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  • winsabokk winsabokk Mar 31, 2011 5:07 PM Flag

    Cross-border yuan settlement/Brazil Won't Recognize China As Market Economy

    Just 2 months into 2011 and already Cross-border yuan trade settlement has surpased all that of 2010 by almost 50%.

    And FWIW, I think China will be doing more to revalue it's currency soon. See below WRT Brazil using it's influence and throwing it's weight around a bit.

    And I can't blame them. Trading raw commodities for finished goods manufactured elsewhere would only hurt the Brazilian economy in the long run.

    So once China revalues, then maybe they will talk.

    Of course, the US is in Brazil's corner WRT this Chinese currency issue and once China revalues, prices for finished goods in USD's are liable to go up, up, and away in the US as well as in most OECD countries....

    And that might give another leg up in commdity prices as the Chinese get more buying power.


    Which will in turn give other emerging mkts that are commodity driven another boost in terms of pricing power ....atleast in USD's.

    Already, Brazilian ethanol processors are finding it cheaper to buy US ethanol than make it themselves.

    So as the USD falls on a relative basis, inflationary pressures in the US will catch up and become more apparent just like people elsewhere are finding.

    ( FWIW, I still think we'll see real/ USD parity within the next decade so USD-based investors need to protect themselves if purchasing power is of any concern)

    But if Bernanke thinks this will help US competitiveness, he's out of his mind.

    The USD currency devaluation that we are likely to see merely recognizes past misdeeds.

    So I doubt very much that the US will get much of an economic boost from this lowered valuation.

    That is unless the US govt wants the people to become 'hewers of wood and drawers of water' again.

    What's everyone going to do, make more ethanol grow more subsidized corn the old fashioned way?

    How much more devaluation will Bernanke need to do to get everyone back to work?

    Keep in mind, as the dollar falls, energy prices will go up and hurt US competitiveness in buying oil which in turn hurts industrial competitivess as well as the US balance of payments which also need to be financed.

    But not to worry, Obama is laying the groundwork for more US oil independence.

    Damn the torpedoes, full speed ahead ....with batteries.

    Talk about painting yourself in a corner...

    Burn all your energy bridges and limit our options.

    Obama/ Bernanke, what a team.

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    • wins

      I can't find your last post on this thread(from last night). I think it was deleted... no ?

      • 2 Replies to rgneckow
      • Yeah, it got deleted. see if this works.


        Here's some more stuff on taxes and transfer pricing along the lines that I discussed earlier.

        Mostly to do with large US corps using ongoing strategies to beat the tax system.

        Concept is to shift as much revenues as possible to a low tax jurisdiction and minimize taxes.

        And it seems its mostly tech firms along with big pharma that are most able to get away with this nonsense along with the big Financials.



        this allows firms the likes of GOOG to get away with an overseas tax rate of 2.4%.

        And of course, this lowers overall avg effective tax rates overall because it's an increasingly common practice.

        So when Musky quoted his 'List of countries by tax revenue as percentage of GDP', indicating that the US compared favorably, that's what I was responding to.

        US tax rates from that point of view (i.e. ranked as a % of GDP among countries) only look low because of these large US based multinationals that get to play these games and skew what the overall avg effective tax rates are as related to GDP.

        But this is meaningless for small domestic firms.

        And since it's the large firms doing this and the practice is increasingly common, it really gives the wrong impression as to what the tax situation really is like in the US ....especially for domestically oriented firms.

        So the prescribed rates in the US are not that low which is what Muskie's link might lead one to believe.

        Vewy deceiving!


        << The heart of Google's international operations is a silvery glass office building in central Dublin, a block from the city's Grand Canal. In 2009 the office, which houses roughly 2,000 Google employees, was credited with 88 percent of the search juggernaut's $12.5 billion in sales outside the U.S. Most of the profits, however, went to the tax haven of Bermuda.>>

        And this is what I was referring to the day before yesterday but Muskie didn't seem to want to have any part of it.

        Whether deliberate or not, I'm not sure so that's why I asked him about his 'angle of inclination' lol.

        --------------------

        Anyway, there are many such examples of large S&P 500 tech firms and big pharma that do the same type of thing in order to minimize their taxes.

        So to maybe clarify some of what I meant the day before yesterday: In terms of the domestic US economy, it's not so important what the effective avg tax rate that US corps might pay when it's so skewed by the large S&P 500 firms if smaller domestic firms pay at a much higher prescribed rate.

        And this effective rate varies a lot depending on the nature of the company and how aggressive they are in pursuing tax avoidance strategies.

        Of course, if all US companies with multinational sales and profits paid tax at the prescribed US rate on their worldwide income (subject to credit for foreign taxes paid) , taxes as a % of GDP would be a heck of alot higher than that chart that Musky showed us.

        Of course, smaller domestic oriented US firms DO pay taxes at much higher effective rates because they don't have nearly the same opportunity to play Dublin 'Dutch Sandwich' schemes.

        IOW, small firms pretty much pay the prescribed rate... subject to tax write-offs etc that might skew things once in a while.


        ‘Dutch Sandwich’ saves Google billions in taxes


        http://www.msnbc.msn.com/id/39784907/ns/business-bloomberg_businessweek/

    • <<< I happen not to accept as fair the fact that 24 year old bankers make more than 50 year old teachers... But that is another story... I understand why and I understand the unlikelihood that this reality will not change. But it is still not fair. >>>

      I think everybody makes there own choice for profession when they choose their courses in the University... what's unfair about choices ? Did teachers just start making thousands of dollars less than bankers in the last 50 years ? I think everybody that choose a career as a teacher knew the salary before graduating from college.

      As for Mr. Buffet and his rich friends. In public they might admit that they should pay more taxes. If that is true, these are the very people taking full advantage of the tax laws, if not abusing the tax laws. So my question is "if they think they should pay more taxes... what is stopping them from paying till it hurts".... like the rest of us ? If they don't pay as much as they are forced to pay, or as much as they think they should pay... what's stopping them ? ... the law... lol.
      They just want to sound sympathetic in public.. that's all.

      And musk... how many Warren Buffets are there out there ? .... not many. That is not the best example.

    • wins... Please don't muddle the issue with another topic.
      Sorry guy, but we are talking about TAXES !!!!
      Do the topics have some common ground ? Yes, but I'm not talking about the person that you and musk are referring to that makes 10 million per year. Let's talk about incomes less than one million, where the numbers are more substantial.

      As for redistribution of wealth. I find it interesting that folks that are wealthy are not in favor of it, while folks with little are in favor of redistributing. Like if mentioned earlier today... a world of self interest prevails.

      However, since you mention the topic, I find it interesting that in Old Testament times of the Bible, I believe there was an example of such a thing. Check out this link, it's pretty interesting.
      http://www.cruzlaw.com/new_page_1.htm

      I can't comment on just how that would fly in this day and age.

    • Thanks for that.

    • RG, I think the difference between Musk's and your POV is WRT one of his central ideas being that redistribution of wealth so as to level the playing field is a good idea and you would disagree with that concept.

      And so do I.

      However, leveling the playing field is an honorable thought.

      I may get ticked off at Muskie but I wouldn't for a second say his heart isn't in the right place...i.e. his intentions are good.

      BUT wealth redistribution is not how to deal with the problem.

      Lets start with the idea that wealth HAS been increasingly concentrated into fewer hands over the years.

      And I agree with that observation.

      I would also agree that when wealth gets so concentrated it can be unhealthy from a greater societal point of view.

      The question is how do you deal with this issue.

      to me, wealth redistribution deals with the symptom, not the cause of the problem.

      And dealing with the symptom in the wrong way causes **more problems and it solves nothing.

      All it does is require continuous redistribution ad infinitum.

      And wealth redistribution absolutely kills ambition and incentive from the many that it takes from if carried out to extremes.

      Instead what we need to do is level the playing field (i.e. deal with the cause) so that those with wealth don't continue to have their niche protected and remain free from competitive forces.

      Of course, corruption is something that has to be looked into.

      Wealthy people and big corporations are famous for having things their way.

      They ensure that legislation doesn't present a barrier and that various tax loopholes remain open etc.

      I don't want to get into it here, but I'm also strong believer in high inheritance taxes (as a hammer only)when estates reach ridiculous levels (say 250-500 million?) which would be inflation adjusted over time).

      But this tax could be entirely avoided if estates get broken up into small enough pieces (say 25- 50 million?) thus ensuring that wealth gets divvied up at death.

      The idea is not for govt to receive the funds but to ensure that perpetual family dynasties (and connections to political power that tend to go with that) don't go on forever.


      As an aside, I would also want to ensure that family business could continue under the same management and control so depending on family circumstances(# children etc), business continuity could be ensured.

    • You funny.

    • <<I also think that tobacco, soda, chips and alcohol should be taxed for the maximum return -- because we all pay for the bad habits of others ... and why should we? Let them pay for their own cancers, diabetes and alcoholism.>>

      Ahhh more govt social engineering and behavioural modification as prescribed by musky.

      What is it with you?

      Why can't you live and let live? IOW, mind your own business.

      Can't you see govt has enough on it's plate already?



      <<Let them pay for their own cancers...>

      Do you not see the contradiction here?

      Of course, I guess you operate under the assumption that we live under a socialized HC system already and that's the only way to go.

      So that's the mindset you have from the get-go. Govt look after everything.

      OK so lets be consistent...
      If user pay is what you suggest,i.e "Let them pay for their own cancers...." etc, a shorter life span would reduce govt expenditure, no?

      I say let smokers smoke tax free. Subsidize potato chip consumption lol.

      It's the long-lived patients in retirement homes needing extended care that will kill us financially.

      Those that live to 90+ and run out of financial resources and rely increasingly on more and more govt support as they age.



      I say if you want the govt to save money in the long run, we tax the crap out of fruits, vegetables , granola and trail mix! LOL

      Of course, I'm joking but my point is, we should minimize govt's role in our lives.

      And people's own bad habits actually work to REDUCE govt expense for both HC and SS.

      So it IS user pay!

      good grief we have to learn to draw a line as to how far we let govt influence and dictate how we live.

      Seat belt laws, crash helmets for motorcycle/trail bike riding, life jackets , all kinds of things that are meant to save us from hurting ourselves already.

      Not that I object to these things but do we really need govt enforcement and financial penalties for people that might not want to wear a helmet on a slow recreational cruise in an off-road situation?

      How far do we want to go?

      Crash helmets for alpine /water skiiing too? Get caught, pay a fine.... Or fight it in court and make a bunch more administrative work for the legal system...Which means more govt employees which costs money!

      How about for young children climbing trees or tradesmen climbing ladders? Should we require helmets for that too?

      Where does it end?

      seems to me if you had it your way, landowners would be forced to prune all the lower limbs of apple trees (or face a fine) so kids couldn't climb them and get hurt!

      Arrrrgh

      Did your mom not let you go play outside as a kid?

    • I am not at all sure that how much you lose to taxes is a different conversation than how much you keep... same coin, different side.

      Success is its own reward. In the example above, the banker kept $800,000. I think that is quite a good reward. The teacher kept $26k... not so good.

      As for me... Well, no, lets talk about you, for a change... LOL...

      I completely accept as fair that when I make less, I pay proportionally less and when I make more, I pay proportionally more. I accept the fairness of a progressive tax structure.

      I happen not to accept as fair the fact that 24 year old bankers make more than 50 year old teachers... But that is another story... I understand why and I understand the unlikelihood that this reality will not change. But it is still not fair.

      I should also add, having written this before, that I think the tax structure should be Radically progressive over a certain level of income. Nobody needs to keep $100 million in compensation in a single year. I think -- and this is just one mans opinion -- that a $10 million annual income is quite sufficient to motivate people. I mean, after your first $10 million, the rest is gravy, right?

      Well we should tax gravy at 80%, or more. We should have hedge fund managers paying to get rid of Qadaffi, for cancer research, and for the conquest of space. You and I should not have to pay for this stuff b/c the system does not reward us sufficiently... and we just dont have the money.

      Many VERY rich people - like Warren Buffet -- agree with this. THAT is fair.

    • You're funny, you just changed the scope of the conversation. We are not talking about how much they kept, we are talking about how much tax they pay.... two subjects for Republicans, same subject evidently for Democrats.



      I can't make excuses for corrupt bankers, but what about all the good bankers in the industry ? Are there not bad teachers as well ?
      The banker did something wrong because they make a higher income than teachers ? You evidently make more money in the stock market than other people do, are you doing something something wrong because you make more money ? Should folks not as profitable at stock investing point a bad finger at you because of your success ? If the teacher wanted to be a banker and make more money, I think they had the same opportunity... no ?

    • I drink alcohol, with no apologies to society ;-)

      You think flat tax is fair. Ok, I get it.

      Here is what is not fair: After a 20% flat tax, the $1 million banker, who bankrupted your pension plan, keeps $800K while the $30K teacher, who taught your kid to read, keeps $24K. The banker goes to St. Tropez on a private plane, the teacher goes to the Bronx zoo on the subway.

      Not fair.

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