Showing posts from April, 2013

The Great Age of Decoupling

On April 23rd, the Pew Research Center released its analysis of recent US Census Bureau data. It supported with data, what the rhetoric was already suggesting.  During the first two years of the “US economic recovery”, the mean net worth of households in the upper 7% of the wealth distribution rose by an estimated 28%, while the mean net worth of households in the lower 93% dropped by 4%.  This is in the context of overall wealth increasing.   
This should come as no surprise to anyone who has been following the trends.  In that great documentary on the financial crisis called “The Flaw”, the point was made that the last time income inequality was this high was in the run up to the Great Depression.  Aside from the overall level of income inequality is the fact that the trend shows that the gap has been widening for a while.  Recent Gini coefficients that measure inequality demonstrate that it has been rising in the US and here in the UK. USA Tax Singapore This whole phenomenon becom…

Beware of the Currency War

So last week, the Financial Times reported that the UK Exchequer Secretary, David Gauke, held a number of high level meetings with U.S. businesses to assure them that the UK remains a respectable low tax country and that the Government had stuck to its plans in spite of public anger over corporate tax planning.  "Since the controversy about large corporations and tax broke last year, we have twice further announced further cuts in corporation tax," he said.  He told West Coast businesses that their ideas and intellectual property would be lightly taxed in the UK.  But he said that Britain was not a tax haven and had a "stronger reputation for respectability that some of our competitors" because it did not strike preferential deals with individual taxpayers. American Tax Singapore
In a previous blog I mentioned that the UK was at a crossroad.  Is it in her best interest to get closer to the EU (aka Germany), disengage from the EU and pivot to the Pacific (as Obama …

Beware of the Alchemists

A Mark Buchanan article in Bloomberg last week was called “Beware of Economists Peddling Elegant Models”.  In it, the theoretical physicist proposes that –  “Mathematics can be beguilingly elegant. It can also be dangerous when people mistake its elegance for truth.   Albert Einstein's theory of general relativity might be the best example of elegant math, capturing a wide range of subtle and surprising phenomena with remarkable simplicity.  Step toward the practical, though, and physics moves quickly away from elegance to makeshift usefulness.  There's no pretty expression for the operation of a nuclear reactor, or for how air flows past the swept wings of an aircraft.  Understanding demands ugly approximations or brute-force simulation on a large computer“.
A friend recently pointed out that there is also a book and YouTube video called the Alchemists of Wall Street which makes a similar point.  The point is that we cannot place all our trust in mathematics to model the rea…

Declining Confidence in Paper Currencies

The media has been all over the Cyprus story and particularly the proposed plan to tax savings account depositors.  The proposal is based on a sliding scale of between 6-10% of the value of savings deposits. Of course what many fail to acknowledge is that over the past several years, the U.S. Federal Reserve Bank printed trillions of dollars in new currency to fund government-sponsored bailouts of companies deemed “too big tofail” by politicians and regulators. Quantitative Easing (QE) on both sides of the Atlantic has helped drive inflation and consequent devaluing of dollars and pounds in a way not too dissimilar to Cyprus.
At the same time, the media has spun this bailout as being unique because it penalized ‘foreign’ (i.e. Russian) investors as opposed to Americans or Western Europeans. Despite this, there is something about the way in which Cyprus was handled that has scared many investors and ordinary savers.  The loss of wealth seemed too ‘direct’. 
A friend of mine has pointe…