Democracy or Bust in Europe

Yanis Varoufakis
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European Union flag


BERLIN – “Europe will be democratized or it will disintegrate!” That maxim is more than a catchphrase from the manifesto of the Democracy in Europe Movement – DiEM25, the group I just helped to launch in Berlin. It is a simple, if under-acknowledged fact.
 
Europe’s current disintegration is all too real. New divisions are appearing seemingly everywhere one looks: along borders, within our societies and economies, and in the minds of Europe’s citizens.
 
Europe’s loss of integrity became painfully evident in the latest turn in the refugee crisis. European leaders called upon Turkish President Recep Tayyip Erdoğan to open his country’s borders to refugees from the war-torn Syrian city of Aleppo; in the same breath, they chastised Greece for letting the same refugees into “European” territory, and even threatened to erect fences along Greece’s borders with the rest of Europe.
 
Similar disintegration can be seen in the realm of finance. If an American citizen won some lottery jackpot, she would not care whether her prize dollars were deposited in a bank domiciled in Nevada or New York. This is not so in the eurozone. The same sum of euros has very different “expected” value in a Portuguese, Italian, Greek, Dutch, or German bank account, because banks in the weaker member states are reliant on bailouts from fiscally stressed governments. That is a sure sign of the single currency’s disintegration.
 
Meanwhile, political rifts are dividing and multiplying in the European Union’s heartland. The United Kingdom is torn on whether to exit or not – a reflection of its political establishment’s own chronic unwillingness both to defend the EU and to confront its authoritarianism. The result is an electorate prone to blaming the EU for everything that goes wrong, but with no interest either in campaigning for more European democracy or in leaving the EU’s single market.
 
More ominously, the Franco-German axis powering European integration has fractured. Emmanuel Macron, France’s Economy Minister, could not have put it more chillingly when he said that the two countries are edging toward a modern version of the Catholic-versus-Protestant Thirty Years’ War.
 
Meanwhile, southern countries languish in a state of permanent recession that they blame on Europe’s north. And, as if this were not enough, another menacing fault line has appeared along the former Iron Curtain, with governments of formerly communist countries openly defying the spirit of solidarity that used to characterize (at least in theory) the European project.
 
Why is Europe disintegrating? And what can be done about it?
 
The answer lies in the EU’s origins. The EU began life as a cartel of heavy industries determined to manipulate prices and redistribute monopoly profits through a bureaucracy located in Brussels. To fix prices across European borders, there was a need to fix exchange rates as well. During the Bretton Woods era, the Unites States provided this “service.” But as soon as the US ditched Bretton Woods in the summer of 1971, the Brussels-based cartel’s administrators began to design a European fixed exchange-rate system. After a series of (often spectacular) failures, the euro was born to superglue exchange rates together.
 
As with all cartel managers, the EU technocrats treated genuine pan-European democracy as a threat. Patiently, methodically, a process of de-politicizing decision-making was put in place.

National politicians were rewarded handsomely for their acquiescence, while anyone opposed to the cartel’s technocratic approach was labeled “un-European” and treated as an outsider.
 
Thus, although European countries remained democratic, the EU institutions, where sovereignty over crucial decisions was transferred, have remained democracy-free. As Margaret Thatcher explained during her last Parliamentary appearance as British Prime Minister, who controls money and interest rates controls the politics of Europe.
 
Handing Europe’s money and politics to a cartel administration did not only spell the end of European democracy; it has also fueled a vicious cycle of authoritarianism and poor economic results. The more Europe’s establishment chokes off democracy, the less legitimate its political authority becomes. That leads European leaders to double down on authoritarianism in order to stick to their failed policies when recessionary economic forces strengthen. This is why Europe is the world’s only economy that has failed to recover since 2008.
 
It is through this vicious cycle that Europe’s crisis is turning its peoples inward and against one another other, amplifying latent jingoism and xenophobia. Indeed, it is what has rendered Europe incapable of absorbing external shocks – like last summer’s refugee influx.
 
What we should do now is what democrats should have done in 1930 to prevent a catastrophe that is now becoming imaginable once again. We should establish a pan-European coalition of radical, social, green, and liberal democrats to put the “demos” back into democracy, countering an EU establishment that sees people power as a threat to its authority. This is what DiEM25 is about and why it is necessary.
 
Are we utopian? Maybe. But it is more realistic than the EU establishment’s attempt to hang on to our disintegrating, anti-democratic, cartel-like union. If our project is utopian, it is also the only alternative to a dystopia in the making.
 
The real danger is not that we shall aim too high and miss. The real danger is that Europeans train their eyes on the abyss and end up there.
 


G-20 Says Economic Risks Have Risen Globally

Finance ministers say all tools are needed to sustain growth, but don’t call for coordinated spending

By Ian Talley and James T. Areddy

  G-20 officials at the G-20 Finance Ministers and Central Bank Governors Meeting in Shanghai Saturday.

G-20 officials at the G-20 Finance Ministers and Central Bank Governors Meeting in Shanghai Saturday. Photo: Zuma Press
 
 
SHANGHAI—Citing mounting threats to the global economy, world financial chiefs vowed to accelerate long-promised economic overhauls to ease the burden on the easy-money stimulus policies that are fast running out of steam.

Finance ministers and central bankers from the Group of 20 largest economies meeting in Shanghai during the weekend sought to allay growing concerns that fissures in the global economy—including the potential for a sharp deceleration in the Chinese economy—could pitch the world back into recession.

“We will use all policy tools—monetary, fiscal and structural” to strengthen growth, boost investment and ensure stability in financial markets, the G-20 said in its official communiqué issued Saturday after two days of intense talks.

Global markets have shuddered in recent months amid a souring growth outlook, overall weak demand and anxieties that China’s economy may be falling faster than Beijing acknowledges and might potentially undermine an increasingly fragile global economy. The International Monetary Fund earlier this week said it likely would downgrade its forecast in coming months, calling for a coordinated program to boost demand.

“There’s clearly a sense of renewed urgency” among the G-20 countries, IMF Managing Director Christine Lagarde said after the meeting. “They don’t have much time left.”
 
The G-20 said “downside risks and vulnerabilities have risen,” pointing to volatile capital flows, the commodity price plunge and a potential exit of the U.K. from the European Union in a list of threats to global growth.

“Additionally there are growing concerns about the risk of further downward revision in global economic prospects,” the group said.

Although the G-20 said countries may need to explore ramping up spending, its promises fell short of calls by the IMF and others for a coordinated stimulus package to revive flagging output. And there was no discussion of any sort of currency accord, as suggested by some investors, as a way to temper global economic turmoil.

But the G-20’s statement reflected a gathering consensus that many countries are depending too heavily on monetary policy to stimulate growth. The statement reiterated a pledge for countries to refrain from cheapening their currencies to gain a competitive edge—another sign of concern about China, among others.

“We’ve been practicing monetary policy accommodation now for many years, and clearly that is an area of diminishing returns,” said Angel Gurría, secretary-general of the Organisation for Economic Cooperation and Development.

German Finance Minister Wolfgang Schäuble said debt-financed fiscal policies and easy money monetary policies may have prevented the financial crisis from spiraling out of control, “but they may have laid the foundation for the next crisis.”

Instead, G-20 countries said they would speed up implementation of previous commitments to restructure their economies, efforts meant to raise longer term growth prospects and encourage investors concerned about anemic expansions.

In 2014, the G-20 outlined a plan to add $2 trillion more in goods and services to the $75 trillion global economy. Two years later, the group has failed to deliver more than half of those promised reforms and growth is more than a half percentage point lower than forecast rate of 4.1%.

Japanese Prime Minister Shinzo Abe’s plan to use monetary easing, government spending and structural reforms to revitalize a country long mired in low growth has fallen flat. Brazil’s government, rocked by a continuing corruption scandal and in the middle of a two-year-plus contraction, has put off its reforms, including infrastructure investments needed to deepen the arteries of commerce. A thicket of regulations constrain foreign investment in India.

Central banks, however, have kept the easy-money spigots open. Europe and Japan are now delving into the uncharted—and some say risky—waters of negative interest rates in an increasingly desperate effort to jump-start perennially sluggish growth.

Measures such as those that push the value of currencies down haven’t been accompanied by promised structural revamps such as rewriting industry regulations and tax codes. That, officials say, is undermining the impact of monetary policy.

Turmoil overseas is weighing on one of the few bright spots in the global economy, the U.S., where the Federal Reserve is considering slowing the pace of rate increases. “We need to redouble our efforts to boost global demand rather than relying on the U.S. as the consumer of first and last resort,” U.S. Treasury Secretary Jacob Lew said.

Meanwhile, as China’s slowdown grinds on, capital is rushing for the exits by about $100 billion a month recently, stoking concerns that Beijing may revert to currency devaluation.

That, in turn, might not only spur investor panic about the world’s second largest economy, but also trigger a cascade of other exchange rates depreciations around the globe.

Senior Chinese officials worked hard to reduce anxiety about the nation’s economic transition.

China’s central bank Governor Zhou Xiaochuan played down the likelihood authorities intend to push the yuan lower.

Many officials praised Beijing’s statements. “There was a clear and credible communication from the Chinese,” said Pierre Moscovici, Europe’s economic commissioner.

Enough doubt lingers that G-20 countries said they would consult closely on exchange rate policies. “It’s a commitment to keep each other informed and avoid surprising each other because that’s what you do when you want to try to conduct your policies in an orderly way,” Mr. Lew said.

Financial sector policy makers agree that China remains one of the world’s fastest-growing economies and isn’t in crisis, cushioned by $3 trillion in foreign exchange reserves.

Uncertainties abound, however, about how successful Beijing will be in guiding the economy toward consumer demand and how much pain it is ready to endure in moving away from the investment-led model that produced years of growth.

The massive capital outflows and plunges in China’s stock markets that have erased trillions of dollars of market capitalization worry global markets that many Chinese are losing confidence.
Given the G-20’s slow uptake in delivering structural overhauls, markets may have reason to doubt the group’s ability to take the weight off central banks.

Koichi Hamada, a special economic adviser to Japan’s prime minister, suggested Tokyo should intervene in exchange markets to keep investors from pushing the yen’s value up.

“Sporadic interventions may be needed to punish speculators who are taking advantage of temporary market psychology to keep the yen far above its market value,” Mr. Hamada wrote in a blog post on Friday.



Bombing in Turkey

A bombing in Ankara moves Turkey closer to a fight with Syria—and Russia

Turkey blames the terror attack on Kurdish rebels in Syria. But the rebels are backed by America, and by Russia too
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A DEADLY car bomb in Ankara on February 17th just a few hundred metres from Turkey’s parliament has fanned the flames of the war that Turkish troops are fighting against Kurdish insurgents in the country’s south-east. It also threatens to pull Turkey yet deeper into the chaos in Syria and to sour its relations with America. Most worryingly, it has brought Turkey one step closer to a direct confrontation with Russia.

On Thursday, Turkish officials identified the man who detonated a car packed with explosives next to a military bus in the heart of the country’s capital, killing 27 military personnel and one civilian, as a member of the People’s Protection Units (YPG), a Syrian Kurdish militia. “A direct link between the attack and the YPG has been established,” said Ahmet Davutoglu, the Turkish prime minister. He claimed the outlawed Kurdistan Workers’ Party (PKK), a Turkish-Kurdish group that has fought Turkey’s government for decades, provided logistical support for the attack.

The YPG has no history of attacks inside Turkey. It denied any role in the bombing, and said the government was blaming it as a convenient excuse for launching a military operation in Syria. A senior PKK commander claimed ignorance of the attack, but did not exclude the possibility that other Kurdish militant groups were involved. “We know that previously such acts have been carried out in retaliation for massacres in Kurdistan,” Cemil Bayik told a Kurdish news agency. The PKK has been battling government troops and police in Turkey’s south-east since last summer; the fighting has left hundreds dead, including over 200 civilians, and displaced more than 100,000 people.

Metin Gurcan, a military analyst and columnist for al-Monitor, a website, finds the PKK’s denial unconvincing. “They have a record of trying to franchise violence without taking responsibility,” he says. “They may be trying to export the violence [from the south-east] to the west of the country."

On Thursday, a PKK roadside bomb killed six troops in Diyarbakir, a south-eastern province. The same day, Turkish jets pounded PKK bases in the highlands of northern Iraq.

The Ankara bombing has widened the rift between Turkey and its allies over the YPG. Turkey, which regards the group as a front for the PKK, wants America to suspend its co-operation with the militia in Syria. But Washington considers the YPG an important partner in the war against Islamic State (IS). It has acknowledged ties between the YPG and the PKK, which it labels a terrorist group, but refuses to place the two in the same category.

Since the attacks, Mr Davutoglu has doubled down. “We cannot excuse any NATO ally, including the US, of having links with a terrorist organisation that strikes us in the heart of Turkey,” he said on Thursday. The same day, his ministry of foreign affairs summoned the ambassadors of the five permanent members of the UN Security Council.

Turkish warnings appear to be falling on deaf ears. Late on Thursday John Kirby, a spokesman for the State Department, suggested that Ankara had yet to provide conclusive proof of the YPG’s involvement in the attack. He also ruled out ending American backing for the group. “I think I’ve said that they’ve been some of the most effective fighters against Daesh [IS], and they have been supported by the air from the coalition,” he said. “And going forward, I would expect that that sort of support…would continue.”

The two NATO allies will probably find a way out of the dispute. But the far deeper row between Turkey and Russia has now reached uncharted waters. Having traded threats since late November, when Turkey shot down a Russian jet that had briefly entered its airspace after a bombing run in Syria, the two sides are now embroiled in a proxy war. In past couple of weeks Russia has effectively provided the YPG with air cover, paving the way for the group’s advance against Ankara-backed rebel forces north of Aleppo. The Turks have responded by raining artillery fire on the YPG for several days in a row, hinting at a possible ground operation and allowing as many as 2,000 rebels to cross into Syria to check the Kurdish offensive.

On February 19th Mr Davutoglu stopped just short of accusing Moscow of engineering the bombing in Ankara. “I would like to warn Russia, which is giving air support to the YPG in its advance on Azaz [a key rebel stronghold], not to use this terrorist group against the innocent people of Syria and Turkey,” he said.

Meanwhile, the YPG has started to leverage its budding relationship with the Russians. In an interview, the head of the newly opened Syrian-Kurdish representation to Moscow, Rodi Osman, warned that any Turkish incursion into Syria would result in a “great war” with his hosts. “Russia will respond if there is an invasion,” he said. “This isn’t only about the Kurds, they will defend the territorial sovereignty of Syria.”

For that reason alone, a unilateral Turkish offensive in northern Syria has hitherto seemed highly unlikely. Whoever staged the Ankara bombing hopes to have made it less so. “For an actor, or a group of actors, who want to draw Turkey into Syria,” says Mr Gurcan, “this was the perfect attack.” 


No Brexit

Anatole Kaletsky

Double-decker bus in London, Great Britain

LONDON – Among the multiple existential challenges facing the European Union this year – refugees, populist politics, German-inspired austerity, government bankruptcy in Greece and perhaps Portugal – one crisis is well on its way to resolution. Britain will not vote to leave the EU.
 
This confident prediction may seem to be contradicted by polls showing roughly 50% support for “Brexit” in the June referendum. And British public opinion may move even further in the “Out” direction for a while longer, as euroskeptics ridicule the “new deal” for Britain agreed at the EU summit on February 19.
 
Nonetheless, it is probably time for the world to stop worrying. The politics and economics of the question virtually guarantee that British voters will back EU membership, even though this may not become apparent in public opinion polls until a few weeks, or even days, before the vote.
 
To understand the dynamics that strongly favor an “In” vote, start with the politics. Until this month’s deal, Britain’s leaders were not seriously making the case against Brexit. After all, Prime Minister David Cameron and his government had to pretend that they would contemplate a breakup if the EU rejected their demands.
 
Under these circumstances, it was impossible for either Labour politicians or business leaders to advocate an EU deal that Cameron himself was not yet ready to promote. The Out lobby therefore enjoyed a virtual monopoly of public attention. This situation may briefly persist, even though the EU deal has now been agreed, because Cameron has no wish to antagonize his party’s implacable euroskeptics until it is absolutely necessary; but as the referendum approaches, this political imbalance will abruptly reverse.
 
One reason is Cameron’s decision to release his ministers from party discipline during the referendum campaign. Initially viewed as a sign of weakness, Cameron’s move has turned out to be a masterstroke. Having been offered the freedom to “vote your conscience” on the EU deal, every significant Conservative politician has come round to support Cameron.
 
These newfound EU loyalists include two of the most potentially influential euroskeptics, London Mayor Boris Johnson and Home Secretary Theresa May. As a result, the Out campaign has been left effectively leaderless and has already split into two rival factions – one driven mainly by anti-immigrant and protectionist sentiment, the other determined to concentrate on neoliberal economics and free trade.
 
As the political tide turns, it can be confidently predicted that the British media and business opinion will follow, mainly because of direct financial interests. For example, Rupert Murdoch, whose outlets dominate the media landscape, needs membership in the EU single market to consolidate his satellite TV businesses in Britain, Germany, and Italy. Another powerful motivator for Murdoch, as well as for other media proprietors and business leaders, is to be on the winning side and to maintain good relations with Cameron, unless they see overwhelming evidence that he will lose.
 
That brings us to the main reason for ignoring current opinion polls: Only when Britain starts seriously debating the costs and benefits of leaving the EU – and this may not happen until a few weeks before the referendum – will voters realize that Brexit would mean huge economic costs for Britain and no political benefits whatsoever.
 
The economic challenges of Brexit would be overwhelming. The Out campaign’s main economic argument – that Britain’s huge trade deficit is a secret weapon, because the EU would have more to lose than Britain from a breakdown in trade relations – is flatly wrong. Britain would need to negotiate access to the European single market for its service industries, whereas EU manufacturers would automatically enjoy virtually unlimited rights to sell whatever they wanted in Britain under global World Trade Organization rules.
 
Margaret Thatcher was the first to realize that Britain’s specialization in services – not only finance, but also law, accountancy, media, architecture, pharmaceutical research and so on – makes membership in the EU single market critical. It makes little economic difference to Germany, France, or Italy whether Britain is an EU member or simply in the WTO.
 
Britain would therefore need an EU association agreement, similar to those negotiated with Switzerland or Norway, the only two significant European economies outside the EU. From the EU’s perspective, the terms of any British deal would have to be at least as stringent as those in the existing association agreements. To grant easier terms would immediately force matching concessions to Switzerland and Norway. Worse still, any special favors for Britain would set a precedent and tempt other lukewarm EU members to make exit threats and demand renegotiation.
 
Among the conditions accepted by Norway and Switzerland that the EU would surely regard as non-negotiable are four that completely negate the political objectives of Brexit. Norway and Switzerland must abide by all EU single market standards and regulations, without any say in their formulation.
 
They agree to translate all relevant EU laws into their domestic legislation without consulting domestic voters. They contribute substantially to the EU budget. And they must accept unlimited EU immigration, resulting in a higher share of EU immigrants in the Swiss and Norwegian populations than in the UK.
 
If Britain rejected these encroachments on national sovereignty, its service industries would be locked out of the single market. The French, German, and Irish governments would be particularly delighted to see UK-based banks and hedge funds shackled by EU regulations, and UK-based businesses involved in asset management, insurance, accountancy, law, and media forced to transfer their jobs, head offices, and tax payments to Paris, Frankfurt, or Dublin.
 
When confronted with this exodus of high-value service jobs and businesses, Britain would surely balk and accept the intrusive regulations entailed by Swiss and Norwegian-style EU association agreements. Ultimately, Brexit would not only force a disruptive renegotiation of economic relations; it would also lead to a loss of political sovereignty for Britain.
 
Or maybe just for England, given that Scotland would probably leave the UK and rejoin the EU, taking many of London’s service jobs to Edinburgh in the process. Once Britain’s political, business, and media leaders start drawing attention to these hard facts of life after Brexit, we can be confident that voters will decide to stay in the EU.
 


Rothschild: USA is the New Switzerland

by Jeff Thomas


At one time, tax havens took great pride in calling themselves just that, since low-tax jurisdictions provide people with freedom from oppressive taxation.

But, in recent decades, the Organisation for Economic Co-operation and Development (OECD, based in France but largely funded and controlled by the U.S.) has been on a rampage to crush tax havens.

The attacks have been regular and forceful, and although tax havens still exist around the world, every one of them has caved to a greater or lesser degree to ever more stringent OECD “international practices.” Presently, all tax havens live in fear of the OECD and its powerful enforcer, the U.S.

No measure has been more devastating to freedom from taxation than the U.S. Foreign Account Tax Compliance Act (FATCA). The secret of its success is that the U.S. fines banking institutions for not following the arbitrary FATCA guidelines. How can one country fine a bank in another country if that bank is following the laws of the country in which it’s located? Well, failure to pay the fine may result in the U.S. cutting the bank out of international transfers in the dollar system, which would collapse the bank.

Essentially, this is a “shakedown” operation, purported to focus on tax evasion but, in fact, focused primarily on demanding protection money from international banks. (According to Bloomberg Business, more than eighty Swiss banks have been subject to a total of roughly five billion dollars in penalties and fines imposed by the U.S.)

Not surprisingly, the OECD has spent decades castigating the very existence of tax havens, declaring them to exist solely for the purposes of money laundering, terrorism funding, tax evasion, and even “international prostitution” (no kidding).

In spite of the OECD’s condemnation of tax havens, the U.S. has, in recent years, created tax havens in several states and is being dubbed “the new Switzerland.” Of particular interest here is that the U.S. itself has not signed on to the OECD’s “international standards.” The U.S. is, therefore, imposing more stringent restrictions on others than it is willing to comply with itself. (Had Attila the Hun gotten into banking, this is the approach he might have used.)

Recently, the U.S. has lifted the veil on their ambitions by announcing further, more dramatic inroads into becoming a tax haven. Andrew Penney, a managing director of Rothschild & Co. in San Francisco, announced that the world’s wealthy can avoid paying tax by moving their wealth to the U.S. As the U.S. banks will not be subject to the draconian limitations that the U.S./OECD have forced on the world’s other tax havens, the U.S. will (presumably) take over the tax haven business.
In one fell swoop, the sanctimonious position taken by the U.S., portraying tax avoidance as unpatriotic and even criminal, has been turned on its head.

Rothschild, a dominant banking name worldwide, since the eighteenth century has a company in Reno, Nevada, just down the road from casinos such as Harrah’s and Eldorado, placing their new tax haven where “high rollers” might be found. Mister Penney has described the U.S. as “effectively, the biggest tax haven in the world,” although Rothschild & Co. have cautioned him not to publicise this view.

Now, it’s important in assessing this development not to point any undeserved criticism at the U.S.

They should not be criticised because:

• They offer client privacy.

• They offer freedom from U.S. taxation for non-U.S. citizens.

• They offer a haven for those who are subjected to excessive taxation elsewhere.

These are laudable practices. However, criticism may justifiably be made because the U.S. has spent decades vilifying these very practices, as practiced by other tax havens. Further, the U.S. has then done all it could to destroy those freedoms in the existing tax havens, even to the point of endangering the economies of those countries, then hypocritically offering the very same opportunities itself.

So… will the U.S. be “the new Switzerland” it’s claiming to be? I think not.

First, Americans cannot make use of the haven. That will mean that the U.S. government will be providing tax advantages to non-U.S. nationals that it does not provide to its own citizens. (The Isle of Jersey has a similar tax structure, which has allowed the OECD to come down heavily on them, crippling Jersey’s economy.)

In addition, this fact will not sit well with Americans, who will resent foreigners being more greatly advantaged in America than Americans themselves. The great majority of Americans have declared in polls that they already distrust their own politicians across the board. “Tax discrimination” will most certainly aggravate that existing resentment.

Second, the OECD have been fairly successful in their campaign to remove privacy from tax havens, through the characterisation of tax havens as centres for money laundering, terrorism funding, and tax evasion. For the U.S.-led OECD to accept the U.S. adopting the very same business practices that are the model for tax havens, the OECD loses its one effective weapon – the concept of tax avoidance as shameful.

More and more, the existing legitimate tax havens of the world have been bristling at the ever-increasing “international standards” demanded by the OECD. Many have outright refused to adopt standards that have not been adopted by OECD member countries. With the Americans jumping into the tax haven pool at the deep end, the tax havens of the world are likely to refuse to honour existing agreements, let alone take on more stringent trumped-up standards.

Third, with the U.S. going full blown into the tax haven business, it can be expected that they’ll welcome clients from France, Germany, the UK, etc. – countries whose wealthier citizens are the primary clients of existing tax havens. In doing so, the U.S.’s allies in the OECD will cry foul. It’s likely that they’d create their own tax havens in order to compete. This would mean that Germans would be making deposits in the U.S. whilst Americans would be making deposits in Germany. (The U.S. would end up as the greater loser, and the once-allied countries would be like a group of cats fighting over the same bone.)

Finally, there’s the question as to whether those who possess wealth would be attracted to the U.S. haven. To be sure, some would reason, “What could be safer? They’re the world’s most powerful country.” Others, though, would think it through more carefully. Already, many of them view the U.S. as though it has a sign at its entry, reading:

DANGER! Depositing your wealth in a U.S. financial institution will subject you to the whims of the U.S. government, which has recently passed considerable legislation for capital controls and confiscation of bank deposits.

They regard the U.S. as being deeply suspect, as the U.S. has been the world’s foremost danger to the retention of wealth in recent years. To them, the deposit of any wealth in a U.S. institution is paramount to placing their heads in the lion’s mouth.

The U.S. has fined the banks in the world’s tax havens of billions of dollars under a bogus premise, thereby endangering depositors. Will those same depositors now trust the U.S. to honour their deposits in the same way the victim banks did?

Historically, tax havens have been smaller countries whose economies were based largely on the success of their tax haven services. This simple fact is critical to trust. It means that they would collapse if they failed to honour their commitment to depositors. Those who have held wealth for generations understand that larger countries cannot be trusted as holders of their wealth, as they can pull out the rug at any time.

As long as taxation exists, there will be tax havens. The wealth will flow to those that are most likely to honour their commitments over the long term.

Editor’s Note: A big part of any strategy to reduce your political risk is to place some of your savings outside the immediate reach of the thieving bureaucrats in your home country. Obtaining a foreign bank account is a convenient way to do just that.

That way, your savings cannot be easily confiscated, frozen, or devalued at the drop of a hat or with a couple of taps on the keyboard. In the event capital controls are imposed, a foreign bank account will help ensure that you have access to your money when you need it the most.

In short, your savings in a foreign bank will largely be safe from any madness in your home country.

Despite what you may hear, having a foreign bank account is completely legal and is not about tax evasion or other illegal activities. It’s simply about legally diversifying your political risk by putting your liquid savings in sound, well-capitalized institutions where they’re treated best.

domingo, febrero 28, 2016

STATE OF MINDS / THE ECONOMIST

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Dementia

State of minds

China is ill prepared for a consequence of ageing: lots of people with dementia
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ON A stage decorated with tinsel and fairy lights, Liu Changsheng is singing “The East is Red” into a microphone, wearing a yellow and grey tracksuit. For Mr Liu, the Maoist anthem of the 1960s may arouse memories more vivid than those he has of his immediate past. Now in his seventies, he has dementia, an incurable brain disease that is often revealed by a loss of short-term memory. For two years Mr Liu has lived at the Qianhe Nursing Home in northern Beijing in a facility for around 75 dementia patients. They are among the few sufferers of this condition in China who receive specialist care.

Dementia has mostly been a rich-world sickness, because it becomes more common as people live longer. China is fast catching up. Life expectancy increased from 45 in 1960 to 77 now, and the population is ageing rapidly: one person in six is over 60 now; by 2025 nearly one in four will be. Factors that increase the (age-adjusted) risk of developing dementia are also on the rise, including obesity, smoking, lack of exercise and diabetes.

Already about 9m people in China have some form of dementia. In absolute terms, that is more than twice as many as in America. It is also more than double the number in India, a country with a population similar in size to China’s but a much younger one. Nearly two-thirds of China’s sufferers have the form known as Alzheimer’s, cases of which have tripled since 1990.

The number of Alzheimer’s patients may increase another fourfold between now and 2050.

China’s government is woefully unprepared for this crisis, with a severe lack of health-care provision for sufferers. So too is the public. Despite recent public-information campaigns, many Chinese regard dementia as a natural part of ageing, not as a disease, and do not know that it is fatal. Others see it as a psychological ailment rather than a degeneration of the brain itself. It carries a stigma of mental illness, making sufferers and their relatives reluctant to seek help.

This compounds the suffering caused by dementia: active management can sometimes slow its progress.

Even at the Qianhe Nursing Home, where Mr Liu lives, some aspects of the care appear crude.

A shared “activity” space for dementia sufferers has no games or toys to entertain them; relatives are discouraged from visiting more than once a week for fear of “disturbing” their kin (in the West, care homes encourage visits, which can be stimulating and provide a sense of warmth and familiarity). Some dementia patients end up in psychiatric wards, which cannot deal effectively with their specific requirements. There is an acute shortage of medical workers qualified to treat sufferers. One reason is that few are attracted to the work. Zhang Xiurong, 50, a care assistant at Qianhe, is paid less than 3,000 yuan ($450) a month, close to the average national migrant wage, to provide all patients’ basic needs 12 hours a day, with only four days off a month. “No Chinese parent wants their one daughter to work in a hospital cleaning bedpans,” says Michael Phillips of the Shanghai Jiao Tong University School of Medicine.

In the West most patients go to a care home for the final brutal stages of the disease, which can last more than a year. In China families carry most of the burden from beginning to end. The government has long underinvested in social care, assuming that adult children will take responsibility. But this is unsustainable. Plunging birth rates since the 1970s, exacerbated by a one-child-per-couple policy, mean that the number of working-age adults per person over 65 will fall by 2050 from ten to 2.5. Migration into cities is leaving some elderly people in the countryside without family members to care for them.

Need for new thinking
 
The government has been slow to recognise the scale of the problem. It funds some dementia research, but the money goes to scientists looking for a cure, rather than to those trying to find ways of alleviating the suffering of patients who have no chance of one. “People don’t get Nobel prizes or grants for developing a strategy for community care,” says Dr Phillips.

In any country care can be expensive, both for families and governments. In China the government will find itself having to spend much more as relatives prove unequal to the task.

Because family members rarely understand the condition, more than 90% of dementia cases go undetected, according to a study led by Ruoling Chen of King’s College in London. Sufferers will benefit when the government at last realises it has to step in.