About 'bad debt recovered'|...to have a policy change. There's still a distinction between the good guys and the bad guys. The good guys happen to be governments the US probably...
A number of large US corporations have been moving their corporate registration and headquarters to Switzerland from the Caribbean and Delaware recently. This is profoundly bad sign of something being very wrong for business in the USA being ignored by Washington, D.C. Then comes the news that the rats are jumping ship over at Citicorp and another danger sign is being ignored. The US government has gone into theatric hysterics for tarp financing and automobile industry bail out legislation ignoring quieter more dangerous signs in the economy. Originally the first company to move it's corporate organization to Switzerland in the last few years was the Philip Morris International unit from Atria which also spun off Kraft Foods a few years before . More recently a number of other US corporations have started moving to Switzerland. Why? That question lingered a while and then found the answer began to appear out of the mist. The reason why is a combination of Sarbanes Oxley with an emphasis on the Marked to Market accounting rule. A paper slip move across the Atlantic and into the Alps can save many a good solid company from the unnecessary accounting pressure of having to value its assets at the steepest decline shocks since the great depression. If this is the reason for the Swiss migration, the whole lot of American corporations should also consider making the move. The same sort of thing happened years ago when virtually all of American shipping companies re-registered their ships in Liberia or Panama, It all had to do with some underlying regulatory parameters to be avoided by keeping registration in the USA. The United States never really recovered the merchant marine forces it once had after creating the regulatory rational to cause the whole fleet to re-register. What congress and the president and maybe also the president to be are missing is the simple fact that a number of corporations will just appear to be bankrupt just because of the marked to market rule when they are completely viable. The whole idea that a company is insolvent just because underlying assets are temporary valued in accounting statements at market value when below the cost of money borrowed to finance the acquisition is the equivalent of destroying most of the largest most successful corporations in US history over many years for the sake of some really stupid notion of what accounting "transparency" means as an ethical and moral standard. This is a good reason for banks to brace for worse times to come by not lending more money. Congress has not fixed the problem yet because its know nothing by politics members love the handiwork of their legislation because it has all the right sounding buzz words incorporated including "Transparency". It would be absurd for anyone with a mortgage to be forced to mark their home value to market values just because the cost of their mortgage exceeds the the market value of the home. That is a great way to produce a national bankruptcy. Best thing happening for everyone is for smart agile corporations to flee as fast as possible to Switzerland if that helps prevent stupid accounting rules from destroying their businesses. The announcements from citigroup of rats leaving ship and asset sales immediately brings to mind marked to market revelations coming there. Citibank could be sitting on a 50 billion dollar short fall because of the way accounting is now required? It is just a vague suspicion but with plenty of evidence of asset devaluations and real deflationary pressures that make most banks seem insolvent if loans are forced to be written off or written down just because of temporary deflation/ devaluation. This is a big warning sign completely ignored even with the migration to Switzerland apparently catching on. Imagine the top 500 US corporations suddenly headquartered in Switzerland and not in NYC or Chicago. That is the sort of Globalization that is going to be very beneficial to the US national tax base. The business accounting becomes more opaque for those companies and it could mean their survival over rivals staying based in the US and the Caribbean. Another danger sign completely ignored continues to be the large US dollar cash holdings of sovereign wealth funds and national banks. Having foreign debt has never been the problem because of Us currency inflation. In a perverse sort of way the US government might be better off if foreigners cashed out their dollars and bought gold, other commodities, or virtually anything else putting dollar currency into circulation. This is a big point being missed. Foreign governments are actually loosing money based on holding US dollar reserves as they are loosing purchasing power will do so soon as the US government is being forced to print new dollars to circulate because of the foreign irrational hoarding. It is beyond the Us government's ability to stabilize all the countries of the world so that US dollars are the safe refuge of choice. Gold is way better for silly hoarding if that is what foreigners want to do. Everyone excited by gold doubling in value in X number of years is missing the longer term charts showing it is an even poorer long term investment performer than real estate, fine art and stocks. It would be better to have China selling off its US dollar treasury bonds in exchange for over priced gold if they want to sit on it and feel rich. That would really be a stupid luxury purchase. Let them buy Gold. Let them eat it too and put the dollars into circulation for orders for US products directly or after the dollar purchases. The simple way to encourage dollars into circulation and out of treasury bonds one might think are low yields but the better way is to give foreign purchasers a spending bonus of as much as 20% which gives them added wealth for having traded with the US. The bonus would only apply to a point in time when the dollars would become worth less than a dollar to encourage less trading and more spending now when it is needed most. There is no reason the US Treasury cannot work out such a plan to reduce government debt and put dollars into international orders for US products, The US should have zero capital gains taxes and overall taxes as low as the lowest the industrial world has to offer so investment capital goes into US banking. The whole deleveraging thesis is based on the idea that the US is a debtor nation because of foreigners holding nothing more than unused trade credits . It is true there was too much leverage being used and too many derivatives of derivatives and hypothocations of hypothocations of capital and condominiums kitchens in condominium apartments. De leveraging is over played rhetoric that Washington is too ignorant to see as the extrapolation that it is. Congress and the President seem to think that the way to make real estate solid is to somehow stop valuations from falling in the market place and these same people are talking about the need for de leveraging. Home prices are best if they fall to levels where actual buyers can afford to buy homes not best. Homes naturally depreciate and high real estate costs do not help with economic development as much as lower prices. Those calling for slow ten year de leveraging want their cake and to eat it too. Collectivist sympathy for those who paid too much for homes and for banks that were stupid enough to loan too much are really calling for socialized housing. The government lowers interest rates to banks to zero percent interest and still banks are not refinancing? That is a sign the country needs new banks with access to that zero percent fed money. Washington has no memory of what banking originally was in this country. The bank of Morgan like many others was founded on financing international shipping trade in what today we use the buzz word "globalization" to signify today as if it is new and special. The US Treasury is the main agency that needs to leverage if any institution does by getting foreigners out of lending it money and spending it now. No one see it. The US leads the world economy and we hear from the financial news media is the need for China to take control which is just pure nonsense with everyone in Washington dc nodding their heads along with the stupid drum beat from the press. Next we hear about more special stimulus programs with give away money freshly printed and the status quo which really means US consumption of foreign goods on an immediate level and useless digging holes and filling them work for Obama's big public works programs nonsense. That money will be tightly controlled and go to the politically worthy and will only re-inflate a small part of the economy that is not really suffering anyway with existing national gas taxes already paying for maintenance as one example. The economy in the USA booms when we have a gold rush effect. Gold rush effects like the INTERNET boom and the housing boom seem to do the most for most participants in the economy always with an eventual fall out of a few winners and a lot of looses but these seem to be better as an alternative to planning the economy, One really good idea that would make for a much better US and world economy would be for the US congress to pass a different kind of stimulus program such as one offering the Russians a trillion dollars in US dollars for it's Eastern Coastal Lands. Another way would be to offer American Citizens the opportunity to buy US own land in the west in a big auction and allow development of all sorts on that land . The environmental stranglehold in the US is the reason the Russian Frontier might be a better investment. Countries in Africa could be offered big dollar outlays to be recolonized for US redevelopment and Cuba too. These kinds of foreign outlays of US dollars for value might be better than blowing money on fixing highways that only need regular maintenance. Washington is as ignorant of what the warning signs mean as they are to creative solutions. We always had a boom and bust economy. That is not going to change. There is no evidence to support the idea that big government spending on band aid fix its of the economy is going to net a big new boom. People in Washington are uniformly power brokers not entrepreneurs who will make a difference. Expanding the area of US land area by offering money for the next Alaska purchase or Louisiana purchase would be one of the best ever US stimulus packages. Less regulation and lower taxes can bring on a boom otherwise otherwise why not just have Congress pass a leveraging gone bust and stay busted program which is what they seem to be doing? Opportunity happens when government lets it happen or in spite of government. The American People need to decide if they want control freaks rewarding their friends with the special opportunities or open opportunity for everyone and anyone. The American people have to decide if they want the right to have a raw economic boom or a controlled survival. Economic busts are the cost of booming but history shows that successive booms and busts bring the country to a higher level of economic prosperity when the cycle is unimpeded. |
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