693 How to create a Public Bank - Ellen Brown; 5 years jail for respected tax agent

How to create a Public Bank - Ellen Brown; 5 years jail for respected
tax agent

Newsletter published on 24 October 2014

(1) Without Monetary Reform, Jews will continue to rule the world -
Brother Nathanael
(2) How to create a Public Bank - Ellen Brown
(3) How Economists With Bad Ideas Wreck Your Life, the Economy, and the
World
(4) A serious depression is pending as a result of austerity - Michael
Hudson
(5) Close the tax loophole on inversions - Jacob J. Lew (Treasury Secretary)
(6) ATO targeting Tax Crime; 5 years jail for respected tax agent; Mark
Leibler co-operative

(1) Without Monetary Reform, Jews will continue to rule the world -
Brother Nathanael

    Brother Nathanael<bn@realjewnews.com> 17 October 2014 14:35

http://www.realjewnews.com/?p=973

A Platform For Monetary Reform

By Brother Nathanael Kapner

October 16, 2014 @ 8:47 pm

Money is the life blood of the economy but our money is diseased.

Our whole society has a pathological blood disorder with diseased money
making laws, jobs, courts, everything sick.

Our money is a debt scam run by Jewish shysters.

These are facts you can verify. Jews head the Fed. Look at the names:
Greenspan, Bernanke, Yellen, Fischer.

Now, there are two battles being fought: monetary policy and fiscal policy.

Monetary policy comes first. It’s who creates our money. Fiscal policy
comes second. It’s how government spends the money.

Who makes our money? It says the government right on the bill. But it’s
actually the Jews who make it, not the ‘United States Of America.’

IF the government DID make our money it wouldn’t have to borrow it and
there’d be no national debt.

In 1913, Warburg, Schiff, Rothschild, Untermeyer, blackmailed and bribed
politicians with perks, insider tips, and bennies to give them the power
to create money AT INTEREST on debt.

This is one of the greatest crimes in the history of man.

Now, the Jewish bankers love the Austrian School—an economic scheme with
a Jewish stamp—because it opposes government regulation of their crimes.

Austrians also claim that fiat money is bad because it creates inflation.

That’s a crock.

Historically gold standard money has always been largely fiat paper. We
were on the gold standard in the ‘roaring’ 20’s. It didn’t slow
inflation down at all. That’s why we call the 20’s ‘roaring.’

Fiat money is only bad if its quantity is controlled by bankers for
their profit.

But it can be good like the greenback if its quantity is controlled by
the government. Historically, the American government has a perfectly
transparent record of issuing the legally allocated amount.

Either way fiat money is necessary. You can’t operate credit cards,
ATM’s, and debit cards without electronic fiat money.

I’m calling for a Nationalist Convention on Monetary Reform to replace
our sick money with healthy money.

The platform I’m presenting is the Chicago Plan which is already widely
recognized by economists.

Michael Kumhof of the IMF recently gave a paper on the Chicago Plan
which made a big splash in financial circles.

Martin Wolf of the Financial Times came out for the Chicago Plan. He
took flak.

And Dennis Kucinich sponsored legislation based on the Chicago Plan.

[Clip: “I propose legislation that will put the Fed under Treasury.
Legislation that will enable the United States government to not have to
borrow money from banks.”]

This is a band wagon fighting to get lined up. We need to pile it on and
help organize it.

Occupy backs it. Bill Still and Ellen Brown support it.

Here’s the Plan.

The government takes over the Fed from the Jews. The Treasury creates US
dollars without borrowing anything. Borrowing becomes unnecessary.
National debt disappears.

The government spends or lends the new money into circulation.

Elected officials, not Jewish bankers, periodically adjust the quantity
issued. That controls inflation based on fixed legal formulas, not on
banker profits.

Under the Chicago Plan, banks can’t create US dollars any more. They
need to get them the hard way, through earnings just like we do, or
through deposits. They can’t lend money they pretend to have.

The government stops selling bonds, like T-Bills, and redeems the old
ones with the new money.

Look, people with no jobs don’t have money. We want to get money into
their hands and collection agencies off their backs.

One way is by funding the rebuilding of our decaying infrastructure,
creating jobs; giving low interest loans to small businesses;
refinancing student loans at lower interest; and making student loans
eligible for bankruptcy.

Another way is through direct distribution. This may be necessary with
all our jobs offshored or taken over by robots. Economies need
purchasing power—money in the hands of the people—to succeed.

But first comes monetary policy…how our money is created. It’s in the
interests of both conservatives and liberals.

We can have a truce on fiscal policy long enough to get monetary policy
passed.

Monetary Reform is the mother of all reform. Without it Jews will
continue to rule the world.

(2) How to create a Public Bank - Ellen Brown

From: Ellen Brown <ellenhbrown@gmail.com> Date: Tue, 14 Oct 2014
15:43:41 +0000

http://www.truth-out.org/news/item/26800-building-an-ark-how-to-protect-public-revenues-from-the-next-meltdown

Building an Ark: How to Protect Public Revenues From the Next Meltdown

Tuesday, 14 October 2014 10:47 By Ellen Brown

North Dakota is the only state to post a budget surplus every year since
2001. The state owns its own bank. Other local governments would do well
to follow suit, not just for the promising profit potential, but as
protection against a "bail in" of public deposits. (Image: Troy Page / t
r u t h o u t; Adapted From: AComment, ribarnica and austrini / flickr)

Concerns are growing that we are heading for another banking crisis, one
that could be far worse than in 2008.  But this time, there will be no
government bailouts. Instead, per the Dodd-Frank Act, bankrupt banks
will be confiscating (or “bailing in”) their customers’ deposits.

That includes local government deposits. The fact that public funds are
secured with collateral may not protect them, as explained earlier here.
Derivative claims now get paid first in a bank bankruptcy; and
derivative losses could be huge, wiping out the collateral for other claims.

In a September 24th article titled “5 US Banks Each Have More Than 40
Trillion Dollars In Exposure To Derivatives, Michael Snyder warns:

     Trading in derivatives is basically just a form of legalized
gambling, and the “too big to fail” banks have transformed Wall Street
into the largest casino in the history of the planet. When this
derivatives bubble bursts (and as surely as I am writing this it will),
the pain that it will cause the global economy will be greater than
words can describe.

The too-big-to-fail banks have collectively grown 37% larger since 2008.
Five banks now account for 42% of all US loans, and six banks control
67% of all banking assets.

Besides their reckless derivatives gambling, these monster-sized banks
have earned our distrust by being caught in a litany of frauds. In an
article in Forbes titled “Big Banks and Derivatives: Why Another
Financial Crisis Is Inevitable,” Steve Denning lists rigging municipal
bond interest rates, LIBOR price-fixing, foreclosure abuses, money
laundering, tax evasion, and misleading clients with worthless securities.

Particularly harmful to local governments have been interest rate swaps
misrepresented as protecting government agencies from higher rates.

Yet as Michael Snyder observes:

     At this point our economic system is so completely dependent on
these banks that there is no way that it can function without them. . .
. We are steamrolling toward the greatest financial disaster in world
history, and nobody is doing much of anything to stop it.

Sidestepping the Steamroller

California Governor Jerry Brown sees it coming. Rather than rebuilding
the state’s crumbling infrastructure, rehiring teachers and other public
employees, and taking other steps to restore the Golden State to its
former prosperity, he has proposed a constitutional amendment requiring
all excess state revenues to go into a rainy day fund to prepare for the
next crisis.

But there is a better way forward.

In North Dakota – the only state to post a budget surplus every year
since 2001 – the state owns its own bank. When the state last went
over-budget in 2001 due to the Dot.com crisis, it merely issued itself
an extra dividend through the Bank of North Dakota – the only
state-owned depository bank in the country – and the next year it was
back on track.

Other local governments would do well to follow suit, not just for the
promising profit potential, but as protection against a “bail in” of
public deposits.

Forming their own banks can also protect local governments from a
looming and  unaffordable rise in municipal bond interest rates. State
treasurers fear that the Fed’s September 2014 exclusion of municipal
bonds from the category of “high quality liquid assets” that big banks
must hold will drive up bond rates, as it shrinks the market for those
bonds and drives up the interest required to attract buyers.

There is also the big money local governments lose to Wall Street just
in fees. A 2013 study found that the city of Los Angeles spends over
$200 million annually on big bank fees and management – more than its
budget to maintain its extensive streets and highways.

In a recent press conference, Mayor Javier Gonzalez of Santa Fe raised
provocative questions facing all elected officials today. He said:

     Right now our bank is Wells Fargo.  They serve the City according
to our contract.  But they also take city revenues, taxpayer dollars,
and they use those taxpayer dollars as part of their loan portfolio that
goes to places outside of Santa Fe and certainly outside of New Mexico.
  And when you think of that most basic concept of taxpayer money being
used to earn revenues for national banks that have reduced their small
business lending by 53%, you have to pause and wonder – is this the best
structure for our community?

Addressing these concerns, Mayor Gonzalez has launched a formal process
to study the feasibility of a city-owned bank of Santa Fe. Public
banking efforts are also underway in other cities and states.

How to Start a Bank Overnight

Forming a state or municipal public bank need not be slow or expensive.
An online bank could be run out of the Treasurer’s office and
operational in a few months. And the bank could be turning a profit
immediately – without spending the local government’s own revenues.

How? The way Wall Street does it with our public deposits and
investments: by leveraging. We could reclaim those funds and put them to
work for our local economies.

The bank could be capitalized with a bond issue (borrowing from the
public), and this capital could be leveraged into a loan portfolio that
is about eight times the capital base. The bond issue could be financed
with 1/8th of the interest accruing from this portfolio. The remaining
7/8th could be pocketed as profit.

This profit could be earned immediately and without risk, by buying
municipal bonds rather than issuing loans. That move could also help
municipalities, by guaranteeing that their bond rates remain low in the
face of threatened interest rate rises on the private market.

How to Start a Bank at Virtually No Cost or Risk

To demonstrate the safety and viability of the model, the bank can start
small and build from there. For startup capital, a new bank needs
anywhere from a few million to $20 million nationwide. (The amount
varies from state to state.) To be cautious and conservative, however,
let’s say $40 million.

Many cities have this money available in “rainy day” or reserve funds.
Many others have substantial investments, often underperforming, that
could be more responsibly invested as an equity position in a bank. In
California, for example, a whopping $55 billion is languishing in the
Treasurer’s Pooled Money Investment Account, earning a mere 0.23% interest.

Moving a portion of those funds into the state’s own bank would just be
good portfolio management. State pension funds are another investment
option.

If surplus funds are not available, capital can be raised with a bond
issue. (That is how the Bank of North Dakota got its start in 1919.)
Assume the interest due on these bonds is 3%. The local government’s
cost of funds will be $1.2 million annually.

At a 10% capital requirement, $40 million is sufficient to capitalize
$400 million in loans. But again assume the bank is started
conservatively at a 20% capitalization, for a loan portfolio of $200
million.

To make those loans, the bank will need deposits. These can be acquired
without advertising or other costs, by moving $200 million out of the
local government’s existing deposit account at JPMorgan Chase or another
Wall Street bank. (In North Dakota, all of the state’s revenues are
deposited by law in its state-owned bank.) Assume the new bank pays 0.3%
interest on these deposits, or $0.6 million annually as its cost of funds.

To satisfy the 10% reserve requirement for deposits (something different
from the capital requirement), $20 million of this deposit pool would be
held in reserve. The remaining $180 million are counted as “excess
reserves,” which can be used to make an equivalent sum in loans or bond
purchases.

Assume the excess reserves are used to buy local municipal bonds paying
3% annually. The return to the bank will be $5.4 million less $0.6
million in interest on the deposits, for a total of  $4.8 million annually.

To recoup the cost of the bond issue, $1.2 million can be paid from
these profits as a dividend to the local government. The bank will then
have a net profit of $3.6 million annually; and this profit will have
accrued to the local government as the bank’s owner, without needing to
advance any money from its own budget.

What if the state needs its deposits for its budget?

That is the beauty of being a bank rather than a revolving fund: banks
do not actually lend their deposits, as the Bank of England recently
acknowledged. Rather, they create deposits when they make loans. If the
state or local government needs more cash for its operating expenses
than the bank has kept in reserve, the bank can do what all banks do: it
can borrow. And if it has grown to be a large bank, it can borrow
quickly and cheaply – from other banks through the Fed funds market at
0.25%, or from the money market at 0.15%.

A smaller public bank might want to keep a larger cushion of deposits in
reserve for liquidity purposes. If it keeps 30% in reserve, in the above
example $140 million would be left to invest in bonds, generating $4.2
million annually in interest. Deducting $1.8 million as the cost of
servicing deposits and capital, the bank would still generate $2.4
million in profit, while providing a safe place to park public revenues.

What of the bank’s operating costs? These can be kept quite low. The
Bank of North Dakota operates without branches, tellers, ATMs, retail
services, mega-salaries or mega-bonuses. All those saved costs fall to
the bank’s bottom line.

Ballpark operating expenses for a small but growing public bank with a
President, Chief Financial Officer, Chief Lending Officer, Chief Credit
Risk Management Officer, Compliance Officer, and the systems required to
support a banking function are estimated at under $1 million per year. A
start-up focused on municipal bonds could be operated for even less.
This expense could come out of the initial $40 million in
capitalization, again without impairing the local government’s own
operating budget.

Manifesting the Bank’s Full Potential

Once a charter has been obtained and sound banking practices have been
demonstrated, the capital ratio can be dropped toward 10%. When the bank
has built up a sufficient capital cushion, it can begin to work with
community banks and other financial institutions for the broad range of
commercial lending that creates jobs and prosperity and generates
profits as non-tax revenue for the municipality, following the Bank of
North Dakota model.

The public bank can also invest in infrastructure loans to the state or
local government itself. Interest now composes about half of capital
outlays for public projects. Since the local government will own the
bank, it will get this interest back, cutting infrastructure costs in half.

These are just a few of the possibilities for a publicly-owned bank,
which can provide security from risk while generating a far greater
return on the local government’s money than it is getting now on its
Wall Street deposit accounts. As we peer into the jaws of another
economic meltdown, moving our public funds into our own banks is an
investment we can hardly afford not to make.

(3) How Economists With Bad Ideas Wreck Your Life, the Economy, and the
World

Author Jeff Madrick discusses what bad ideas cost us, and how to defeat
them.

Lynn Stuart Parramore

October 13, 2014

http://www.alternet.org/economy/how-economists-bad-ideas-wreck-your-life-
americas-economy-and-world

Many of us have long known in our guts that something about mainstream
economics doesn't add up. As a new, must-read book proves, we were
right. For decades, dubious, false and nonsensical ideas have dominated
public discourse and decision-making, from the irrational belief in the
efficiency of markets to a willful blindness about the inequalities of
wealth and economic opportunity in a system that has been rigged for the
benefit of the few. Author Jeff Madrick has just come out with his
latest challenge to the pernicious ideas that have captured the minds
and clouded the judgment of huge numbers of orthodox economists and the
legions who follow their advice: Seven Bad Ideas: How Mainstream
Economists Have Damaged America and the World. [3] In this brisk and
accessible volume, which should be on Econ 101 syllabi, Madrick outlines
the wrong-headed propositions, fictitious models, shoddy research, and
partisan agendas that have made a reexamination of the entire field long
overdue, especially in the wake of the financial crisis of 2008.
Madrick’s book is part of a healthy movement to set the record straight
and chart a new direction for an economics that can serve the whole of
society and lead to sustainable growth.

Lynn Parramore: Why does the invisible hand (the metaphor used by
18th-century economist Adam Smith to explain what he saw as the benefits
of individuals in pursuit of their own interests) get top billing in
your list of bad economic ideas? What value judgments come with this
model of how the economy works?

Jeff Madrick: Adam Smith’s invisible hand is really the hub of the
wheel: the other ideas are all spokes. It argues that if we all follow
our self-interest and the government stays out of the market—for
instance, it should not regulate prices—then the interaction of buyers
and sellers will result in the greatest prosperity for all.

The invisible hand suggests that all wages will be established at fair
levels and that regulation of financial markets can be minimized because
free markets will lead to the "right" price for securities or
commodities or currencies. On and on. But this is only an idea, if a
beautiful one. It tells us how a market may work, not how it actually
does work. Long after Adam Smith wrote about the invisible hand, as the
economics profession became increasingly ideologically conservative,
economists came to accept it as a rule, not a hypothesis.

LP: What do bad economic ideas cost the ordinary person?

JM: Bad economic ideas result in less income for most of us over time,
unfair rewards for work, and the exclusion of many groups. For example,
bad economic ideas do not deal with racism. They create a justification
for high pay for bankers and CEOs when such pay is not justified. Bad
economic ideas channel our precious savings into self-serving areas
rather into productive investments. They lead to financial crises when
many of us lose homes or a chunk of our pensions. On it goes.

LP: People with 401(k)s watching the stock market’s recent dip may have
heard experts cite the weakened European economy as a factor. How does
austerity economics in other parts of the world affect us at home?

JM: Austerity economics, which argues that we should cut budget deficits
through tax hikes and reduced social spending even in times of economic
weakness, have led to slow growth and outright recession in Europe.
Recessions result in very high unemployment rates—25 percent in Spain,
for example, and 50 percent for youth. European governments led by
Germany should be spending to stimulate growth, but they are caught in
the grips of bad economic ideas and so they are not doing this.

Americans pay a price because those countries export their slow growth
in the sense that they don’t buy what we make. They also jeopardize
financial markets because their debt levels rise as their incomes fall,
possibly sending up rates or leading to defaults. The U.S. has also
practiced austerity, if less so. The sequester took a lot of strength
out of the U.S. economy. Pro-austerity people argue that deficits reduce
a nation’s savings, but that is exactly what you want to do in weak
economies. Businesses will invest if they sell goods and services.
Savings will lie fallow, but conservative economists claim it is an
automatic adjustment, that savings will be invested. It is a tragically
wrong idea.

LP: You note that many conservative economists would like to see
government’s role in society and the economy drastically reduced. How
does this position impact our ability to respond to emergencies like Ebola?

JM: I think we have denigrated government in America since the 1970s and
clearly since Ronald Reagan. We react to Hurricane Katrina as if it is
an afterthought. As a result, our government is not ahead in all kinds
of fields — clean energy, for example. Or how about the technology
needed to restrain methane emission due to methane release, which could
be disastrous?

Ebola is yet another example. We wait for a crisis rather than trying to
get ahead of it. I fear Ebola most, but people should know this reflects
an anti-government attitude that started 40 years ago and has not truly
abated. It permeates economics today.

LP: You mention several forces that keep economists committed to bad
ideas, like the conformity required for professional success, the
pretense that economics is a science akin to physics, and the addiction
to simplistic models that do not account for the messiness of the real
world. Given these forces, how can we move toward a better economics?

Crisis should have moved us to a better economics, and to some small
extent it has. Economists have gone back to the drawing board. They are
trying to write finance into their forecasting models, something they
completely neglected before. They are a little more humble. But I would
say not much. They still think they have a special knowledge that others
don’t. Thus, they turned the seven bad ideas of my book into rules of
thumb rather than hypotheses that have to be adjusted to every new problem.

But it is easier to have a one-size-fits-all solution than to get down
and dirty and recognize the limitations of universalist ideas. The
notion of economics being akin to physics confers a certain kind of
prestige, but it is also easier to measure contributions, even if they
are wrong. These ideas are part of the sociology of academia, which
badly needs reforming.

(4) A serious depression is pending as a result of austerity - Michael
Hudson

http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&Itemid=74&jumival=12533

Why Are Stock Markets So Volatile?

A serious depression is pending as a result of austerity, says Professor
Michael Hudson, author of The Bubble and Beyond, and Finance Capitalism
and Its Discontents -   October 17, 14

Rel News Network Interview: Transcript

Why Are Stock Markets So Volatile?  SHARMINI PERIES, EXEC. PRODUCER,
TRNN: Welcome to The Real News Network. I'm Sharmini Peries, coming to
you from Baltimore.

On Wednesday this week, the S&P 500 took a dive and then partially
recovered itself in what stock market watchers call a selloff scare.

To talk about what is behind the volatility is our regular guest, Prof
Michael Hudson.

Thank you so much for joining us, Michael.

MICHAEL HUDSON, PROF. ECONOMICS, UMKC: It's good to be back.

PERIES: Michael, if you heard stock market reporting yesterday or saw
The New York Times' business section today, you would have thought we
were in another stock market plunge. What's behind this fluctuation?

HUDSON: Well, the markets are obviously confused, because there are two
sets of forces on the market, one positive and one negative. The
positive thing is that we're going into a real serious depression
[incompr.] austerity in the United States, austerity in Europe. And for
the last six years, since 2008, almost all of the gains have been going
only to the 1 percent. This has caused--they've kept the debts on the
book. It's creating large unemployment.

And so Europe and America are saying, this the best opportunity we've
had in a century. Here is a chance to do what we call reform. A century
ago, reform meant increasing wage levels and increasing living standards
and taxing the rentiers, but right now reform means, in Europe, breaking
the labor unions, lowering wages, and putting the squeeze on labor. So
all of that is supposed to be good for profits.

PERIES: But, Michael, just last week the Bureau of Labor Statistics in
the U. S. announced that unemployment is the lowest it has been in a
very long time. Why? This is contrary to what you're saying.

HUDSON: Well, it's true that the unemployment rate among people
searching for jobs is low, but there's been a large movement out of the
market for a number of things. Number one, fewer people are even looking
for work. They've given up. Number two, many of the jobs that are being
created are very low wage jobs at the low end of the spectrum or they're
part-time jobs. And if you work for part time at all, you're not
considered unemployed. If you've given up looking

So even though some of the wage levels, the minimum wage has been raised
in Massachusetts and out West, when the minimum wage level is raised,
that means the families that have been living on food stamps while
they've been working at McDonald's or at other low-wage companies, they
don't qualify anymore. So there's been very little change in the actual
family budgets.

The markets were expected to sort of somehow take off with higher profit
if there was a business cycle recovery. But it's become apparent that
we're really not in a business cycle anymore. We're at the end of a long
50-year cycle since World War II, where the debts have been rising so
much that all of a sudden the economy can't be financed by debt anymore.
And if the economy isn't financed by debt, that means that markets can't
grow, that all of a sudden what was fueling the growth and consumer
demand that's been increasing profits has come to an end. This is
especially apparent in Europe. So, basically, what people thought was
supposed to be good news turns out to be quite bad news.

PERIES: Michael, when the World Bank and, actually, the IMF adjusted the
global growth rates last week, which has been a trend--you know, they've
done it consecutively for a number of years now where their long-term
projections aren't just turning out the way they had planned and
projected. Why is that happening?

HUDSON: Well, they had thought when the World Bank and other people had
forecast a trend, they'd take past growth rates as they were up to 2008
and just said, what if they just continue as if growth occurs
automatically? But what was fueling all of this growth was just a
creation of debt, largely by inflating real estate prices, and bank
credit creation, and government spending that has run a deficit.

Now, economies, in order to grow at this rate, they need credit and they
need income. Now, the credit either can come from governments running a
budget deficit and pumping money into the economy, or it can come from
bank lending. But at the IMF meetings last week, it was clear that as
far as Europe's concerned, the banks have not recovered yet. The banks
are not lending. And American banks are not lending. There has not been
any lending in Europe or in the United States for new capital
investment. And it's capital investment to build factories, to make new
means of production that employs labor.

So you have this whole source of employment that was fueling the global
economy since World War II is coming to an end, capital investment to
increase. The only capital investment that's occurring really is in the
BRICS countries, not in America and not in Europe. So the kind of
employment that occurred in the past has not been occurring since 2008.
What we have is sort of living on the corpse of the economy that was
left in 2008 and it's basically an economic shrinkage process we are in.
There's no infrastructure spending. The infrastructure's aging. There's
no corporate industrial investment. That stopped. There's simply
services trade in the military.

PERIES: Michael, only thing that held up yesterday were some of the
transportation stocks. Why is that? And also explained to me--you wrote
to me saying 91 percent of the S&P 500 earnings are spent on stock
buybacks and dividends. What does that mean?

HUDSON: Well, in 2008 the Federal Reserve here and the central bank in
Europe lowered interest rates way down to almost nothing. It's one-tenth
of a percent in the United States. That means that banks can borrow from
the Fed to make loans. And what they've been lending for are for
corporate takeovers and for stock buybacks. In the stock market in the
last year, one-third of all of the stock transactions in the United
States are stock buybacks. That means corporations are using--the S&P
500 have used, I think, 54 percent of their earnings to buy back their
own stock, and they've been using another 40 percent or so to pay
dividends. Now, that has left only 9 percent of earnings of the S&P 500
available for new investment. Never before has this ratio been so low.

Most companies use their earnings to reinvest. They expand. They try to
earn more by investing more to produce more to make more profits to keep
on growing. But that hasn't been occurring at all. They've been using
their earnings basically to give stock options to the managers. The
manager say, okay, I'm paid according to how much I can increase the
price of the stock. I'm not going to use my corporate earnings of IBM or
General Motors or whatever, I'm not going to use these to build more
plant, 'cause then I'm going to use it to push up the stock so I'm going
to get more in my stock option. And you have activist stockholders such
as have been raiding Apple and other companies, like Carl Icahn, that
have been pressing Apple and others to actually borrow not to invest as
the textbooks say, but to buy back their own stocks. So you have
companies that are actually going into debt to buy their own stock.

Now, the low interest rates that in economic theory are supposed to make
it more profitable for companies to invest and employ more labor and
grow are having just the opposite effect. The low interest rates are
creating a new stock market bubble, which is why the stock market has
gone up so much since 2008. But this rising stock market bubble has only
been in the price of the stock. It's stocks going up without any new
capital investment, without any new hiring, and, in fact, with
downsizing and outsourcing. So they've turned the traditional textbook
model of economic recovery inside out.

And gradually the investors and the hedge funds are realizing, wait a
minute, this isn't your textbook kind of recovery; this is a kind of
recovery that's only occurring in the financial sector and real estate
and insurance, the FIRE sector, finance, insurance, and real estate.
It's not occurring in the economy at large. And if all of these earnings
on Wall Street are not recycled in the economy at large, then markets
are going to shrink, there's not going to be much of a rental income for
commercial space, and with shrinking markets you're not going to have
companies earning more profit on investment, even if they're holding
down wages.

PERIES: Michael, does this have anything to do with the murmurs out
there that the interest rates might actually increase?

HUDSON: There was a fear that the markets--that the Federal Reserve was
going to stop quantitative easing. They've been saying, look, we can
hold down interest rates forever. And at the IMF meetings last week, the
Europeans are saying, look, we worry that these low interest rates are
spurring a financial bubble.

Now, if interest rates go up, that means that all of a sudden all of
this borrowed money that's gone into stocks is going to disappear.
People are going to say, okay, we can't make money borrowing to buy
stocks, we can't make money borrowing for real estate, so we're not
going to pay back the bank loans. We're going to stop gambling.

And all of this was exacerbated by the U. S., the new Cold War against
Russia, because essentially the United States went to Europe and said,
let's you and Russia fight. So Europe imposed sanctions, and Russia
imposed harder sanctions. So the European economy is shrinking. And so,
because the European economy's shrinking, the euros going down. The
Eurozone is turning into a dead zone, and the Europeans are moving their
money into the United States. That's pushing up the dollar.

Now, if the Federal Reserve were to raise interest rates at this point,
this would not only slow, bring down the stock market and bring down the
bond market, but it would also bring so much money into the dollar,
because Europe cannot raise its interest rates, that this would price
American goods out of world markets. And that would shrink the market
for American industrial exports all the more. So the United States has
painted itself into a corner where it really can't increase interest
rates. Even though investors worry that the Fed is going to raise it,
the Fed knows that it can't raise interest rates without crashing the
market down.

PERIES: Michael, thank you so much for joining us.

HUDSON: It's always good to be here.

(5) Close the tax loophole on inversions - Jacob J. Lew (Treasury Secretary)

{the meaning is: The Federal Government is fanally serious about making
corporations pay tax - Peter M.}

http://www.washingtonpost.com/opinions/jacob-lew-close-the-tax-loophole-on-inversions/2014/07/27/2ea50966-141d-11e4-98ee-daea85133bc9_story.html

Close the tax loophole on inversions

By Jacob J. Lew

July 27

Jacob J.Lew is the U.S. treasury secretary.

Since we last overhauled our federal tax code, in 1986, countries around
the world have lowered their tax rates, leaving the United States with
the highest corporate tax rate in the developed world. At the same time,
the system has become full of inefficiencies and special-interest
loopholes. That is why it is so important that we reform our business
tax code to make the U.S. economy more competitive and to accelerate
economic growth and job creation. Taking this step will make the United
States an even more attractive place to do business and ensure that
capital and talent are allocated more efficiently in pursuit of high
economic returns, rather than low tax bills.

The president put forward a framework for business tax reform more than
two years ago and has been pushing Congress to move forward on it. The
president’s proposal would lay the foundation for broadly shared
long-term growth by lowering corporate tax rates, broadening the tax
base, simplifying the system and eliminating wasteful carve-outs and tax
expenditures. These reforms would result in savings that could be
reinvested in our nation’s aging infrastructure.

But one particular tax loophole has become increasingly urgent to
address: the fact that the law rewards U.S. corporations with
substantial tax benefits when they buy foreign companies and declare
that they are based overseas.

This practice, known as an inversion, has accelerated in recent months,
with a significant number of big corporations nearing completion of such
deals and reports of many more in the works. To be clear, there is
nothing wrong with cross-border merger activity; our economy is stronger
for our investment overseas and for foreign investment in the United
States. But these activities should be based on economic efficiency, not
tax savings. Many of these transactions have been motivated by — and
even expressly justified by — the tax savings. In touting these
transactions, individual firms have projected saving as much as $1
billion per year. On July 15, I wrote a letter to Congress and called on
lawmakers to address this problem as soon as possible.

Many of these companies are for all intents and purposes still based in
the United States, and they remain here to take advantage of everything
that makes the United States the best place in the world to do business:
our rule of law, our universities, our research-and-development
capabilities, our innovative culture and our skilled workforce. By
moving their tax homes overseas, these companies are making the decision
to reduce their taxes, forcing a greater share of the responsibility of
maintaining core public functions on small businesses and hardworking
Americans. That includes paying for the things all of us, particularly
U.S. businesses, depend on: our national defense, education, medical
research, courts and vital infrastructure such as roads, bridges and
airports. In addition, by allowing these transactions to continue, we
run the risk of eroding our corporate tax base and undoing the progress
we have made to reduce our budget deficits.

Enacting comprehensive business tax reform is clearly the best way to
address the problems in our tax code that trigger inversions, although
even if we cut our tax rates and broaden the tax base, we would still
need to enact anti-inversion provisions because companies always would
find countries with near-zero rates to which they could relocate.
Moreover, even the most optimistic know that the administration and
Congress need more time to complete bipartisan comprehensive business
tax reform. While the business-tax-reform process moves steadily
forward, the pace of inversions is increasing at breakneck speed. We
must confront this problem now, before our tax base is so eroded as to
damage the prospects of comprehensive reform.

The president’s proposal applies a common-sense approach to determine
whether a corporation has truly switched its base of operations to
another country — a company would not be able to move outside the United
States for tax purposes if it is still managed and controlled in the
United States, does a significant amount of its business here and does
not do a significant amount of its business in the country it claims as
its new home.

The president’s plan also would eliminate the incentives a U.S.
corporation has to acquire a foreign company and use its foreign address
to claim tax status beyond our borders. To make sure the merged company
is not merely masquerading as a non-U.S. company, shareholders of the
foreign company would have to own at least 50 percent of the newly
merged company — the current legal standard requires only 20 percent.
This approach is based on a bipartisan law enacted in 2004 and could
serve as a basis for a bipartisan solution again. Right now, leaders in
Congress have put forward strong legislation that adopts elements of
this plan.

For legislation to be effective, it must be retroactive. Current
proposals in Congress would apply to any inversion deal after early May
of this year. The alternative — legislation taking effect after the
president signs it into law — could have the perverse effect of
encouraging corporations to act more quickly, negotiate new deals and
rush to close those transactions before the bill is enacted. It would be
a mistake for Congress to pass anti-inversion legislation that creates a
race against the clock and encourages more, not fewer, inversions.

Making legislation effective before the date that a bill is enacted is
not a new or novel approach; the Congressional Research Service referred
to the practice as “quite common” in a 2012 report. A good example of
this is the 2004 anti-inversion legislation. Passed by a Republican-led
Congress and signed into law by President George W. Bush in October
2004, it had an effective date of March 2003.

For all these reasons, I call on Congress to close this loophole and
pass anti-inversion legislation as soon as possible. Our tax system
should not reward U.S. companies for giving up their U.S. citizenship,
and unless we tackle this problem, these transactions will continue.
Closing the inversion loophole is no substitute for comprehensive
business tax reform, but it is a necessary step down the path toward a
fair and more efficient tax system, and a step that needs to be in a
place for tax reform to work.

(6) ATO targeting Tax Crime; 5 years jail for respected tax agent; Mark
Leibler co-operative

https://www.ato.gov.au/General/The-fight-against-tax-crime/In-detail/Targeting-Tax-Crime-magazine/2014/Targeting-tax-crime--Project-DO-IT---October-2014/

Targeting tax crime: Project DO IT – October 2014

  Opportunity ending - make the right choice before it is too late.

       With its increasing capability to track money flows back to
beneficiaries, the ATO is one step away from knocking on the doors of
suspected tax evaders.

       ‘I want the people who have undisclosed money offshore to realise
they are on notice,' says Greg Williams, ATO Deputy Commissioner. 'If
they think they can remain undetected, they should think again. We are
just one step away from knocking on their door,' he says.

       'To support the enforcement of Australia’s tax and super laws,
the law gives us full access to the details of every single
international funds transfer involving Australia. Further, our
international tax treaty partners are sharing more information with us
every day,' he says.

       ‘Make no mistake; the ATO has a long reach. Just because
something happens outside Australia's borders doesn’t mean it’s beyond
the watchful eye of the ATO,’ the deputy commissioner says.

       The ATO is also working more closely with banks to get a better
understanding of the volumes of data available from AUSTRAC.

       ‘We now have a greater ability to follow the trail of money
across borders to the end beneficiary. Tax evaders should be aware that
complex structures designed to throw authorities off the scent won’t
stand up,’ Greg Williams says.

       During 2012–13, AUSTRAC information contributed to 1,428 ATO
audits that raised $572 million in additional tax. This is an increase
of 127% from the $252 million raised in 2011–12.

       For those who heed the warning and want to come forward, the
ATO’s offshore voluntary disclosure initiative, Project DO IT, should be
just the circuit breaker they are looking for.

       Project DO IT provides Australians with the opportunity to
voluntarily declare undisclosed or incorrectly reported offshore
financial activities, and avoid steep penalties and the possibility of
criminal charges.

       With just two months remaining until the 19 December deadline,
the ATO wants people to know that time is running out and they need to
act quickly.

       Case Study: 5 years jail for respected tax agent

       Those who think that that there is safety in numbers will find
that they are mistaken. It’s not a numbers game when it comes to
catching tax evaders; our access to data and ability to use it is
unprecedented, and momentum is only growing.

       Recently a high-profile, respected tax agent was found to have
used money laundering and other methods to help clients avoid paying
tax. The court was told she used banks in Vanuatu to channel millions of
dollars.

       When the ATO uncovered the fraud, every one of the tax agent’s
clients also came under suspicion, due to their tax file numbers being
associated with the crime. Some of those clients have already been
jailed under the Project Wickenby program while others are still being
investigated.

       The position of trust tax agents have with their clients and
their knowledge of the tax system means they have a critical role in
maintaining and protecting the integrity of that system. When that
position is used to take advantage of the system for the agent's own
personal gain and that of their clients, the penalties are severe.

       The tax agent was sentenced to five years in jail, with the judge
noting that the agent’s actions “were a significant breach of trust on
the part of a qualified and highly placed accountant.”

A good offer

Project DO IT – the ATO’s offer of reduced penalties for those who
disclose offshore income – is a genuine offer that advisers and relevant
individuals should take seriously. This is the advice of tax advisers,
Mark Leibler and Michael Bersten, in a panel interview with ATO deputy
commissioners, Michael Cranston and Greg Williams, hosted by David Koch.

'This is a unique once-in-a-lifetime opportunity. Anyone who doesn’t
take advantage of it would have to be insane, frankly,' Mark Leibler
says in the interview, while Michael Bersten warns those affected: 'If
you have something to disclose, you should come forward'.

Reinforcing what Mark Leibler and Michael Bersten say, Deputy
Commissioner Michael Cranston urges taxpayers to act. 'Project DO IT is
a good offer and those who let it pass by will regret it,' he said.

'If you need to disclose international financial activities, act quickly
and decisively. If we detect you first, you will be exposed to the full
force of the law, including severe penalties.'

Under the initiative, the ATO is providing a number of benefits. Most
significantly, taxpayers have an opportunity to avoid steep penalties
and the risk of criminal prosecution for tax avoidance.

‘If you have something to disclose you should come forward, it’s in your
own best interests to get some further advice and find out what your
position is,' Michael Bersten says.

'It's an offer so good that we couldn’t possibly offer it again,' Greg
Williams says.

Project DO IT is an opportunity for all Australians who have engaged in
previously unreported offshore financial activities to get their tax
affairs in order.

There are very few taxpayers who would not be eligible to make a
disclosure under this initiative.

The process has been designed with the assistance of advisers and
professional associations.

'The ATO has gone through a really fantastic process of consulting and
ensuring this is a really robust, fair and balanced program. This is in
the best interests of Australia and the individuals concerned,' Michael
Bersten says.

For more information on the offer, eligibility, and what you need to do
to disclose, refer to ato.gov.au/projectdoit