, declining real wages, deindustrialization, delayed gratification, dematerialisation, deskilling, disintermediation, double helix, Douglas Engelbart, Douglas Engelbart, edge city, experimental subject, financial deregulation, financial independence, floating exchange rates, future of work, global village, Gunnar Myrdal, Hacker Ethic, hiring and firing, Howard Rheingold, illegal immigration, income inequality, Induced demand, 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, John Markoff, knowledge economy, knowledge worker, labor-force participation, laissez-faire capitalism, Leonard Kleinrock, longitudinal study, low skilled workers, manufacturing employment, Marc Andreessen, Marshall McLuhan, means of production, megacity, Menlo Park, moral panic, new economy, New Urbanism, offshore financial centre, oil shock, open economy, packet switching, Pearl River Delta, peer-to-peer, planetary scale, popular capitalism, popular electronics, post-industrial society, postindustrial economy, prediction markets, Productivity paradox, profit maximization, purchasing power parity, RAND corporation, Robert Gordon, Robert Metcalfe, Shoshana Zuboff, 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 new new thing, 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, zero-sum game
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.
Zeitgeist by Bruce Sterling
anti-communist, Ayatollah Khomeini, Berlin Wall, Frank Gehry, Grace Hopper, informal economy, invisible hand, Iridium satellite, jitney, market bubble, Maui Hawaii, new economy, offshore financial centre, rolodex, sexual politics, shareholder value, Silicon Valley, Ted Kaczynski, the scientific method, undersea cable, upwardly mobile, urban decay, Y2K
With twenty thousand dollars U.S. in it.” Wiesel and his Princess exchanged significant glances. “But there isn’t.” Starlitz reached into his lime-green waistcoat pocket, and came out with a gold plastic rectangle. “Because cash is yesterday. Customs people are very down on cash now. So instead I brought you this handy Visa card. It’s made out in your favorite name. With a twenty-thousand-dollar line of credit from an offshore bank in Turkish Cyprus.” Wiesel reached out reflexively, then restrained himself. “How do I know that’s true?” “You can call their toll-free number, pal. It’s printed here on the back of the card. Cyprus is a Commonwealth country, so Cypriot bankers always speak great English. You can call the bank first thing, from the suite that I booked you at the Istanbul Pera Palace.” Wiesel grunted. “Christ.”
The Making of a World City: London 1991 to 2021 by Greg Clark
Basel III, Berlin Wall, Big bang: deregulation of the City of London, Boris Johnson, British Empire, business climate, business cycle, capital controls, carbon footprint, congestion charging, corporate governance, cross-subsidies, deindustrialization, Dissolution of the Soviet Union, East Village, Fall of the Berlin Wall, financial innovation, financial intermediation, global value chain, haute cuisine, housing crisis, industrial cluster, intangible asset, Kickstarter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, Masdar, mass immigration, megacity, New Urbanism, offshore financial centre, Pearl River Delta, place-making, rent control, Robert Gordon, Silicon Valley, smart cities, sovereign wealth fund, trickle-down economics, urban planning, urban renewal, working poor
The City’s traditional markets – bills, gilts and sterling – were joined by other, nonsterling denominations, particularly dollar markets that had become the currency of choice for international transactions (Hamnett, 2003). This boosted a sector that already possessed a number of important strengths: a large pool of British-based multinationals, established roles in shipping and insurance, and an enduring reputation for expertise and dependability (Budd and Whimster, 1992). London therefore began to function as a proficient offshore banking centre for dollar deposits. From 1974, antagonism against the new Labour government generated unprecedented discontent and distrust within the City about the capacity of government policy to create prosperity or financial stability. Specialist government bodies such as the Monopolies Commission and the Restrictive Practices Court began to cooperate with the Bank of England to overcome anti-competitive practices in banks and charges at the Stock Exchange that had mostly been in place since the war (Michie, 2004: 49–51).
Networks of Outrage and Hope: Social Movements in the Internet Age by Manuel Castells
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, zero-sum game
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.
Heartland: A Memoir of Working Hard and Being Broke in the Richest Country on Earth by Sarah Smarsh
call centre, financial independence, housing crisis, income inequality, invisible hand, late fees, Mason jar, mortgage debt, mortgage tax deduction, offshore financial centre, Pepto Bismol, profit motive, Ronald Reagan, trickle-down economics, women in the workforce, working poor
The difference was that we stood to pay more for our errors than did wealthier Americans who made the same mistakes. If you work every day and still can’t afford what you need, is it worse to steal a little from a big store owned by billionaires than to be a billionaire who underpays his employees? Is it worse to do business under the table with a couple hundred bucks than to keep millions of dollars in an offshore bank? Is a poor alcoholic worse than a rich one? Is a poor gambler worse than a rich one? Is a poor teenager who gets knocked up more irresponsible than a rich one? On that last point, as a young girl I gleaned from cultural attitudes that the answer was yes. While it was locally accepted, to some extent, broader society hated the idea of a girl like me getting pregnant. Maybe it was because of the financial repercussions of having a child.
Winners Take All: The Elite Charade of Changing the World by Anand Giridharadas
"side hustle", activist lawyer, affirmative action, Airbnb, Bernie Sanders, bitcoin, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cognitive dissonance, collective bargaining, corporate raider, corporate social responsibility, crowdsourcing, David Brooks, David Heinemeier Hansson, deindustrialization, disintermediation, Donald Trump, Edward Snowden, Elon Musk, friendly fire, global pandemic, high net worth, hiring and firing, housing crisis, Hyperloop, income inequality, invisible hand, Jeff Bezos, Kibera, Kickstarter, land reform, Lyft, Marc Andreessen, Mark Zuckerberg, new economy, Occupy movement, offshore financial centre, Panopticon Jeremy Bentham, Parag Khanna, Paul Graham, Peter Thiel, plutocrats, Plutocrats, profit maximization, risk tolerance, rolodex, Ronald Reagan, shareholder value, sharing economy, side project, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steven Pinker, technoutopianism, The Chicago School, The Fortune at the Bottom of the Pyramid, the High Line, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, Travis Kalanick, trickle-down economics, Uber and Lyft, uber lyft, Upton Sinclair, Vilfredo Pareto, working poor, zero-sum game
“Any industry that still has unions has potential energy that could be released by start-ups,” the Silicon Valley venture capitalist Paul Graham once tweeted. As America’s level of inequality spread to ever more unmanageable levels, these MarketWorld winners might have helped out. Looking within their own communities would have told them what they needed to know. Doing everything to reduce their tax burdens, even when legal, stands in contradiction with their claims to do well by doing good. Diverting the public’s attention from an issue like offshore banking worsens the big problems, even as these MarketWorlders shower attention on niche causes. As life expectancy declined among large subpopulations of Americans, winners possessed of a sense of having arrived might have chipped in. They might have taken an interest in the details of a health care system that was allowing the unusual phenomenon of a developed country regressing in this way, or in the persistence of easily preventable deaths in the developing world.
Reinventing the Bazaar: A Natural History of Markets by John McMillan
"Robert Solow", accounting loophole / creative accounting, Albert Einstein, Alvin Roth, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, corporate raider, 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, information asymmetry, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, Kenneth Arrow, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, ought to be enough for anybody, 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.
The Orchid Thief: A True Story of Beauty and Obsession by Susan Orlean
— In 1967 Gulf American pleaded guilty to using “false, misleading, deceptive, and unfair practices” to sell its Florida land. The next year Leonard Rosen sold Gulf American to a Pennsylvania finance company called GAC Corporation; he and his brother each received stock in GAC worth $63 million. Leonard eventually started up another land company that marketed desert wasteland in Nevada to German investors. In 1977 he was indicted for tax fraud, and a grand jury investigated secret offshore bank accounts that he controlled; he pleaded no contest and received a $5,000 fine and three years’ probation. GAC had given the Rosens stock worth almost $ 115 million in exchange for Gulf American. GAC marketed the Gulf American property until 1975. By then GAC was $350 million in debt. The subsequent bankruptcy took thirteen years to settle and is considered the biggest and most complex reorganization in Florida’s corporate history, involving more than nine thousand creditors, twenty-seven thousand lot owners, and five hundred thousand acres of land.
American Pain: How a Young Felon and His Ring of Doctors Unleashed America’s Deadliest Drug Epidemic by John Temple
The investigator said he was looking to start an adult video store but was short on cash and maybe they could help each other out. Chris agreed to meet, more interested in picking the guy’s brain than really working with him. Chris met the investigator at the Moonlite Diner, a chrome 50s-style restaurant two miles east of the new clinic location. At the restaurant, the fast-talking investigator drank coffee and explained how it was done. He’d help Chris establish an account at an offshore bank, maybe in the Cayman Islands, and take the cash there. He’d done it before, he said. Once he’d walked into a bank on Grand Cayman with $7 million in Colombian drug cash, and no one blinked an eye. The going rate was six points, the PI said, but the price was negotiable. Chris was less worried about the rate than the idea of just handing over hundreds of thousands to someone. “I wouldn’t ever trust anyone to launder that kind of money,” Chris said.
Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street by William Poundstone
Albert Einstein, anti-communist, asset allocation, beat the dealer, Benoit Mandelbrot, Black-Scholes formula, Brownian motion, buy and hold, buy low sell high, capital asset pricing model, Claude Shannon: information theory, computer age, correlation coefficient, diversified portfolio, Edward Thorp, en.wikipedia.org, Eugene Fama: efficient market hypothesis, high net worth, index fund, interest rate swap, Isaac Newton, Johann Wolfgang von Goethe, John Meriwether, John von Neumann, Kenneth Arrow, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Myron Scholes, New Journalism, Norbert Wiener, offshore financial centre, Paul Samuelson, publish or perish, quantitative trading / quantitative ﬁnance, random walk, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Rubik’s Cube, 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, zero-sum game
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.
The Paypal Wars: Battles With Ebay, the Media, the Mafia, and the Rest of Planet Earth by Eric M. Jackson
bank run, business process, call centre, creative destruction, disintermediation, Elon Musk, index fund, Internet Archive, iterative process, Joseph Schumpeter, market design, Menlo Park, Metcalfe’s law, money market fund, moral hazard, Network effects, new economy, offshore financial centre, Peter Thiel, Robert Metcalfe, Sand Hill Road, shareholder value, Silicon Valley, Silicon Valley startup, telemarketer, The Chicago School, the new new thing, 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.
Merchant of Death: Money, Guns, Planes, and the Man Who Makes War Possible by Stephen Braun, Douglas Farah
air freight, airport security, anti-communist, Berlin Wall, blood diamonds, Donald Trump, en.wikipedia.org, failed state, Mikhail Gorbachev, Nelson Mandela, 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.
The New Digital Age: Transforming Nations, Businesses, and Our Lives by Eric Schmidt, Jared Cohen
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, drone strike, 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, John Markoff, Julian Assange, Khan Academy, Kickstarter, knowledge economy, Law of Accelerating Returns, market fundamentalism, means of production, MITM: man-in-the-middle, mobile money, mutually assured destruction, Naomi Klein, Nelson Mandela, offshore financial centre, Parag Khanna, peer-to-peer, peer-to-peer lending, personalized medicine, Peter Singer: altruism, Ray Kurzweil, RFID, Robert Bork, 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.
Invisible Women by Caroline Criado Perez
Affordable Care Act / Obamacare, augmented reality, Bernie Sanders, collective bargaining, crowdsourcing, Diane Coyle, Donald Trump, falling living standards, first-past-the-post, gender pay gap, gig economy, glass ceiling, Grace Hopper, Hacker Ethic, Indoor air pollution, informal economy, lifelogging, low skilled workers, mental accounting, meta analysis, meta-analysis, Nate Silver, new economy, obamacare, Oculus Rift, offshore financial centre, pattern recognition, phenotype, post-industrial society, randomized controlled trial, remote working, Silicon Valley, Simon Kuznets, speech recognition, stem cell, Stephen Hawking, Steven Levy, the built environment, urban planning, women in the workforce, zero-sum game
Nevertheless, such tax systems are sometimes ‘imposed as conditions on developing countries by international financial institutions’.34 In a parallel to UK tax giveaways that outpace its spending cuts, the IMF estimates that developing countries lose $212 billion per year from tax-avoidance schemes, which far outstrips the amount they receive in aid.35 Over a third of the world’s total unrecorded offshore financial wealth is thought to be secretly held in Switzerland, which recently faced questions from the UN ‘over the toll that its tax and financial secrecy policies take on women’s rights across the globe’.36 A 2016 analysis by the Center for Economic and Social Rights (CESR) found that the amount of money lost to tax dodging by multinational copper firms such as the Swiss-headquartered Glencore in Zambia, could finance 60% of the country’s health budget.
This Machine Kills Secrets: Julian Assange, the Cypherpunks, and Their Fight to Empower Whistleblowers by Andy Greenberg
Apple II, Ayatollah Khomeini, Berlin Wall, Bill Gates: Altair 8800, Burning Man, Chelsea Manning, computerized markets, crowdsourcing, cryptocurrency, domain-specific language, drone strike, en.wikipedia.org, fault tolerance, hive mind, Jacob Appelbaum, Julian Assange, Mahatma Gandhi, Mitch Kapor, MITM: man-in-the-middle, Mohammed Bouazizi, nuclear winter, offshore financial centre, pattern recognition, profit motive, Ralph Nader, Richard Stallman, Robert Hanssen: Double agent, Silicon Valley, Silicon Valley ideology, Skype, social graph, statistical model, stem cell, Steve Jobs, Steve Wozniak, Steven Levy, undersea cable, Vernor Vinge, We are Anonymous. We are Legion, We are the 99%, WikiLeaks, X Prize, Zimmermann PGP
It was on the set of Helgason’s talk show that Assange reintroduced a long-smoldering idea, a blend of his love of Neal Stephenson’s data haven novel Cryptonomicon, his recent work digging into the internals of the Cayman Islands holdings of the Swiss bank Julius Baer, and Barlow’s seed of an idea from his talk a year before. “You mentioned to me this idea that in Iceland we should become a vanguard of publishing freedom,” Helgason, a cheery round man with blond curls said to the pair of WikiLeakers in their on-camera interview. “Absolutely, absolutely,” Assange responded. “We see in the Caribbean Islands and the Cayman Islands that politicians create laws to enable offshore financial institutions to hide the assets of the developing and the developed world,” he said. Iceland could pull off the opposite trick, he argued: transforming itself into an island where nothing is hidden. He went on to list the world’s most liberal freedom-of-information and media laws from Sweden to Georgia. “Why not pull all this together, and become the center for publishing in the world?” Two days later, he and Domscheit-Berg spoke at the same Digital Freedom Society conference that Barlow had keynoted, fleshing out the idea with an even longer list of possible laws Iceland could cherry-pick and emulate.
Dark Towers: Deutsche Bank, Donald Trump, and an Epic Trail of Destruction by David Enrich
Affordable Care Act / Obamacare, anti-globalists, Asian financial crisis, banking crisis, Berlin Wall, buy low sell high, collateralized debt obligation, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Donald Trump, East Village, estate planning, Fall of the Berlin Wall, financial innovation, forensic accounting, high net worth, housing crisis, interest rate derivative, interest rate swap, Jeffrey Epstein, London Interbank Offered Rate, Lyft, Mikhail Gorbachev, NetJets, obamacare, offshore financial centre, post-materialism, Ralph Waldo Emerson, Renaissance Technologies, risk tolerance, Robert Mercer, rolodex, sovereign wealth fund, too big to fail, transcontinental railway, yield curve
It wouldn’t be until October 2014—after prodding from the Kremlin, which was trying to halt an exodus of cash from the country—that Deutsche’s headquarters would realize that there was a massive Russian money-laundering scheme operating out of its Moscow outpost, with a helping hand, perhaps unwitting, from the bank’s London and New York offices. A year after Hellenic Bank had first flagged the suspicious transactions, Deutsche alerted regulators in multiple countries to what it had uncovered. Government investigations were launched in the United States and Britain, and they eventually would find that Wiz’s wife had offshore bank accounts with what looked like millions of dollars she had received from Russians, at least some of which had originated with the bank’s mirror-trading clients and paid to her via DBTCA. (Wiz also sometimes received bags of cash.) Broeksmit’s concerns about DBTCA’s laxity were proving prescient. For the better part of a year, Anshu had been publicly insisting that Deutsche had more than enough capital to protect it in the event of another financial crash.
Financial Statement Analysis: A Practitioner's Guide by Martin S. Fridson, Fernando Alvarez
business cycle, corporate governance, credit crunch, discounted cash flows, diversification, Donald Trump, double entry bookkeeping, Elon Musk, fixed income, information trail, intangible asset, interest rate derivative, interest rate swap, negative equity, new economy, offshore financial centre, postindustrial economy, profit maximization, profit motive, Richard Thaler, shareholder value, speech recognition, statistical model, time value of money, transaction costs, Y2K, zero-coupon bond
“It's an investigator's dream.”20 Former SEC attorney Christopher Bebel added, “Scrushy's prospects look bleak.”21 Compounding Scrushy's legal problems, federal prosecutors disclosed in July 2003 that they had uncovered evidence of tax fraud, obstruction of justice, witness intimidation, money laundering, and public corruption. It also emerged that the Federal Bureau of Investigation was looking into the suicide of William Massey Jr., who managed an umbrella company for Scrushy's personal businesses. Two months before taking his own life, Massey made a hasty business trip to the Bahamas. The FBI suspected Scrushy of setting up offshore bank accounts as a tax dodge. On November 4, 2003, federal prosecutors charged Richard Scrushy with 85 charges related to a false accounting scheme, including conspiracy, securities fraud, mail and wire fraud, and money laundering. Perjury and obstruction of justice were added the following year, when a revised indictment consolidated the charges into a total of 58. The 2003 indictment made Scrushy the first CEO accused of violating the Sarbanes-Oxley Act because he had signed the financial statements.
Prosperity Without Growth: Foundations for the Economy of Tomorrow by Tim Jackson
"Robert Solow", bank run, banking crisis, banks create money, Basel III, basic income, bonus culture, Boris Johnson, business cycle, carbon footprint, Carmen Reinhart, Cass Sunstein, choice architecture, collapse of Lehman Brothers, creative destruction, credit crunch, Credit Default Swap, David Graeber, decarbonisation, dematerialisation, en.wikipedia.org, energy security, financial deregulation, Financial Instability Hypothesis, financial intermediation, full employment, Growth in a Time of Debt, Hans Rosling, Hyman Minsky, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet of things, invisible hand, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, liberal capitalism, Mahatma Gandhi, mass immigration, means of production, meta analysis, meta-analysis, moral hazard, mortgage debt, Naomi Klein, new economy, offshore financial centre, oil shale / tar sands, open economy, paradox of thrift, peak oil, peer-to-peer lending, Philip Mirowski, profit motive, purchasing power parity, quantitative easing, Richard Thaler, road to serfdom, Robert Gordon, Ronald Reagan, science of happiness, secular stagnation, short selling, Simon Kuznets, Skype, smart grid, sovereign wealth fund, Steve Jobs, The Chicago School, The Great Moderation, The Rise and Fall of American Growth, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, universal basic income, Works Progress Administration, World Values Survey, zero-sum game
How much we have is more important than what kind of person we are. And who we are today is infinitely more important than how our lives might be seen in retrospect. Yet there is something immediately recognisable in the idea that, ultimately, we can’t take it all with us. The story of our lives, as seen in the round, will not be a record of all the stuff we momentarily enjoyed and ultimately threw away. Nor even of the wealth we managed to accumulate in offshore bank accounts. Neither will it simply be a sum of momentary pleasures.10 Rather, the good life is something in which we must invest (to use an economic term) both at the personal and at the societal level. The consumer society may have raised instant gratification to the status of a social good. But the wisdom of ages has always recognised that deeper instincts drive the human psyche and occasionally draw out what might legitimately be called the best in us.
The Way of the Gun: A Bloody Journey Into the World of Firearms by Iain Overton
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, Ross Ulbricht, WikiLeaks, 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.
Democracy Incorporated by Sheldon S. Wolin
affirmative action, Berlin Wall, British Empire, centre right, coherent worldview, collective bargaining, colonial rule, corporate governance, creative destruction, cuban missile crisis, David Ricardo: comparative advantage, dematerialisation, Donald Trump, Fall of the Berlin Wall, full employment, illegal immigration, invisible hand, mass incarceration, money market fund, 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.
Merchants' War by Stross, Charles
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.
Power Hungry: The Myths of "Green" Energy and the Real Fuels of the Future by Robert Bryce
addicted to oil, Bernie Madoff, carbon footprint, Cesare Marchetti: Marchetti’s constant, cleantech, collateralized debt obligation, corporate raider, 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, Intergovernmental Panel on Climate Change (IPCC), 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, WikiLeaks
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.
Bottle of Lies: The Inside Story of the Generic Drug Boom by Katherine Eban
Affordable Care Act / Obamacare, Bernie Madoff, global pandemic, Mahatma Gandhi, Nelson Mandela, offshore financial centre, old-boy network, Ponzi scheme, rolodex, Ronald Reagan, Skype, Upton Sinclair, urban planning
The GIJN conferences opened the door to an international community of brave and talented journalists, who inspired and helped me throughout this project. I am indebted to Mark Lee Hunter of Story-Based Inquiry Associates for his advice on how to turn years of reporting and mountains of information into an actual story, at a moment when I felt stuck. At the International Consortium of Investigative Journalists (ICIJ), deputy director Marina Walker Guevara generously allowed access to the offshore banking records of the Panama and Paradise papers, while Emilia Diaz Struck patiently provided instructions on how to navigate within the records. At the Freedom of the Press Foundation, director of newsroom digital security Harlo Holmes and digital security trainer Olivia Martin offered valuable guidance on digital file encryption, risk assessment, and secure communication with sources. Throughout my reporting, I relied on a database called FDAzilla, which captures every inspection the FDA has performed around the world, and also provides important ancillary data.
Making Globalization Work by Joseph E. Stiglitz
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, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Jones Act, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, new economy, 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, zero-sum game
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.
Islands in the Net by Bruce Sterling
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.”
Frommer's Caribbean 2010 by Christina Paulette Colón, Alexis Lipsitz Flippin, Darwin Porter, Danforth Prince, John Marino
Amenities: Restaurant; self-service bar; complimentary transport; babysitting; nature trails; 2 tennis courts; fishing; kayaks; sailboats; snorkeling; water-skiing; windsurfing. In room: Ceiling fan, Wi-Fi, no phone. G UA N A I S L A N D 8 The Cayman Islands You are likely to find a lot of mil- lionaires r unning ar ound the Cayman Islands, a British Overseas Dependent Territory lying 773km (479 miles) due south of Miami. It’s an offshore banking mecca, and G rand Cayman is a hav en for some shady dough. For that r eason, and because vir tually everything has to be impor ted, the cost of living her e is about 20% higher than in the U nited S tates. The Cayman dollar is even more valuable than the U.S. dollar. Seven Mile Beach and several dive spots have put G rand Cayman on the tourist map. Ringed by glorious coral reefs, Grand Cayman is teeming with marine life and is a world-class diving destination.
The daily a verage is bet ween 77°F (25°C ) and 84°F (29°C ). G R A N D C AYM A N 9 2 G R A N D C AYM A N The largest of the thr ee islands and a r eal diving mecca, G rand Cayman sur vives and flourishes thanks to a unique blend of tourism, financial ser vices, low crime, conser vatism, and political stability . Home to the branch offices of mor e than 500 banks and dozens of insurance companies, its capital, G eorge Town, is the offshore banking center of the Caribbean. (No problems finding an ATM here!) Retirees are drawn to the peace and tranquillity of this B ritish C rown Colony, site of many large-scale r eal estate and condominium developments. The overwhelming majority of the Cayman Islands’ population liv es on G rand Cayman. The manners and pr esuppositions of the locals r eflect their British heritage. ESSENTIALS See “Getting There,” above.
It has fe wer nonstop flights fr om N orth America, fe wer luxur y hotels, and almost no nightlife to speak of. It also has a reputation as being a money-laundering hav en for dr ug traffickers and other suspicious businesses (despite adamant denials b y Nevis officials). The tiny island has some 9,000 offshor e businesses—about one business per inhabitant—r egistered and operating under strict secrecy laws. In fact, disagreements about controls over offshore banking activities trigger ed a rift betw een the two islands that almost led to N evis’s secession. I n the most r ecent r eferendum on the issue, in 1998, a majority of N evisians (but not the two-thir ds r equired) voted for independence from St. Kitts. • Brimstone Hill Fortress, S t. Kitts, which commands a vie w of six islands: N evis, Montserrat, Saba, Statia, St. Martin, and St. Barts. This is arguably the gr eatest panorama in the Caribbean.
Be Your Own Financial Adviser: The Comprehensive Guide to Wealth and Financial Planning by Jonquil Lowe
AltaVista, asset allocation, banking crisis, BRICs, buy and hold, correlation coefficient, cross-subsidies, diversification, diversified portfolio, estate planning, fixed income, high net worth, money market fund, mortgage debt, mortgage tax deduction, negative equity, offshore financial centre, Own Your Own Home, passive investing, place-making, Right to Buy, risk/return, short selling, zero-coupon bond
Therefore, after the end of the tax year, Sarah completes form R40 to claim back the tax deducted from her £173 share of the net interest. Including tax at 20 per cent, this is equivalent to gross interest of £216.25, so she gets a tax refund of £216.25 – £173 = £43.25. Savings income paid gross More unusually, savings income may be paid gross to all savers. This applies, for example, to most accounts you have with offshore banks. Although the interest is paid gross, as a UK resident, you are nevertheless liable for tax and should declare this income to the Revenue. Savings accounts and income bonds from NS&I pay gross interest. If you are a non-taxpayer, it is convenient to receive interest gross because it saves you claiming tax back. However, it is easy to register to receive gross interest from accounts that would normally pay net interest, so you do not need especially to seek out products that always pay interest gross.
The Transparent Society: Will Technology Force Us to Choose Between Privacy and Freedom? by David Brin
affirmative action, airport security, Ayatollah Khomeini, clean water, cognitive dissonance, corporate governance, data acquisition, death of newspapers, Extropian, Howard Rheingold, illegal immigration, informal economy, information asymmetry, Iridium satellite, Jaron Lanier, John Markoff, John von Neumann, Kevin Kelly, Marshall McLuhan, 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, Robert Bork, 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, zero-sum game, 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.
The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the JunkBond Raiders by Connie Bruck
corporate raider, diversified portfolio, Edward Thorp, financial independence, fixed income, Irwin Jacobs, 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.
The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz
"Robert Solow", affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, business cycle, 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, information asymmetry, invisible hand, jobless men, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, 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%, wealth creators, women in the workforce, zero-sum game
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.
The Gun by C. J. Chivers
air freight, Berlin Wall, British Empire, cuban missile crisis, defense in depth, G4S, 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.
The Social Life of Money by Nigel Dodd
accounting loophole / creative accounting, bank run, banking crisis, banks create money, Bernie Madoff, bitcoin, blockchain, borderless world, Bretton Woods, BRICs, business cycle, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computer age, conceptual framework, credit crunch, cross-subsidies, David Graeber, debt deflation, dematerialisation, disintermediation, eurozone crisis, fiat currency, financial exclusion, 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, Kickstarter, Kula ring, laissez-faire capitalism, land reform, late capitalism, liberal capitalism, liquidity trap, litecoin, London Interbank Offered Rate, M-Pesa, Marshall McLuhan, means of production, mental accounting, microcredit, mobile money, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, negative equity, new economy, Nixon shock, Occupy movement, offshore financial centre, paradox of thrift, payday loans, Peace of Westphalia, peer-to-peer, 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, Veblen good, Wave and Pay, Westphalian system, 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.
The Origins of Political Order: From Prehuman Times to the French Revolution by Francis Fukuyama
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, endogenous growth, 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, land reform, land tenure, means of production, offshore financial centre, out of africa, Peace of Westphalia, principal–agent problem, RAND corporation, rent-seeking, Right to Buy, Scramble for Africa, selective serotonin reuptake inhibitor (SSRI), 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, zero-sum game
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.
The Stack: On Software and Sovereignty by Benjamin H. Bratton
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, basic income, Benevolent Dictator For Life (BDFL), 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, Douglas Engelbart, Edward Snowden, Elon Musk, en.wikipedia.org, Eratosthenes, Ethereum, 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, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invisible hand, Jacob Appelbaum, Jaron Lanier, Joan Didion, John Markoff, Joi Ito, Jony Ive, Julian Assange, Khan Academy, liberal capitalism, lifelogging, linked data, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Masdar, McMansion, means of production, megacity, megastructure, Menlo Park, Minecraft, MITM: man-in-the-middle, Monroe Doctrine, Network effects, new economy, offshore financial centre, oil shale / tar sands, packet switching, PageRank, pattern recognition, peak oil, peer-to-peer, performance metric, personalized medicine, Peter Eisenman, Peter Thiel, phenotype, Philip Mirowski, Pierre-Simon Laplace, place-making, planetary scale, RAND corporation, recommendation engine, reserve currency, RFID, Robert Bork, 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, undersea cable, universal basic income, urban planning, Vernor Vinge, Washington Consensus, web application, Westphalian system, 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.
The Trouble With Billionaires by Linda McQuaig
"Robert Solow", battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, George Akerlof, Gini coefficient, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, lateral thinking, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, plutocrats, Plutocrats, Ponzi scheme, pre–internet, price mechanism, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce
Bogle, 21 September 2011. 24 A good deal has been written on tax havens in recent years. Two of the best descriptions and analyses are Ronen Palan, Richard Murphy & Christian Chavagneux, Tax Havens: How Globalization Really Works (Ithaca: Cornell University Press, 2010), and Nicholas Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (London: Vintage Books, 2012). 25 Tax Justice Network, 27 January 2011. 26 ‘Greece would have avoided a bailout if it were not for tax havens, says former PM’, The Telegraph, 30 August 2012. 27 Ed Howker & Shiv Malik, ‘Cameron family fortune made in tax havens’, The Guardian, 20 April 2012. 28 ‘Revealed: Tax havens of the top 20 UK companies’, This Is Money, 24 January 2011. 29 Fajeev Syal & Martin Williams, ‘Tory treasurer wants UK to become more like a tax haven’, The Guardian, 21 September 2012. 30 Ibid. 31 Tom Bergin, ‘Special Report: How Starbucks avoids UK taxes’, Reuters, 15 October 2012. 32 Nicholas Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (London: Vintage Books, 2011). 33 Before the imposition of the fixed charges, Richard Murphy estimated the annual revenue loss to be in excess of £4.3 billion.
Wealthy and influential members of Britain’s economic elite have a long history of exploiting tax havens to dodge British tax laws. The Prime Minister’s own fortune is in part attributable to tax havens. As the Guardian reported, ‘David Cameron’s father ran a network of offshore investment funds to help build the family fortune that paid for the prime minister’s inheritance.’27 The UK’s top twenty companies have more than a thousand subsidiaries in offshore tax havens.28 An investigation of the use of tax havens found that sixty-eight MPs and peers were either directors or had a controlling interest in businesses with links to tax havens.29 These Parliamentarians have influence over tax and financial regulations in relation to tax havens. Conservative Party treasurer Lord Fink admitted that, when the Tories were in opposition, he lobbied to make domestic tax laws even more like those of offshore tax havens so that British hedge funds and other businesses would not have to set up offshore operations in order to avoid tax.30 Over the past few years, the UK corporate tax rules have been continually changed to reduce the taxes paid by multinationals.
Although many are small, exotic islands that conjure up sunny images of the good life, tax havens actually inflict incalculable harm on the world.24 By depositing their assets in tax haven banks, the world’s wealthy are able to hide their assets from tax authorities in their own country. Tax havens thus facilitate a wide range of clearly objectionable outcomes – including drug and human trafficking and other forms of organized crime, embezzlement and bribery. In addition, tax havens help terrorists move untraceable funds around the world; they allow individuals to escape from professional, parental and other legal obligations; they distort world trade and investment flows; and they exacerbate financial crises by making much of the global financial system invisible. Over the past few decades, the use of tax havens has been the common denominator in almost every large money laundering operation, Ponzi scheme, financial crisis, mega commercial fraud, and large accounting and business scandal.
The Joy of Tax by Richard Murphy
banking crisis, banks create money, carried interest, correlation does not imply causation, en.wikipedia.org, failed state, full employment, Gini coefficient, high net worth, land value tax, means of production, offshore financial centre, quantitative easing, race to the bottom, savings glut, seigniorage, The Spirit Level, The Wealth of Nations by Adam Smith, transfer pricing
If, for example, in 2005, near the start of our campaign, anyone had called for a wealth tax many people would have laughed at the idea, because, as was widely known at that time, it was really easy back then for almost anyone to take their assets out of the UK and locate them in a tax haven, after which there was almost no prospect of that wealth being traced. What is extraordinary is that over the last few years this has changed, or is in the process of changing, for a number of reasons. Although I was told as recently as 2009 by the UK Treasury that there was no chance of what is called automatic information exchange of data on the accounts held in tax havens by UK residents taking place in my lifetime, it is now going to happen, with all the benefits of it flowing through to the UK’s HMRC in the next few years at the latest. What this means is that if a UK resident has any interest in a bank account, company, trust or other arrangement in one of a whole list of tax havens, including all those operated under UK control such as Jersey, Guernsey, the Isle of Man, the Cayman Islands, the British Virgin Islands, Bermuda and more, then that place will have an automatic and legal responsibility to report the fact through their governments to HM Revenue & Customs.
And the same transparency is also being created across the EU and beyond. The change is dramatic, and very welcome. But the change is not restricted to the tax haven world. Again, pretty much as a result of the work of tax campaigners like the Tax Justice Network and Global Witness, pressure has been brought to bear on the UK government and the governments of many other places, including tax havens, to ensure that their registries of companies include details of the beneficial owners of those companies and not just those persons who lend their name as nominees to be recorded on public record. This is another vital development because it will make it much harder in future to disguise the ownership of a company in any country, including tax havens; and consequently money flows designed to avoid or evade tax can be more easily traced. These measures on beneficial ownership of companies are not yet comprehensive enough: it seems unlikely that this information will be placed on public record, where it would be available to people who trade with these companies, and who need to know it.
In my study of this data, which was published in July 2015,16 I showed that there was very clear suggestion of profit-shifting taking place, with billions of euros of profits appearing to be reallocated by just seventeen EU banks to places like Belgium, Luxembourg, Singapore, Ireland, Jersey and the Isle of Man, all of which have reputations as tax havens, and away from countries like Germany, the Netherlands, the UK and Spain. Unsurprisingly, the reaction from big business, and most especially that based in the USA, has been furious.17 Those who have gained enormously from using tax havens and from the secrecy that corporate accounting, combined with tax haven opacity, has been able to create do not want to give up the benefits without a fight, but the moves are all against them. It is widely thought that country-by-country reporting will be voluntarily disclosed by many companies within a few years, paving the way to mandatory publication by all multinational corporations.
Why We Can't Afford the Rich by Andrew Sayer
accounting loophole / creative accounting, Albert Einstein, anti-globalists, asset-backed security, banking crisis, banks create money, basic income, Boris Johnson, Bretton Woods, British Empire, business cycle, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, 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, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, Kickstarter, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, plutocrats, Plutocrats, popular capitalism, 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, wealth creators, WikiLeaks, Winter of Discontent, working poor, Yom Kippur War, zero-sum game
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.
Open: The Progressive Case for Free Trade, Immigration, and Global Capital by Kimberly Clausing
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, active measures, Affordable Care Act / Obamacare, agricultural Revolution, battle of ideas, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, corporate social responsibility, creative destruction, currency manipulation / currency intervention, David Ricardo: comparative advantage, Donald Trump, floating exchange rates, full employment, gig economy, global supply chain, global value chain, guest worker program, illegal immigration, immigration reform, income inequality, index fund, investor state dispute settlement, knowledge worker, labor-force participation, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, meta analysis, meta-analysis, offshore financial centre, open economy, Paul Samuelson, profit motive, purchasing power parity, race to the bottom, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transfer pricing, uber lyft, winner-take-all economy, working-age population, zero-sum game
The question, then, is how to design a better corporate tax that is more suited to a global economy. To stem profit shifting to tax havens, we should stop the tax system’s favoring of foreign income. Prior to the Tax Cuts and Jobs Act (TCJA), we allowed the deferral of US taxation on foreign income until it was repatriated to the United States. Post TCJA, we tax haven income at half the US rate, and completely exempt from tax the first ten percent of the return on assets. Rather than either of these approaches, we should tax foreign income as it is earned at the normal rate (allowing a tax credit for foreign tax). Doing so would remove the tax incentive to shift profits to tax havens as well as the tax disincentive to repatriate income.41 An alternative, more incremental, step would be to institute a per-country minimum tax that would tax foreign income as it was earned, not allowing deferral of US tax on income earned in the lowest-tax countries.
But, by taxing all forms of income at the same rate, there will be greater revenue at any choice of top tax rates, since revenue will not leak out as taxpayers shift their income into tax-favored forms. This should keep top tax rates lower than they would be in the counterfactual. Just How Special Are Tax Havens? By almost any plausible metric, the affiliates of multinational firms book too much income in tax havens, relative to the true economic activity that occurs there. In 2010, affiliates of US multinational firms reported profits in Bermuda that were sixteen times the size of the entire Bermuda economy, and reported profits in the Cayman Islands that were twenty times the size of that economy.1 US multinational firms have accumulated over $2.6 trillion in permanently reinvested earnings in low-tax locations, over $1 trillion of which is held in cash. Seven tax havens are responsible for over half the foreign profits of US multinational firms, and these seven havens have a combined population that is less than that of California.
Seven tax havens are responsible for over half the foreign profits of US multinational firms, and these seven havens have a combined population that is less than that of California. I estimate that most of the income booked in these tax havens is there artificially; absent profit shifting, reported profits would be much lower in tax havens and much higher in non-havens.2 Figure 10.3: Seven Key Profit Shifting Locations of US Multinational Companies Note: Figure shows results of data analysis of the underlying BEA data from Kimberly Clausing, “The Effect of Profit Shifting on the Corporate Tax Base in the United States and Beyond,” National Tax Journal 69:4 (2016), 905–934. Data source: US Bureau of Economic Analysis. ________________________ 1. Even these figures underestimate the size of the problem, since tax haven GDPs are also distorted upwards by artificial profit shifting. 2. Clausing, “The Effect of Profit Shifting.”
Financing Basic Income: Addressing the Cost Objection by Richard Pereira
banks create money, basic income, income inequality, job automation, Lyft, new economy, offshore financial centre, Paul Buchheit, quantitative easing, sovereign wealth fund, Tobin tax, transfer pricing, uber lyft, universal basic income, unpaid internship, Wall-E
During this “golden age for corporate proﬁts” some of the largest multinational companies are paying zero tax, and receiving tax refunds and subsidies simultaneously (Buchheit 2013). How many Canadian tax dollars are we losing to tax havens? . . . There are three independent estimates that put the ﬁgure as high as $80 billion a year that federal and provincial governments are losing to various forms of tax evasion. A recent Statistics Canada report showed that a quarter of all Canadian direct investment abroad was going to countries that have been identiﬁed as tax havens. Barbados was the destination for $53 billion in 2011. (CPJ – Citizens for Public Justice 2012; Canadians for Tax Fairness n.d.) As concerns developing countries, tax havens facilitate transfer pricing, capital ﬂight and corruption worth 10 times the value of aid received by these countries (CPJ 2012). In the UK one of numerous high-proﬁle stories recently involved the American multinational company Starbucks repeatedly claiming annual ﬁnancial losses despite making billions of pounds in proﬁts.
In the two-year period during which this book was being written and edited, we have seen the pursuit of policies of austerity deepen worldwide, while simultaneously the issue of tax evasion and avoidance through offshore tax havens has continually gained more exposure in the popular press. In the United States, the growing gap between rich and poor was a central feature of a very long presidential campaign, particularly before the Democratic Party ﬁnalized its choice of candidate for the White House. In some countries sovereign wealth funds (SWFs) have continued to amass wealth for public goods, while other countries have allowed the value of public and natural resources to be squandered. It is clear that there is vast v vi PREFACE wealth in societies throughout the world, but that it increasingly is consolidated in fewer hands, fewer large multinational corporations and in offshore tax havens that are an affront to the proper functioning of society and management of its public ﬁnances.
In the UK one of numerous high-proﬁle stories recently involved the American multinational company Starbucks repeatedly claiming annual ﬁnancial losses despite making billions of pounds in proﬁts. Transfer pricing allows such corporations to use offshore tax havens and other mechanisms to misprice transactions between companies in a group (Clinch 2012). The issue affects all countries and their ability to provide public goods, including UBI. If we take the $342 billion in total savings available from UBI implementation identiﬁed thus far ($132 billion in savings from Young and Mulvale’s net costing plus additional savings of $210 billion detailed in Subsection “First Response: Savings from Replacement of Existing Income Security Programmes”) and add the $80 billion in tax leakage from Canada to offshore tax havens each year, a large surplus is further built up by implementing the NIT version of UBI, as well as surpluses achieved by implementing the demogrant version of UBI as costed by multiple proposals in the cost objection.
Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace by Matthew C. Klein
Albert Einstein, Asian financial crisis, asset allocation, asset-backed security, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, British Empire, business climate, business cycle, capital controls, centre right, collective bargaining, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, deglobalization, deindustrialization, Deng Xiaoping, Donald Trump, Double Irish / Dutch Sandwich, Fall of the Berlin Wall, falling living standards, financial innovation, financial repression, fixed income, full employment, George Akerlof, global supply chain, global value chain, illegal immigration, income inequality, intangible asset, invention of the telegraph, joint-stock company, land reform, Long Term Capital Management, Malcom McLean invented shipping containers, manufacturing employment, Martin Wolf, mass immigration, Mikhail Gorbachev, money market fund, mortgage debt, New Urbanism, offshore financial centre, oil shock, open economy, paradox of thrift, passive income, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Scramble for Africa, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Tim Cook: Apple, trade liberalization, Wolfgang Streeck
Instead, much of the value generated by Apple’s American operation is counted as an export from a corporate tax haven. While most of the value generated by Apple comes from its workers in the United States, much of the income Apple generates when it sells its wares abroad is officially paid to Apple’s tax haven subsidiaries. The exact mechanics are complicated and have likely evolved over time, but the simplified version goes something like this. First, Apple’s Irish subsidiary pays a fee to the parent in Cupertino, California, to cover the cost of research and development. This counts as an export of services from the United States to Ireland. (Most of America’s exports of R&D services go to corporate tax havens, while most of Ireland’s imports of R&D services come from the United States.) The next bit is tricky.
This cannot be explained by real economic relationships; the explanation is instead profit shifting meant to minimize tax obligations. The seven corporate tax havens together were responsible for more than $324 billion in U.S. direct investment income in 2018. Subpart F may have been rendered mostly useless by the Treasury’s mistake in 1996, but until the 2017 tax law changed things, the Revenue Act of 1962 still meant that American corporations could avoid paying U.S. taxes on those foreign profits only if they were reinvested abroad. Dividends and stock buybacks were not allowed. Almost anything else, however, was acceptable. The result was that subsidiaries of American multinationals located in corporate tax havens accumulated trillions of dollars of financial assets in the past two decades. From 1998 through 2017, American companies operating in the seven corporate tax havens “earned” and then “reinvested” more than $2.1 trillion of profits.
Another is that more than three-quarters of the net income earned by foreign subsidiaries of American corporations are now attributed to a handful of tiny tax havens.35 The counterpart to the hyperprofitability of American and European companies’ foreign operations lies in the southwestern bit of the Republic of Ireland, which, officially, is one of the wealthiest parts of Europe. Cork is the largest city in the region and has been home to Apple’s European headquarters since 1980. About six thousand people currently work there in functions ranging from logistics to manufacturing custom iMacs. Major pharmaceutical companies, including Pfizer, GlaxoSmithKline, and Johnson & Johnson, also have operations in Cork. Further north, Dublin is home to subsidiaries of Facebook, Google, and Microsoft.36 Fig. 1.2 Most U.S. foreign direct investment income is now booked in corporate tax havens (share of net income attributed to subsidiaries in the Caribbean, Ireland, Luxembourg, the Netherlands, Singapore, and Switzerland).
Who Owns England?: How We Lost Our Green and Pleasant Land, and How to Take It Back by Guy Shrubsole
back-to-the-land, Beeching cuts, Boris Johnson, Capital in the Twenty-First Century by Thomas Piketty, centre right, congestion charging, deindustrialization, digital map, do-ocracy, Downton Abbey, financial deregulation, fixed income, Goldman Sachs: Vampire Squid, Google Earth, housing crisis, James Dyson, Kickstarter, land reform, land tenure, land value tax, linked data, loadsamoney, mega-rich, mutually assured destruction, new economy, Occupy movement, offshore financial centre, oil shale / tar sands, openstreetmap, place-making, plutocrats, Plutocrats, profit motive, rent-seeking, Right to Buy, Ronald Reagan, sceptred isle, Stewart Brand, the built environment, the map is not the territory, The Wealth of Nations by Adam Smith, trickle-down economics, urban sprawl, web of trust, Yom Kippur War, zero-sum game
THE ESTABLISHMENT: CROWN AND CHURCH Queen Victoria bought Helen Walch, Sandringham: A Royal Estate for 150 Years (The Sandringham Estate, 2012). Sandringham has grown Ibid., map on pp. 118–19. tax haven of Jersey Land Registry land titles show that Houghton Hall and its surrounding estate is registered in the name of Jersey-based company Mainland Nominees Ltd. See also the entry for Mainland Nominees Ltd on Companies House, which states it to be registered in Jersey. On Jersey’s status as a tax haven, see John Christensen, ‘Portrait of a tax haven: Jersey’, 5 November 2017, https://www.taxjustice.net/2017/11/05/portrait-tax-haven-jersey/ Balmoral in Scotland In fact, the situation with Balmoral is even more complicated: it’s owned by a trust, of which the Queen is the principal beneficiary. For full details, see Wightman, The Poor Had No Lawyers, pp. 151–4.
They are owned by the Wallace Partnership Group Ltd, who in turn are owned by Albanwise Ltd. But who owns Albanwise? Thanks to Companies House publishing Persons of Significant Control, we now know: a mysterious Italian billionaire called Count Padulli, who also owns a 4,500-acre estate in Norfolk. His country of residence, however, is stated to be the tax haven of Guernsey. The increasing trend in recent decades to base companies overseas, and often in offshore tax havens, has presented a fresh challenge to obtaining information on who owns England. Offshore jurisdictions like Guernsey, the British Virgin Islands and Panama aren’t just attractive to companies for reasons of ‘tax efficiency’: they also provide a cloak of secrecy, with less transparent company registries than the UK. If you register a company in the British Virgin Islands, for instance, there is no obligation to reveal the Person of Significant Control who lies behind it.
The practice of vesting estates in family trusts to avoid inheritance tax had been honed by tax lawyers over the past century. Increasingly, some large landholdings were now being made over by deed entirely to professional wealth managers, like Rathbones Trust Company Ltd, who today are the registered owners of the Marquess of Northampton’s Compton Wynyates estate, among others. What was new at the time was the increasing registration of landed estates in offshore tax havens. Britain was integral to the development of the modern system of tax havens during the 1960s and 70s. As Nicholas Shaxson has charted, former colonies like the Cayman Islands joined Guernsey, Jersey and the City of London to create a web that would ‘catch financial business from nearby jurisdictions by offering lightly taxed, lightly regulated and secretive boltholes for money’. Now this new overseas empire was to throw a lifeline to the ailing aristocracy by allowing them to escape the burden of taxation being imposed in the motherland.
A People's History of the United States by Howard Zinn
active measures, affirmative action, agricultural Revolution, Albert Einstein, American ideology, 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, God and Mammon, Howard Zinn, illegal immigration, jobless men, land reform, Mercator projection, Mikhail Gorbachev, minimum wage unemployment, Monroe Doctrine, new economy, New Urbanism, Norman Mailer, 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.”
What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler
8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, plutocrats, Plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game
He concluded: “Analysis of such data suggests the reduction in top tax rates have had little association with savings, investment, or productivity growth.”55 Other factors influence these macroeconomic variables, but tax rates on capital do not. Equally important to the question of tax fairness is elimination of tax havens used by wealthy citizens and multinational enterprises to shift their taxes onto others. Tax havens launder money. They are pirates, surfing the global economy, indulged by politicians in Berlin, London, Paris, Tokyo, and Washington. The OECD has identified forty-two tax havens, such as the Cayman Islands and Switzerland, where hiding foreign money is an economic mainstay. Local economies there prosper from banking laws promising low taxes and secrecy to wealthy foreigners, drug dealers, smugglers, multinationals, arms merchants, and tyrants with bloody hands. The United States is a big loser from the piratical tax haven business model.56 In combination with weakly drawn American laws and under-resourced tax officials, havens have converted the payment of taxes by wealthy Americans and US multinationals such as Apple, Caterpillar, and GE to a voluntary exercise.
Shell and BP have created nearly 1,000 paper entities in tax parasites to filter profits, including more than 100 in the Caribbean.44 Nearly 19,000 US firms, including hedge funds and large banks such as JP Morgan Chase, maintain tax addresses at a single Cayman Island law firm, Maples and Calder.45 In 2009, Congressional GAO investigators determined that 83 of the largest 100 American firms exploit tax havens.46 Such behavior isn’t punished; in fact, 63 of those firms including Boeing, Caterpillar, Kraft Foods, and Merck receive large federal contracts. Tax-haven habitués also include 14 banks that were saved from bankruptcy by the 2008 taxpayer bailout. The family capitalism countries confront the same problem, although two of their number (Belgium and Netherlands) are also significant tax havens. For example, McDonald’s and Starbucks count Europe as important markets, but pay virtually no tax on sales there. Since opening its first store in 2002, the Starbucks chain of over 200 stores in France and Germany has never reported a taxable profit.
Bush by 99 percent, with only 22 negligence penalties imposed in 2002.27 Another significant contributor to lower corporate taxes has been the use of tax havens by multinationals, which we will discuss in a moment. This combination of lower rates and weak enforcement caused the effective corporate tax rate during 2011 to be only one-half the effective rate when Reagan took office.28 (It was 21 percent rather than the nominal rate of 35 percent, with multinationals, in particular, paying far less than the nominal rate.)29 These changes have enabled American firms in recent years to have the lowest tax burden as a share of GDP of any rich democracy, comparable to that of the corporate sector in Turkey. American business contributes less than one-third the share of taxes by Australian firms, for example.30 Piratical Tax Havens: Stealing Tax Revenue from Neighbors There are plenty of American firms with tax rates approaching the nominal rate of 35 percent, but the average effective rate is 21 percent because thousands of others pay far less.
The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing
3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Boris Johnson, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, disruptive innovation, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, Sam Altman, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, The Rise and Fall of American Growth, Thomas Malthus, Thorstein Veblen, too big to fail, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, Y Combinator, zero-sum game, Zipcar
Bernie Sanders, the Vermont senator who campaigned for the presidential nomination in 2016, listed twenty profitable corporations that had received taxpayer bailouts while operating subsidiaries in tax havens to avoid taxes and even receiving tax rebates. Bank of America received $1.9 billion as a tax refund in 2010, even though it made $4.4 billion in profits. During the crisis, it received a $45 billion bailout and $1.3 trillion in near-zero-interest loans. At the same time, it was operating 371 subsidiaries incorporated in tax havens, 204 of them in the Cayman Islands (zero corporate tax rate). That enabled it to save $2.6 billion in federal income taxes. Goldman Sachs received a bailout of $824 billion in cash and low-interest loans. In 2008, it paid no federal income tax and instead received a $278 million tax refund, even though its profits were $2.3 billion. It would have owed $2.7 billion in federal taxes had it not been using offshore tax havens. In the UK, New Labour rescued the Royal Bank of Scotland, using £45 billion of taxpayers’ money to buy 79 per cent of its shares.
Across Britain, they have been used to fund schools, streetlights, prisons, police stations and care homes, burdening central and local government with huge debts to financial capital estimated at a whopping £310 billion, more than five times the value of the assets created.28 Much of the rental income from taxpayer-funded debt payments is going to investment funds based in tax havens. The biggest holders of PFI equity are Semperian, based in the tax haven of Jersey; Innisfree, the biggest investor in hospitals after the NHS, whose largest shareholder is Jersey-based Coutts & Co.; 3i Infrastructure, a Jersey-based subsidiary of 3i, a venture capital company; and Equitix, acquired in 2015 by Tetragon Financial Group, based in Guernsey, another tax haven.29 NHS privatisation has been accelerated by the Health and Social Care Act 2012, which basically abolished the government’s responsibility to provide a national health service. There is now no legal guarantee to provide comprehensive health services, beyond emergency care and ambulances, while NHS contracts have been opened up to unlimited privatisation.30 Private service contractors, often with links to those commissioning their services, are making large rental incomes, paid by an increasingly cash-strapped (tax-funded) NHS.
Chapter 3 deals with one of the dirty secrets of the age: the stealthily built edifice of subsidies that in diverse ways flow to the plutocracy, the elite, their corporate equivalents and other rentiers. Those below them pay the price in higher taxes, lower benefits and worse public services. The rentiers have shunted much of their wealth into tax havens, as the Panama Papers leaked in spring 2016 so comprehensively revealed. No fewer than seventy-two former or current heads of state or government – princes, sheikhs, Presidents and Prime Ministers – were exposed, as well as a wide array of the world’s wealthiest. Those tax havens did not come about and persist for many years by accident; they were and remain a means of subsidising the rich, a hand-out they neither earn nor deserve. Chapter 4 reviews a contrasting side of the global economy, the spread of many forms of debt, which might once have been expected to fade as economies became richer and their residents wealthier.
The People vs. Democracy: Why Our Freedom Is in Danger and How to Save It by Yascha Mounk
affirmative action, Affordable Care Act / Obamacare, Andrew Keen, basic income, battle of ideas, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, Cass Sunstein, central bank independence, centre right, clean water, cognitive bias, conceptual framework, David Brooks, deindustrialization, demographic transition, desegregation, Donald Trump, en.wikipedia.org, Francis Fukuyama: the end of history, German hyperinflation, gig economy, Gini coefficient, Home mortgage interest deduction, housing crisis, income inequality, invention of the printing press, invention of the steam engine, investor state dispute settlement, job automation, Joseph Schumpeter, land value tax, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, mass immigration, mortgage tax deduction, Naomi Klein, new economy, offshore financial centre, open borders, Parag Khanna, plutocrats, Plutocrats, post-materialism, price stability, ride hailing / ride sharing, rising living standards, Ronald Reagan, Rosa Parks, secular stagnation, sharing economy, Thomas L Friedman, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, universal basic income, upwardly mobile, World Values Survey, zero-sum game
Any American citizen or permanent resident must pay taxes in the United States.27 Other countries should follow America’s lead and end the preferential treatment of citizens who move to tax havens for part of the year to evade the obligation to pay their fair share.28 Even in the United States, the same principle could be enforced more vigorously and extended to factors beyond citizenship: for example, it might make sense to require anybody who owns residential real estate in a country to pay taxes there.29 While this rule would go a long way toward solving the noxious role that legal tax havens play, it would not do anything to solve the problem of illegal tax havens. But here, too, the nation state holds more trump cards than the fatalists tend to assume. On the rare occasions in which big countries have worked together to put pressure on tax havens, they have celebrated surprising successes, as the recent series of deals between Switzerland and countries including the United Kingdom and the United States demonstrates.30 What’s more, nation states can make real inroads even in the absence of international cooperation.
See Eoin Burke-Kennedy, “Ireland Branded One of World’s Worst Tax Havens,” Irish Times, December 12, 2016, https://www.irishtimes.com/business/economy/ireland-branded-one-of-world-s-worst-tax-havens-1.2901822; and Leslie Wayne, “How Delaware Thrives as a Corporate Tax Haven,” New York Times, June 30, 2012, http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html. 33. For one way that this might work, see Zucman, The Missing Wealth of Nations. For an alternative solution to the same underlying problem, see Reuven Avi-Yonah, “The Shame of Tax Havens,” American Prospect, December 1, 2015, http://prospect.org/article/shame-tax-havens. 34. Francois de Beaupuy, Caroline Connan, and Geraldine Amiel, “France and Germany Plan Tax Crackdown on U.S. Tech Giants,” Bloomberg, August 7, 2017, https://www.bloomberg.com/news/articles/2017-08-07/france-and-germany-plan-crackdown-on-tax-loopholes-used-by-apple. See also Jim Brunsden and Mehreen Khan, “France Drives EU Tax Blitz on Revenues of US Tech Giants,” Financial Times, September 9, 2017, https://www.ft.com/content/371733e8-94ae-11e7-bdfa-eda243196c2c.
Reilly, “Swiss Banks Deal Near in Tax Haven Crackdown, Justice Department Says,” Huffington Post, August 29, 2013, http://www.huffingtonpost.com/2013/08/28/swiss-banks-deal_n_3832052.html; and Polly Curtis, “Treasury Strikes Tax Evasion Deal with Switzerland to Recoup Unpaid Cash,” Guardian, August 24, 2011, https://www.theguardian.com/business/2011/aug/24/switzerland-does-tax-deal-with-treasury. 31. See for example Michael J. Graetz, Jennifer F. Reinganum, and Louis L. Wilde, “The Tax Compliance Game: Toward an Interactive Theory of Law Enforcement,” Journal of Law, Economics, & Organization 2, no. 1 (1986): 1–32. 32. See Eoin Burke-Kennedy, “Ireland Branded One of World’s Worst Tax Havens,” Irish Times, December 12, 2016, https://www.irishtimes.com/business/economy/ireland-branded-one-of-world-s-worst-tax-havens-1.2901822; and Leslie Wayne, “How Delaware Thrives as a Corporate Tax Haven,” New York Times, June 30, 2012, http://www.nytimes.com/2012/07/01/business/how-delaware-thrives-as-a-corporate-tax-haven.html. 33.
Capitalism, Alone: The Future of the System That Rules the World by Branko Milanovic
"Robert Solow", affirmative action, Asian financial crisis, assortative mating, barriers to entry, basic income, Berlin Wall, bilateral investment treaty, Black Swan, Branko Milanovic, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carried interest, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, dematerialisation, Deng Xiaoping, discovery of the americas, European colonialism, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, ghettoisation, gig economy, Gini coefficient, global supply chain, global value chain, high net worth, income inequality, income per capita, invention of the wheel, invisible hand, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, labor-force participation, laissez-faire capitalism, land reform, liberal capitalism, low skilled workers, Lyft, means of production, new economy, offshore financial centre, Paul Samuelson, plutocrats, Plutocrats, post-materialism, purchasing power parity, remote working, rent-seeking, ride hailing / ride sharing, Silicon Valley, single-payer health, special economic zone, The Wealth of Nations by Adam Smith, Thorstein Veblen, uber lyft, universal basic income, Vilfredo Pareto, Washington Consensus, women in the workforce, working-age population, Xiaogang Anhui farmers
We also cannot say much about whether people’s perceptions themselves may be influenced by greater reporting of cases of corruption, more open media, and greater knowledge of corruption outside their own small circles. For more information, we may turn to recent estimates of the amount of funds held in tax havens. The use of these havens is not a neat indicator of corruption, but the two are related. Of course, money made through corruption need not be held in tax havens; it can be “converted” into legitimate activities or, for example, used to buy real estate in London or New York. Thus, assessing the size of tax havens alone could underestimate corruption. But it could also overestimate it, since money earned legally can also be placed in tax havens, simply for the purpose of avoiding taxation. In either case, however, most of the money held in tax havens is extra legal in that it is corrupt either in origin or in intention (to evade taxes).20 Using data on anomalies in assets positions across countries, Gabriel Zucman (2013, 1322) estimated that in 2008, about $5.9 trillion—8 percent of global household financial wealth, or 10 percent of global GDP—was held in tax havens (three-quarters of it unrecorded).
and Singapore.31 These funds are, of course, just camouflaged Indian funds, many illegally acquired domestically and then transferred overseas, whence they re-emerge in India as “foreign investments.” This is something that would have been as difficult to imagine in the India of the 1970s as in the Soviet Union of the same era, but that has become a somewhat banal technique in the age of globalization. Here one needs to consider more carefully the enabling role of the global financial centers and tax havens. The latter have been extensively discussed—especially those in Switzerland and Luxembourg—by Gabriel Zucman in The Hidden Wealth of Nations (2015). The role of tax havens has also been starkly documented by the release of the Panama Papers and the Paradise Papers, and in Brooke Harrington’s book Capital without Borders (2016). But the role of large financial centers like London, New York, and Singapore has attracted less attention. Without the creation of entire batteries of banking and legal services to serve and help it, corruption on a global scale would not have been possible.
Incentives for corruption are inherent in the system, and there is nothing one can do, short of changing the system of values, to affect it. The second ground, the enabling of corruption, is linked with the openness of capital accounts and the battery of services, located either in rich countries or in tax havens, whose main objective is to attract thieves from poorer countries or tax evaders from rich countries by promising them, respectively, immunity from legal pursuit if they bring their money to the countries where the rule of law holds, or shelter from taxes. Here there are lots of things that can be done. Cracking down on tax havens would be relatively easy if important countries that themselves are big losers because their own citizens evade taxes decided to do so. Some recent examples show that big countries, if and when they decide to act, have the power to crack down on corruption: the United States successfully challenged Swiss banking secrecy laws, the European Union ruled against zero corporate tax rates in Ireland and Luxembourg, Germany took severe measures against tax evasion encouraged by Lichtenstein, and the British parliament required that wealth registers be introduced in British-ruled tax havens like the Cayman Islands and the British Virgin Islands.
Rule Britannia: Brexit and the End of Empire by Danny Dorling, Sally Tomlinson
3D printing, Ada Lovelace, Alfred Russel Wallace, anti-communist, anti-globalists, Big bang: deregulation of the City of London, Boris Johnson, British Empire, centre right, colonial rule, Corn Laws, correlation does not imply causation, David Ricardo: comparative advantage, deindustrialization, Dominic Cummings, Donald Trump, Edward Snowden, en.wikipedia.org, epigenetics, Etonian, falling living standards, Flynn Effect, housing crisis, illegal immigration, imperial preference, income inequality, inflation targeting, invisible hand, knowledge economy, market fundamentalism, mass immigration, megacity, New Urbanism, Nick Leeson, North Sea oil, offshore financial centre, out of africa, Right to Buy, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, University of East Anglia, We are the 99%, wealth creators
Or was it the many other reasons put forward so effectively by the Leavers: too few good employment opportunities, too many immigrants, loss of border controls, European courts very occasionally having the effrontery to suggest (usually correctly) that our courts were not being just? What about the retired in Spain, the borders with Gibraltar and Ireland, the Channel Islands and other tax havens – had Brexiteer leaders done any homework on those? How good is a tax haven when your country becomes poorer and an outcast from where the action is? Or were a few people, who had a lot of money to spend on securing the result they wanted, not thinking about that and just wanting to be in the limelight and have the opportunity to indulge in splendid jingoism? CHAPTER 9: WHY NOT BREXIT? We think Brexit is a disaster, but there may be silver linings to the huge dark cloud.
Of the more than 100 former colonies, protectorates and dominions once ruled by Britain (depending on how you count them), fifty-two eventually transformed into the Commonwealth, while some remain as British Overseas Territories and Crown Dependencies. Thirty of those are not very significant for trade, having populations of less than three million or so, but fifteen operate as tax havens. Hardly any of the other European overseas territories are tax havens (see Figure 2.3). The empire has largely gone. What remains today is chiefly significant because of its international tax avoidance/evasion industry. FIGURE 2.3: EU OVERSEAS TERRITORIES AND OUTERMOST REGIONS 2018 The British Overseas Territories and Crown Dependencies are labelled in bold.34 As we write in November 2018, in the very near future Britain will have three choices: it could return humiliated to the European Union by not actually leaving at the last minute; or it could only partly leave (soft Brexit and a long transition) and so lose power and influence while still having to abide by the rules; or it could bail out very fast (hard Brexit).
See: Donnelly, S. (2015) ‘Sidney Webb – the early years’, LSE History blog, 13 July, http://blogs.lse.ac.uk/lsehistory/2015/07/13/sidney-webb-the-early-years/ 4 Verkaik, R. (2018) Posh Boys: How the English Public Schools Run Britain, London: Oneworld. 5 Maley, J. (2006) ‘£45,000 damages for teacher who accused Prince Harry of cheating’, The Guardian, 14 February, https://www.theguardian.com/uk/2006/feb/14/schools. publicschools 6 Evans, A. (2017) ‘Eton deputy head quits amid cheating scandal’, Daily Mail, 25 August (updated online 29 August), http://www.dailymail.co.uk/news/article-4824050/Eton-deputy-head-quits-amid-claims-helped-pupils-cheat.html 7 Stephens, P. (2017) ‘Brexit has broken British politics’, Financial Times, 9 November, https://www.ft.com/content/8e592d24-c482-11e7-a1d2-6786f39ef675 8 Maidment, J. (2017) ‘Almost two thirds of Conservative Party members want Theresa May to resign as Prime Minister’, Daily Telegraph, 10 June, http://www.telegraph.co.uk/news/2017/06/10/almost-two-thirds-conservative-party-members-want-theresa-may/ 9 Osborne, S. (2016) ‘Stephen Crabb resigns as Work and Pensions Secretary citing family concerns’, The Independent, 14 July, http://www.independent.co.uk/news/uk/politics/stephen-crabb-resigns-theresa-may-cabinet-latest-appointments-sackings-work-and-pensions-secretary-a7136651.html 10 Doward, J. (2017) ‘Revealed: why Michael Fallon was forced to quit as defence secretary’, The Guardian, 4 November, https://www.theguardian.com/politics/2017/nov/04/michael-fallon-defence-secretary-sexual-harassment 11 Osborne, S. (2016) ‘Stephen Crabb resigns as Work and Pensions Secretary citing family concerns’, op. cit. 12 Ryan, F. (2018) ‘The new work and pensions secretary is an insult to disabled people, The Guardian, 16 January, https://www.theguardian.com/society/2018/jan/16/esther-mcvey-work-pensions-secretary-insult-disabled-people 13 Anonymous (2017) ‘Capital Flight’, Private Eye, No. 1457, 30 November, p. 7. 14 Elgot, J. (2017) ‘Paradise Papers: Theresa May refuses to promise register of offshore trusts,’ The Guardian, 6 November, https://www.theguardian.com/politics/2017/nov/06/paradise-papers-theresa-may-refuses-to-promise-register-of-offshore-trusts 15 Weaver, M. (2017) ‘Damian Green denies making sexual advances towards young Tory activist’, The Guardian, 1 November, https://www.theguardian.com/politics/2017/nov/01/damian-green-denies-making-sexual-advances-towards-kate-maltby-tory-activist; and Walker, P. (2017) ‘Damian Green urged to step down during pornography inquiry’, The Guardian, 5 November, https://www.theguardian.com/uk-news/2017/nov/04/damian-green-denies-pornography-was-found-on-his-commons-computer 16 Sparrow, A. (2018) ‘May says she wants investigation into release of Damian Green information – as it happened’, 14 February, https://www.theguardian.com/politics/live/2017/dec/21/damian-green-sacking-theresa-may-politics-live 17 http://mashable.com/2017/07/31/theresa-may-cabinet-the-scream-munch/#io9ddnqBKsqb 18 Salmon, J., Sinmaz, E. and Steiner, R. (2016) ‘Home Secretary Amber Rudd told to come clean over her embarrassing links to two firms set up in tax havens’, Daily Mail, 22 September, http://www.dailymail.co.uk/news/article-3803116/Home-Secretary-Amber-Rudd-told-come-clean-embarrassing-links-two-firms-set-tax-havens.html. See also: Hughes, L. and Rayner, G. (2017) ‘Revealed: Nine Tory MPs on the so called “sex dossier” – with some included for already known relationships’, Daily Telegraph, 31 October, http://www.telegraph.co.uk/news/2017/10/31/tory-minister-mp-accused-paying-women-keep-quiet/ 19 Sommerlad, N. (2014) ‘Millionaire Tory Philip Hammond’s £200 a month “tax dodge” – See video as our man confronts him’, Daily Mirror, 11 March, https://www.mirror.co.uk/news/uk-news/millionaire-tory-philip-hammonds-200-3231876 20 Seamark, M. (2013) ‘Boris’s secret lovechild and a victory for the public’s right to know’, Daily Mail, 21 May, http://www.dailymail.co.uk/news/article-2328067/Boris-Johnsons-secret-lovechild-daughter-Stephanie-victory-publics-right-know.html 21 Unite the Union (2014) ‘Government links to private healthcare’, 28 November, https://web.archive.org/web/20170415154126/http://www.unitetheunion.org/uploaded/documents/final%20mp%20dossier%2028%20nov%201411-20887.pdf.
Platform Capitalism by Nick Srnicek
3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, Capital in the Twenty-First Century by Thomas Piketty, cloud computing, collaborative economy, collective bargaining, deindustrialization, deskilling, disintermediation, future of work, gig economy, Infrastructure as a Service, Internet of things, Jean Tirole, Jeff Bezos, knowledge economy, knowledge worker, liquidity trap, low skilled workers, Lyft, Mark Zuckerberg, means of production, mittelstand, multi-sided market, natural language processing, Network effects, new economy, Oculus Rift, offshore financial centre, pattern recognition, platform as a service, quantitative easing, RFID, ride hailing / ride sharing, Robert Gordon, self-driving car, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, software as a service, TaskRabbit, the built environment, total factor productivity, two-sided market, Uber and Lyft, Uber for X, uber lyft, unconventional monetary instruments, unorthodox policies, Zipcar
This is also part of a broader trend towards the growing use of tax havens. In the wake of the crisis, offshore wealth grew by 25 per cent between 2008 and 2014,31 which resulted in an estimated $7.6 trillion of household financial wealth being held in tax havens.32 The point of all this is twofold. At one end, tax evasion and cash hoarding have left US companies – particularly tech companies – with a vast amount of money to invest. This glut of corporate savings has – both directly and indirectly – combined with a loose monetary policy to strengthen the pursuit of riskier investments for the sake of a decent return. At the other end, tax evasion is, by definition, a drain on government revenues and therefore has exacerbated austerity. The vast amount of tax money that goes missing in tax havens must be made up elsewhere. The result is further limitations on fiscal stimulus and a greater need for unorthodox monetary policies.
While the evidence is still preliminary, it does seem that quantitative easing has had an effect in this way: corporate yields have declined and stock markets have surged upwards.26 It may have had an effect on the non-financial sectors of the economy as well, by making much of the economic recovery dependent on $4.7 trillion of new corporate debt since 2007.27 Most important for our purpose is the fact that the generalised low interest rate environment built by central banks has reduced the rate of return on a wide range of financial assets. The result is that investors seeking higher yields have had to turn to increasingly risky assets – by investing in unprofitable and unproven tech companies, for instance. In addition to a loose monetary policy, there has been a significant growth in corporate cash hoarding and tax havens in recent years. In the United States, as of January 2016, $1.9 trillion is being held by companies in cash and cashlike investments – that is, in low-interest, liquid securities.28 This is part of a long-term and global trend towards higher levels of corporate savings;29 but the rise in cash hoarding has accelerated with the surge in corporate profits after the crisis. Moreover, with a few exceptions such as General Motors, it is a phenomenon dominated by tech companies.
This phenomenon also heralded a turn towards a new model of growth: America was definitively giving up on its manufacturing base and turning towards asset-price Keynesianism as the best viable option. This new model of growth led to the housing bubble of the early twenty-first century and has driven the response to the 2008 crisis. Plagued by global concerns over public debt, governments have turned to monetary policy in order to ease economic conditions. This, combined with increases in corporate savings and with the expansion of tax havens, has let loose a vast glut of cash, which has been seeking out decent rates of investment in a low-interest rate world. Finally, workers have suffered immensely in the wake of the crisis and have been highly vulnerable to exploitative working conditions as a result of their need to earn an income. All this sets the scene for today’s economy. Notes 1. Unless otherwise stated in the text, ‘productivity’ will refer to labour productivity rather than total factor productivity. 2.
Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington
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, post-work, 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 go