In January, prices in the eurozone were 0.6% down on their levels a year ago. The figure shows the eurozone heading deeper into deflationary territory from December, when prices were 0.2% down on the year before.

A large contributor to falling prices is the cost of energy, with oil prices down almost 60% on the middle of last year,  Energy prices plunged 8.9% in January.

If food and energy are stripped out of the calculations, eurozone prices were still rising at an inflation rate of 0.5%, down from 0.7% the month before.  The eurozone has only once before experienced deflation at these levels, in July 2009, as the region first went into recession following the financial crisis.

Last week the European Central Bank (ECB) launched a programme aimed at pushing prices back up – known as quantitative easing – through which it injected around 1 trillion euros into the economy.

Was it energy prices that have pulled the eurozone into deflation? While cheaper energy is welcome news for a net importer of the stuff, as the eurozone is, the danger of a period of wider and potentially more damaging deflation is there. Debt is probably the big issue.

So the European Central Bank president Mario Draghi will no doubt see these figures as supporting the decision last week to launch a programme of quantitative easing intended to push inflation higher.  Still, other new data show that a period of deflation doesn’t necessarily mean an economy can’t grow.  In Spain, where prices were falling for much of last year, the economy grew at a respectable 0.7% in the last quarter of 2014.

It’s no secret that companies including Apple, Google, Amazon, Uber, Airbnb and Ikea seem to pay less than their fair share of tax in Australia. Despite booking huge revenues from sales to Australian customers they are able to reduce their profits in this country by shifting profits to tax havens such as Ireland, the Netherlands, Luxembourg and the Cayman Islands, to name a few.

Apple shifrts its  rights for all markets outside the Americas to a subsidiary in Ireland through a cost sharing agreement. The agreement allows Apple to circumvent the US transfer pricing rules. All international sales outside the Americas are routed through Ireland where Apple negotiated a 2.5% tax rate.

Appple also exploits the different rules regarding tax resident status in Ireland. This enabled it to have an entity with no declared tax jurisdiction that booked over US$30 billion in profits between 2009 and 2012.

Most countries, including Australia, currently rely on transfer pricing rules based on arm’s length principles to prevent transfer pricing abuse between wholly owned subsidiaries. This allows tax authorities to vary transactions to what it would be if the two entities involved were separately owned and transacting in a transparent market.

This approach is realistic when there is a market for the products or services, such as with commodities, but is unsuitable for the transfer of intellectual property rights or online sales and services, as there is no market or acceptable technique for valuing them.

Australia, like many other countries, has finally woken up to this problem.

One solution is the UK Diverted Profits Tax.  It is a 25% tax on company profit that is designated (by the tax authority) to have been “inappropriately” shifted out of the UK to a tax haven. In fact the 25% rate is higher than the UK statutory corporate tax rate and has the objective of deterring companies from shifting profits to lower-tax jurisdictions.

Many of the multinational tech companies sell services online and record revenues via a registered entity in a tax haven. The UK government has no jurisdiction over these transactions. Hence it is unclear how the UK will tax entities registered in a foreign jurisdiction. The UK “Google tax” may also lead to double taxation of some profits.

The  US has so far resisted attempts to prevent its corporations from aggressively reducing their foreign taxes as many in the US believe this strengthens these corporations and leads to better economic outcomes for the US itself. Without US involvement this approach will fail.

In the first quarter of Apple’s fiscal year 2007, the last quarter before Steve Jobs unveiled the original iPhone, Apple’s revenue amounted to $7.1 billion.

Contributing $3.4 billion to that total, the iPod was Apple’s most important product back then. Now, eight years later, the iPod has been rendered all but obsolete as smartphones have taken over most music playback duties. Apple doesn’t even break out iPod sales anymore; instead they are buried in the “other products” category along with Apple TV which, as Steve Jobs once put it, is considered a mere hobby at Apple.

Meanwhile iPhone sales alone generated $51.2 billion in the most recent quarter, accounting for almost 70 percent of Apple’s total revenue in that period. Being considered Apple’s most profitable product, it is very likely that the iPhone also accounted for the lion’s share of the company’s record-breaking $18 billion profit over the last three months. It only took the iPhone eight years to evolve from what many considered an overpriced niche product to the planet’s biggest cash cow – an achievement that is unlikely to be repeated in the foreseeable future.

This chart illustrate the iPhone’s huge impact on Apple’s results.

It is not the case that those arguing against austerity are against repaying the debt – they argue that debts cannot be repaid if less government spending (austerity) and more flexible labor markets with lower wages, longer hours, and less security and benefits (structural adjustment) leads to more unemployment.  It should be very clear that – macroeconomically – saving is income not spent.  Cutting income is then not a logical strategy to boost savings, quite the opposite!

It would be a very big step forward if in 2015 we can have a debate on growth in the euro zone, because without growth the logical level of government debt for euro zone governments is zero. The debate about Greece should be viewed as a fight between two paradigms on how to repay debt: austerity versus textbook macroeconomics from the IS/LM model. And that model says that in periods of weak aggregate demand you need to push the interest rate down or increase government spending. Austerity says that less government spending will create more incomes. How the gap between less government spending (which cause incomes to fall) and higher incomes is bridged still seems misty. The evidence says the gap will remain.

So, either you chose more government spending, more economic growth and more debt repaymentt or you chose austerity. That should have been the debate the whole time, instead of Greek taxpayers versus (Greek and non-Greek) bond holders. We had this debate in the economics profession, but somehow it did not get noticed in the press. Perhaps now would be the time.

Jobs. All over the world jobs are short. Especially jobs for young people who we are supposed to be welcoming into the adult world.

Unemployment among the 18-34 year old group is higher than any other. Except perhaps people who have given up looking for work.

The issue is partly lack of training for jobs that are available. Richard Fisher, formerly of the Dallas Federal Reserve in the US noted that plenty of jobs were available for truck drivers but they have to pass an arithmetic test, and many young people fail.

In the US President Obama is pushing community colleges. This is a good move. Two year colleges are set up to prepare and certify young people for jobs.

Infrastructure projects, so sorely needed, are also abundant employers.

The Dardenne brothers Belgian film, “Two Nights and One Day,” shows one part of the pain of not being employed.

A play which one of our editors reviewed shows how emasculating not having a job can be for a middle aged man.

The consequences of unemployment range from not being able to pay the bills to devastating emotional waves.

Jobs should surely be a focus for social efforts across the US and Europe.

When Robots Replace Jobs

Young People Can’t Find Work

Jobs All Around, but Not for You

Theatrical presentation of the Impact of Joblessness

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Lawmakers who came with Obama during his three-day visit.to India were impressed by the comfrotablility shared by the two leaders.

Senator Warner said it was “thrilling” to experience the real sense of optimism and enthusiasm for reinvigorating the US relationship with India.  “Many of the announcements made during our three-day trip were incremental, but they nonetheless represent genuine signs of progress,” he said in the monthly newsletter of the Senate India Caucus.

Noting that it was his my honour to accompany Obama this week to celebrate India’s Republic Day, the commemoration of the adoption of India’s democratic constitution in 1950, Warner said he was proud to attend as co-chair of the bipartisan Senate India Caucus.

“As two of the world’s largest democracies and with the incredible Indian American population that contributes so much to Virginia’s culture and commerce, it is critical for us to continue to deepen and broaden the existing framework of partnership and friendship between the United States and India,” Warner said.

“During a series of productive conversations, Obama and Modi announced a nuclear deal that could clear the way for multinational corporations to build civilian nuclear power plants in India to provide clean power for the people of India,” he said.

For the first time, the US clearly expressed support for bringing India into the Asia-Pacific Economic Cooperation forum, the chief trade group in the region, he said.

The takeway.  China has beenfocusing on Pakistan.  Pakistan was not mentioned by Obama, in public.  Modi announced progress had been made on negotiations over a civil nuclear deal — a new 10-year defense cooperation agreement between the two countries was announced — which may have far-reaching consequences for both sides on sharing intelligence and military education, and there was much talk about boosting bilateral trade from its current level of around $100 billion a year to $500 billion by 2025.

“In my own conversations with Prime Minister Modi and officials from India’s government and industry, I focused on the need for India to make progress on efforts to ease red tape, regulations and legal hurdles that have prevented the US and India from fully tapping the exciting potential of this economic relationship,” Warner said.