[Swiftwater Gazette] China Doesn't Buy It!

[Eric Sandberg]

Brad,

Who'd a thunk it. There is at least one hidden pocket of common sense left
in the world ..... Kiwi land, of all places.

Further down, it looks like congress might be starting to take the hint that
has been blaring in there ears since the beginning of this new "deficit
debacle". I hope they've got the balls to keep it up .... not holding my
breath though.

This from Mish

Rik
____________________________

You Can't Spend Your Way Out of the Crisis

With the Fiscal Insanity Virus Rapidly Spreading The
Globe<http://globaleconomicanalysis.blogspot.com/2008/12/fiscal-insanity-virus-rapidly-spreading.html>I
had nearly given up hope of finding common sense at a high level
anywhere.
Nonetheless, I am pleased to report that I found an amazing display of
honest to goodness common sense in New Zealand.

Kohn Key, New Zealand's prime minister, says You Can't Spend Your Way Out of
the Crisis <http://online.wsj.com/article/SB123638162497057661.html>.

"We don't tell New Zealanders we can stop the global recession, because we
can't," says Prime Minister John Key, leaning forward in his armchair at his
office in the Beehive, the executive wing of New Zealand's parliament. "What
we do tell them is we can use this time to transform the economy to make us
stronger so that when the world starts growing again we can be running
faster than other countries we compete with."

That idea -- growing a nation out of recession by improving productivity --
puts Mr. Key and his conservative National Party at odds with Washington,
Tokyo and Canberra. Those capitals are rolling out billions of dollars in
stimulus packages -- with taxpayers' money -- to try to prop up growth.
That's "risky," Mr. Key says. "You've saddled future generations with an
enormous amount of debt that then they have to repay," he explains. "There
is actually a limit to what governments can do."

Mr. Key's program focuses first on personal income tax cuts, which -- given
that the new top rate, as of April 1, will be 38% -- are still high,
especially when compared to Hong Kong and Singapore. "We just think it's
good tax policy to lower and flatten your tax curve," he says. "People will
move in labor markets and they look at their after-tax incomes."

Much of Mr. Key's reform agenda hinges on his belief that he has to prepare
his country to compete in the global economy. "The world, whether we like it
or not, will become more and more borderless," he says. That means
Wellington is planted firmly behind free trade. "The sooner Doha is
completed," Mr. Key says, referring to stalled global trade talks, "the
better from our point of view."

Mr. Key chuckles when I ask him about the "Buy American" provision tucked
into the Obama administration's stimulus package. The previous government's
"Buy New Zealand" campaign got a "lukewarm" reception, he recalls. "There
are so many component parts manufactured in different parts of the world,
you're chasing your tail the whole time about where something's actually
made."

Key's Common Sense Platform


   - Cutting Taxes
   - Embracing Free Trade
   - Reducing Regulation
   - Understanding there is a limit to what government can do


Meanwhile back in the US, there is good news of sorts.

The Proposed Budget Is Lacking Votes

In the "Good News Unlikely To last" category I note that Obama needs more
votes for his budget<http://finance.yahoo.com/news/Senator-says-Obama-needs-more-apf-14611411.html>
.

The Democratic chairman of the Senate Budget Committee says that President
Barack Obama lacks the votes to see his budget plan for next year passed by
Congress, at least in its current form.

Sen. Kent Conrad of North Dakota tells reporters that situation might change
once lawmakers meet to discuss compromises for the plan.

Having met Wednesday with Obama in the White House, Conrad says that the
president realizes Congress will insist on changing his ambitious plan for
the budget year that begins in October.

Unfortunately, it is highly likely that enough spineless Republicans will
eventually join forces with the "If I Only Had A Brain" Democrats and this
senseless budget will pass.

With the notable exceptions of Rep. Ron Paul of Texas and Senator Shelby of
Alabama ....

When it comes to knowing how to deal with this recession and having the
courage to carry out the plan, Congress is displaying the common sense of an
earthworm attempting to climb a tree along with the backbone of a bowl of
jello minus the bowl.

Senator Shelby, it's clear you have the common sense, so please muster up
the courage to filibuster the budget monstrosity as well as any additional
taxpayer funded bailouts that are proposed.

Contact Your Senators And Legislative Representatives

Please contact your representatives and tell them to stop the madness and
start displaying some common sense. Here is the Online Directory For The
111th Congress <http://www.visi.com/juan/congress/>.


On Fri, Mar 13, 2009 at 10:43 AM, Brad Haslett <flybrad at gmail.com> wrote:

> Rik,
>
> Here's another article that makes you go, duuuuh!  As we've discussed
> before, capital flows where it is treated the kindest.  Whatever makes
> people think they can create "heaven on earth" with the right savior
> is beyond me.  To listen to the Teleprompter Jesus crowd we can all
> throw away our life vests in a few months because The One is going to
> teach us all how to walk on water. I love the statement from Carl
> Levin's office about "offshore abuses" - like avoiding giving your
> money away you earn for taking big risks is an "abuse".
>
> Brad
>
> ----------------
>
> RPT-FEATURE-Corporate oil booms in low-tax Switzerland
> Thu Mar 12, 2009 9:04am EDT
>
> * Companies seek Swiss domiciles despite tax row
>
> * U.S. political climate may be helping
>
> * Appeal as corporate location may outlast offshore dispute
>
> By Sam Cage
>
> ZUG, Switzerland, March 12 (Reuters) - The tidy towns and mountain
> vistas of Switzerland are an unlikely setting for an oil boom.
>
> Yet a wave of energy companies has in the last few months announced
> plans to move to Switzerland -- mainly for its appeal as a low-tax
> corporate domicile that looks relatively likely to stay out of reach
> of Barack Obama's tax-seeking administration.
>
> In a country with scant crude oil production of its own, the virtual
> energy boom has changed the canton or state of Zug, about 30 minutes'
> drive from Zurich, beyond all recognition. Its economy was based on
> farming until it slashed tax rates to attract commerce after World War
> Two.
>
> It still has a chocolate-box old town with views over a lake to the
> high Alps, but is now surrounded by gleaming corporate offices --
> including commodity trader Glencore and oil refiner Petroplus --
> shopping malls and housing developments.
>
> Local authorities say about 13 percent of full-time jobs in Zug canton
> are in the raw materials sector.
>
> Over the past six months companies including offshore drilling
> contractors Noble Corp and Transocean, energy-focused engineering
> group Foster Wheeler and oilfield services company Weatherfield
> International have all announced plans to shift domicile to
> Switzerland.
>
> "Switzerland has a stable and developed tax regime and a network of
> tax treaties with most countries where we operate," Transocean Chief
> Executive Bob Long said in a statement in October, when it announced
> its move. "As a result, the redomestication will improve our ability
> to maintain a competitive worldwide effective corporate tax rate."
>
> Guido Jud, head of Zug's tax office, said about 1,200 companies had
> set up shop there in 2008 -- in line with the long-term average,
> though it is difficult to assess how many of those are foreign
> companies until they file tax returns.
>
> Swiss cantons are free to set their own tax rates. For example in Zug,
> corporate tax is about 16 percent but can fall as low as 9.5 percent
> for companies that do most of their business outside Switzerland. That
> compares with an average global corporate tax rate of 25.9 percent,
> according to consultancy KPMG.
>
> "One trend that we see is that particularly Bermuda-based companies
> are now moving to Switzerland," said Martin Frey, a partner at law
> company Baker & McKenzie. "That may only partly be obviously for tax
> reasons, but also for security reasons and the fact that the Obama
> administration may go after them."
>
> CORPORATE APPEAL
>
> The moves come as the Alpine country is under pressure to stop
> providing a haven to rich individuals who have been illegally dodging
> taxes: the U.S. political climate could be contributing to the
> corporate relocations as authorities seek to crack down on tax
> avoidance and boost their own revenues.
>
> A bill introduced in the U.S. Congress in March targeting "offshore
> tax dodges" by individuals and companies names Switzerland among tax
> havens for evaders.
>
> Offshore tax abuses cost the U.S. Treasury an estimated $30-60 billion
> in lost revenues from corporation tax, plus $40-70 billion from
> individuals, according to the office of Senator Carl Levin, who is
> sponsoring the bill.
>
> Switzerland holds around $2 trillion of estimated global undeclared
> assets, according to the Boston Consulting Group. Revenue generated
> from this could be squeezed as a U.S. probe of its biggest bank UBS
> dilutes banking secrecy.
>
> Yet analysts say the Swiss, whose GDP in 2008 was about 530 billion
> Swiss francs ($460 billion) according to the International Monetary
> Fund, are less likely to meet opposition to the low-tax regimes that
> draw foreign companies: these are deemed less harmful tax avoidance,
> rather than evasion.
>
> "They are still making some money by having lower taxes on companies,"
> said Lee Sheppard, contributing editor to Tax Notes, a tax journal
> based in Washington DC.
>
> "But they're not ever going to be making the amount that other
> governments are annoyed about losing."
>
> Analysts note that because Switzerland has its own tax treaty with the
> United States, blacklisting it at a corporate or individual level
> could cause unproductive diplomatic incidents.
>
> Low-tax jurisdictions like Bermuda or the Cayman Islands look more
> vulnerable because they have less diplomatic clout, which is prompting
> some companies to head for Switzerland.
>
> The European Commission, the European Union's executive body, has said
> the tax regimes in cantons like Zug, Schwyz and Obwalden are a form of
> state aid: it wants Switzerland to end favourable treatment of
> foreign-earned profits.
>
> Switzerland, which is not a member of the EU, denies the cantons'
> special status violates its free trade deal with the bloc and rejects
> negotiations with Brussels on fiscal matters.
>
> But it has pledged to consider some other company taxation regulations
> the EU has objected to, such as the status of foreign companies,
> aiming to ensure these go beyond thinly staffed headquarters to invest
> and create jobs in Switzerland.
>
> CONTINUING TREND
>
> Baker & McKenzie's Frey thinks more companies will shift to
> Switzerland, and Zug's Jud also highlighted the country's neutrality
> and reliability as an attraction to energy companies who do business
> in less stable countries.
>
> "We are not reckoning on an unusually strong boom, but a continual and
> sustainable growth on the scale of the last few years and decades,"
> Jud said.
>
> Companies say Switzerland's attractiveness as a corporate location
> goes beyond tax to include easy and efficient transport, a high
> quality of life high and well-trained staff.
>
> In the current climate, the attractions for the companies that move
> clearly outweigh one drawback: by making the switch they potentially
> sacrifice inclusion in stock market indexes such as the closely
> watched benchmark Standard & Poor's 500.
>
> "In the past and most recently with Transocean, Standard & Poor's has
> ruled that the process of redomesticating to Switzerland renders a
> company 'ineligible for continued inclusion' in the S&P 500," said
> Macquarie Research analyst Angie Sedita in a note.
>
> In buoyant times, inclusion in such indexes has offered access to
> equity capital. But the S&P 500 has fallen more than 50 percent since
> October. (Additional reporting by Braden Reddall in Houston; Editing
> by Sara Ledwith) ($1=1.158 Swiss Franc)
>
> On Fri, Mar 13, 2009 at 9:20 AM, Eric Sandberg <sanderico1 at gmail.com>
> wrote:
> > Brad, Bill,
> >
> > Speaking of Ron Paul ....
> >
> > He's sponsoring a bill right now that would enable the auditing of the
> Fed.
> > Myself, I can't imagine anyone better to audit right at the minute.
> >
> > Here's a link to petition your congressman to get behind this as
> > co-sponsors.
> >
> > http://www.campaignforliberty.com/campaigns/auditthefed.php?projid=16
> >
> > Here's a list of congressmen already on the bandwagon.
> >
> > http://www.dailypaul.com/node/85929
> >
> > The RNC called me up the other day looking for more money. I have to
> admit
> > sending them some before the election, hoping to avoid having The O One
> > become our Messiah, sort of a "lesser of two evils" kind of thing. I told
> > them that they had sure better get to thinking a lot more like Ron Paul
> if
> > they ever wanted to see any more of my money.
> >
> > Rik
> >
> > On Fri, Mar 13, 2009 at 8:44 AM, Bill Effros <bill at effros.com> wrote:
> >>
> >> Oh, I love Hong Kong -- I may have some "Hello China -- Goodbye GB"
> >> T-Shirts left over from the turn-over -- what's your size?
> >>
> >> Begger's Chicken!
> >>
> >> I'll note the fast pass for my grand children -- thanks.
> >>
> >> Obama is clueless -- he just reads what others write.  The economists
> >> surrounding him are committed to their positions and now must play them
> out,
> >> ignoring the fact that when Bush was deficit spending they condemned
> >> him--now they have taken the position that he didn't spend enough soon
> >> enough.
> >>
> >> Of course it won't work.
> >>
> >> You gotta admire Ron Paul for a lot of things.
> >>
> >> But just like Rik, being right ain't enough.
> >>
> >> Protect your own.
> >>
> >> B.
> >>
> >>
> >>
> >> Brad Haslett wrote:
> >>
> >> Bill,
> >>
> >> They have a thing now that may not have existed when you were there
> >> called "Fast Pass". You get a reservation for a time window to the
> >> most popular rides.  The system won't allow you to hold more than one
> >> reservation at a time. This is Cora's 3rd or 4th trip so she knows the
> >> park pretty well - we just follow along.  Thank goodness she's grown
> >> out of her infatuation with Ariel.  I waited in line 90 minutes so she
> >> could spend 15 seconds with a big-boobed redhead in a mermaid costume.
> >>  Come to think of it, it wasn't all that bad! Disney is spending 24
> >> Billion building a new park in Shanghai as we speak.
> >>
> >> As the article pointed out, China has 2 Trillion in currency reserves
> >> they can blow through before they start deficit spending.  Of course,
> >> half of that is held in US dollars and that is what they are worried
> >> about.  US trade is a huge component of their foreign exchange but
> >> China has been building business relationships all over the Pacific
> >> Rim.  According to my conversation with Jia last summer, about 70% of
> >> their manufacturing capacity is for internal consumption.  That last
> >> 30% of capacity is where they make their money. Their leadership is
> >> facing huge social problems and unrest in the Pearl River Delta
> >> because so many jobs have been eliminated and workers are being forced
> >> to go home to the countryside.  China is still primarily an agrarian
> >> society so there's a lot of countryside to go home to.  It is easy to
> >> lose sight of that fact when you're inside a modern city like Beijing
> >> or Shanghai.  Take a train anywhere outside the city and you're
> >> reminded that there are still 900 million peasants.
> >>
> >> To answer your second question, China won't buy US debt if they're not
> >> selling to the US. That is why all the bold talk about protecting
> >> American workers by limiting free trade is so much BS.  It didn't work
> >> with Smoot-Hawley in the 30's and it sure as hell won't work now if we
> >> plan to borrow our way to prosperity.  Go to any premier hotel in any
> >> major city in China and you'll find a lot more Europeans and Asians
> >> from developed countries than Americans.  We tend to think of
> >> ourselves as the center of the universe - the Chinese don't.
> >>
> >> We did some extensive homework over the weekend on Chinese tax law.
> >> My employer has a bid out to expand the pilot domicile in Hong Kong
> >> (which mans the hub in Guangzhou - two hours away).  Hong Kong has
> >> separate laws from the Mainland but both are favorable to ours.  We've
> >> decided to stay put for the time being because of Cora's educational
> >> needs.  Down the road - who knows.  I've got a friend from my Bonanza
> >> list who lives there and would offer me access to his airplane.  The
> >> sailing there is pretty good as well.  The biggest downside is the
> >> pollution.  China has a lot of work to do in that area but they're
> >> slowly working on the problem.  We didn't solve our acid rain and
> >> polluted river issues overnight and neither will they.  Most
> >> certainly, they won't wreck their economy looking for an immediate
> >> fix.  I'm all in favor of "green energy" but it won't happen overnight
> >> and it won't happen by the government deciding who the winners and
> >> losers are.  We may very well wreck our economy by trying though.
> >>
> >> Brad
> >>
> >>
> >>
> >> On Fri, Mar 13, 2009 at 7:49 AM, Bill Effros <bill at effros.com> wrote:
> >>
> >>
> >> Have fun at Disney World.
> >>
> >> Of course it's been many many years since I've been there, but we used
> >> to get up very early to arrive at opening time.  We could just walk from
> >> one ride to the next for a couple of hours, starting at the most popular
> >> and avoiding any ride with a line.  When there's no line you can do the
> >> best rides over and over if you want to.
> >>
> >> You know how old I am, so you know how long ago that was -- don't know
> >> if this trick still works -- but it's something to consider.
> >>
> >> B.
> >>
> >> PS -- How do you suppose China plans to finance its own deficit
>  spending?
> >>
> >> PPS -- If Chinese exports to the US decline, how will China be able to
> >> buy an increasing quantity of US debt to finance our increasing deficit
> >> spending?
> >>
> >>
> >>
> >>
> >>
> >> Brad Haslett wrote:
> >>
> >>
> >> "Inside China there has been a lot of debate about whether they should
> >> continue to buy Treasuries."
> >>
> >> Well duuuuh!   China has been sending "polite" messages for weeks that
> >> they see through this scam and aren't interested in being paid back in
> >> inflated dollars. Did the Sec. of the Treasury think that based on his
> >> Asian Studies degree and time spent living in China that the Chinese
> >> are stupid?  I think now would be a good time to invest in WD-40
> >> because those printing presses are going to need a lot of lubrication.
> >>  Maybe ink and paper would be good investments as well. Why didn't
> >> someone in the American media just pick-up a Beijing phone book and
> >> call the first Wong, or Shen, or Kung their finger landed on and ask?
> >> A month ago our Dear Leader told us we were facing the worst disaster
> >> since the Great Depression, and that we may not recover from it if we
> >> don't spend a Trillion dollars we don't have immediately on welfare,
> >> health-care, green energy, etc. Now that the money we don't have has
> >> been committed but not yet spent, Dear Leader tells us things are not
> >> so bad. I'm confused, but this is my first Great Leap Forward
> >> experience so that's understandable. The Chinese have "been there,
> >> done that" and they ain't buying.
> >>
> >> Someone else run the world for a few days.  We're taking Cora to
> >> Disney World for Spring Break this afternoon. If I have to listen to
> >> fantasy talk from someone with big ears, I prefer M-I-C-K-E-Y!
> >>
> >> Brad
> >>
> >> -------------------
> >>
> >> Mar 13, 6:21 AM (ET)
> >>
> >> By JOE McDONALD
> >>
> >>
> >> BEIJING (AP) - China's premier expressed concern Friday about its
> >> massive holdings of Treasuries and other U.S. debt, appealing to
> >> Washington to safeguard their value, and said Beijing is ready to
> >> expand its stimulus if the economy worsens.
> >>
> >> Premier Wen Jiabao noted that Beijing is the biggest foreign creditor
> >> to the United States and called on Washington to see that its response
> >> to the global slowdown does not damage the value of Chinese holdings.
> >>
> >> "We have made a huge amount of loans to the United States. Of course
> >> we are concerned about the safety of our assets. To be honest, I'm a
> >> little bit worried," Wen said at a news conference following the
> >> closing of China's annual legislative session. "I would like to call
> >> on the United States to honor its words, stay a credible nation and
> >> ensure the safety of Chinese assets."
> >>
> >> Wen's comments foreshadowed possible appeals to President Barack
> >> Obama, who will meet with Chinese President Hu Jintao at a London
> >> summit of leaders of the G-20 group of major economies on April 2 to
> >> discuss the global financial crisis.
> >>
> >>
> >> Analysts estimate that nearly half of China's $2 trillion in currency
> >> reserves are in U.S. Treasuries and notes issued by other
> >> government-affiliated agencies.
> >>
> >> Washington is counting on China to continue buying Treasuries to fund
> >> its $787 billion stimulus package. Last month, visiting Secretary of
> >> State Hillary Rodham Clinton sought to reassure Beijing that
> >> government debt would remain a reliable investment.
> >>
> >> "They are worried about forever-rising deficits, which may devalue
> >> Treasuries by pushing interest rates higher," said JP Morgan economist
> >> Frank Gong. "Inside China there has been a lot of debate about whether
> >> they should continue to buy Treasuries."
> >>
> >> The comments come as finance ministers and central bankers of the G-20
> >> gather in London this weekend to discuss the crisis and possible
> >> remedies.
> >>
> >> U.S. Treasury Secretary Timothy Geithner is pressing for a new
> >> coordinated stimulus but European governments are reluctant to take on
> >> more debt before they see how current plans are working. The Europeans
> >> want to emphasize the need for greater regulation of markets,
> >> including a crackdown on tax havens and increased control over hedge
> >> funds.
> >>
> >> In Beijing, Wen expressed confidence China can emerge from its slump
> >> "at an early date," and said the government is ready to expand its 4
> >> trillion yuan ($586 billion) stimulus to boost growth in the world's
> >> third-largest economy.
> >>
> >> Communist leaders worry about rising job losses and possible unrest
> >> amid a trade slump that saw Chinese exports fall 25.7 percent in
> >> February from a year earlier. They have promised to spend heavily to
> >> create jobs and boost exports.
> >>
> >> "We already have our plans ready to tackle even more difficult times,
> >> and to do that we have reserved adequate ammunition," Wen said. "That
> >> means that at any time we can introduce new stimulus policies."
> >>
> >> In nearby Japan, Prime Minister Taro Aso called Friday for a fresh
> >> stimulus to help lift the world's second-largest economy out of "an
> >> unprecedented economic crisis." The comments helped spark a rally in
> >> Japan's stock market, where the Nikkei 225 stock index surged 5.2
> >> percent.
> >>
> >> China's Wen and other officials point to rising bank lending, power
> >> demand and other signs the stimulus is taking effect. But growth in
> >> retail sales is weakening, suggesting it has yet to spur private
> >> sector spending and investment, which analysts say will be key to its
> >> success.
> >>
> >> Wen said Beijing can meet its 2009 growth target of 8 percent, despite
> >> skepticism by private sector economists, who expect as little as 5
> >> percent. That would be the strongest of any major country but could
> >> lead to more waves of job cuts.
> >>
> >> "I really believe we will be able to walk out of the shadow of the
> >> financial crisis at an early date," he said. "After this trial, I
> >> believe the Chinese economy will show greater vitality."
> >>
> >> The premier promised to focus on job creation and give more help to
> >> smaller companies, which he said generate 90 percent of Chinese new
> >> employment.
> >>
> >> "We will pay all attention possible to this issue and we will never
> >> overlook this issue," he said.
> >>
> >> Wen said Beijing wants the London summit to focus on the plight of
> >> poor countries.
> >>
> >> "We must see to it that we show concern for developing countries, and
> >> help developing countries - the least-developed ones in particular -
> >> become an important topic on the agenda," he said.
> >> _______________________________________________
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