Broad policy objectives were announced at the meeting of the Group of Seven leaders of  the world’s richest economies.  In Japan, ideas were broad, concrete measures skimpy.  The G-7 leaders — including Canadian Prime Minister Justin Trudeau — claimed a “special responsibility” for beefing up policies to stimulate growth of their economies.

But their declaration glossed over disagreements over co-ordinating public spending policies to help perk up weak consumer spending and business investment, saying each country would take into account “country-specific circumstances.”

Germany, in particular, has balked at calls from other G-7 members to commit to an expansionary fiscal policy.

“Weak demand and unaddressed structural problems are the key factors weighing on actual and potential growth,” they said in the declaration. “We remain committed to ensuring that growth is inclusive and job-rich, benefiting all segments of our societies.”

In Japan the public debt is more than twice the size of its economy.  The G-7 group noted the need to ensure debt is “on a sustainable path.”

The G-7 host, Japanese Prime Minister Shinzo Abe said he had won support from his counterparts for his own “three arrows” economic strategy of ultra-loose monetary policy, public spending and longer-term reforms.  Christine Lagarde, head of the International Monetary Fund, said there was agreement on such a three-pronged approach.

Abe appealed to his fellow leaders to act to avert another global crisis, comparing the current global economic situation to conditions just before the 2008 financial crisis. Lagarde was less alarmist, saying the world was “no longer in a 2008 moment.”

“We are out of the crisis but we are suffering the legacy of the crisis,” she said, pointing to bad loans on the books of companies and banks as one of the biggest causes for concern.

The G-7 leaders denounced protectionism and trade barriers and noted the negative impact from overcapacity in some industries. One of the biggest headaches, Abe said, was a glut in China’s steel industry.

In their declaration, the summit leaders cited the possible departure of Britain from the European Union, depending on the outcome of a June 23 vote, as one of many potential shocks for the global economy.

British Prime Minister David Cameron said staying in the EU was “all about Britain’s national interest.” “It’s about Britain being big and bold,” he said.

Matt Levine comments on the Citibank fines for Libor manipulation.

Senior Yen Trader: i think after june I will push for higher libors and lower tibors after june imm we are joining fixing panel in tibor and will keep it high [. . .]
Deutsche Yen Trader: after june coolio
Senior Yen Trader: after june higher lib is ok for you? [. . .] I selling june ey will keep tibor high at least till june for year end I will need low tibor and high l;ibor

Coolio is new, but otherwise it’s even a familiar cast of characters: The main villain in the CFTC order is “Senior Yen Trader,” whom Citi hired in the fall of 2009 because, in a Citi manager’s words, “this guy has forty percent of the market, and he knows where all the fixes are, he knows everybody on the street, he’s a real fuzzy animal, this guy owns it,” only he didn’t say “fuzzy.” Senior Yen Trader seems to be Tom Hayes, whom you may remember from the UBS Libor settlements, and the interdealer brokerLibor settlements, and from being sentenced to 11 years in prison for manipulating yen Libor at UBS before manipulating it at Citi.

The one real novelty may be the chats and e-mails between Libor submitters and “salespeople in other funding units of the bank” about how Citi shouldn’t borrow at rates above Libor.

I just wanted to try to understand the level [ …] the level at which they were paying was quite higher than LIBOR and we as an institution have to be a little be careful about what rates we show in the market since we’re LIBOR setters[…] we monitor quite heavily what different Citi branches pay in the interbank bank market, and the reason is here in London we set the LIBORs, and the CFTC in the ‘States have been very sharp on institutions that set LIBORs […] you were paying in the market quite higher in the market than compared to where I would set LIBOR which kind of ties my hands a little bit so I’m trying to work out what you’re trying to do, [ …].

If Citi had submitted a high Libor, that would have undermined confidence and made it hard for it to get short-term unsecured funding. So its Libor submitters begged its funding salespeople not to get short-term unsecured funding. It’s a real privileging of form over substance.

Patrick Radden Keefe writes:  Since 1713, when the Great Council of Geneva banned banks from revealing the private information of their customers, Switzerland had thrived on its reputation as a stronghold of financial secrecy. International élites could place their fortunes beyond the reach of tax authorities in their own countries. For Swiss wealth managers, who oversaw more than two trillion dollars in international deposits, the promise to maintain financial privacy was akin to a religious vow of silence. Switzerland is the home of the numbered account: customers often specify that they prefer not to receive statements, in order to avoid a paper trail. In light of these safeguards, the notion of a breach at HSBC was shocking in 2008.

The Swiss economy is charged by banking.  Were its secrecy policies to be ended, they would be left making cheese, cuckoo clocks and watches.  The Swiss vote in their cantons almost daily on every imagineable issue, so at some point they will weigh in on the future of their economy.

In the meanwhile, the US and its tax and justice departments want to know which of their citizens are avoiding taxation by stashing their money in private accounts in Swiss banks.

When Hervé Falciani, a computer technicians,  arrived in Geneva, he realized that HSBC. was engaged in a “gigantic swindle.” Clients were not only placing their fortunes in accounts that were “undeclared” to tax authorities; HSBC bankers were actively assisting clients in hiding their money, by setting up shell companies and sham trusts in the British Virgin Islands and Panama. In some instances, the bankers were handing customers hundred-thousand-dollar bricks of U.S. bills, allowing money to be smuggled back home. In a subsequent investigation by French prosecutors, an HSBC client said that the bank had instructed him to “make a company in Panama, which should open an account at HSBC. in Lugano, into which I should transfer all my holdings, in order to not be hit by this tax.”

Like many Swiss banks HSBC. offered “hold mail” accounts, refraining from sending any statements or other mail to clients. Nearly fifteen thousand clients chose this method—roughly half of the account holders at HSBC’s Swiss bank. Another client questioned in the subsequent investigation recalled that when he wanted to make a deposit he would meet his account manager in a public place. “I would give him an envelope holding my money, in cash,” he explained. “And a few days later he would tell me by phone that the funds had been credited to my account in Switzerland.” H.S.B.C. has numerous offices in Paris, but, according to the French investigation, when the Swiss bankers visited clients there they preferred to meet in cafés; in a similar spirit of concealment, account holders used pay phones when making calls to Switzerland. One client pointed out that the furtive face-to-face meetings offered “a bit of reassurance about the money I had in Switzerland, since I had no documents or anything that attested to my having an account.”

Although the conduct that Falciani witnessed may have been illegal, it was fairly standard practice for Swiss banks at the time. A 2014 U.S. Senate report describes a Credit Suisse banker travelling to America to meet a client for breakfast at a Mandarin Oriental hotel, and passing along an issue of Sports Illustrated in which account statements were concealed between the pages.

Swiss banks routinely dispatched emissaries to cultivate new clients at art shows and regattas, and the illegality of the service was implicit in the pitch: if you bank with us, your fortune will not be taxed. It is not illegal for a person or a corporation to hold a Swiss bank account, or to engage in tax “avoidance”—skirting tax requirements through gymnastic accounting and the exploitation of loopholes. But tax evasion, in which wealth is actively concealed from authorities, is illegal, and the behavior of Swiss bankers often suggested that they knew they were crossing the line. According to testimony in a 2014 criminal trial in Florida, representatives of the Swiss bank UBS. who travelled to such events as Art Basel to recruit clients carried encrypted laptops that were configured with an emergency password, so that they could erase the hard drive with a few keystrokes. An unnamed Swiss banker said, “We all have one foot in prison. Maybe that’s why we were all paid so much.”

Mohamed El-Erian writes:  Saudi Arabia has captured the world’s attention with the announcement of Vision 2030, aimed at overhauling the structure of its economy. The plan would reduce historical high dependence on oil by transforming how the Kingdom generates income, as well as how it spends and manages its vast resources. It is supported by detailed action plans, the initial implementation of which has already involved headline-grabbing institutional changes in a country long known for caution and gradualism.

Vision 2030 focuses on three major areas, together with efforts to protect the most vulnerable segments of the population.

First, the plan seeks to enhance the generation of non-oil revenues, by raising fees and tariffs on public services, gradually expanding the tax base (including through the introduction of a value added tax), and raising more income from a growing number of visitors to the Kingdom.

Second, the authorities want to reduce spending by lowering subsidies, rationalizing the country’s massive public investment program, and diverting spending on arms away from foreign purchases.

Third, the Kingdom seeks to diversify its national wealth and, in the process, increase current investment income. For example, the plan would raise funds via the IPO of a small part (up to 5%) of Saudi-Aramco, the giant oil conglomerate, and invest the proceeds in a broader range of assets around the world.

This bold economic vision is not without risks. Economic transitions are inherently tricky, especially one of this scale and scope. Early successes are often needed to solidify the overwhelming buy-in of key constituencies, particularly those that naturally may be resistant to change at first (especially change that eliminates some of the traditional financial entitlements in moving from a familiar, albeit less secure, present toward what is now an unfamiliar future).

The action plans underpinning the implementation of Vision 2030 inevitably involve progressing on multiple fronts simultaneously and in a carefully coordinated and monitored fashion. Requiring invigorated administrative and operational resources, it comes at a time when the Kingdom is not only dealing with lower oil earnings and drawing down its large reserves, but also is increasingly asserting its regional role, including in Syria and Yemen.

How the Saudis proceed on this important economic restructuring is being closely watched by the other five members of the Gulf Cooperation Council – and by many other countries as well. If Saudi Arabia succeeds in transforming its economy, including reforming institutions and restructuring economic incentives, other countries that face similar challenges, in the region and beyond, will be inspired to follow suit.

It appears that in the wake of the Panama Paper Leaks, the Bill and Hillary Clinton family fortune may have been acquired through partners with numerous offshore entities.

The organization that makes up Mrs.Clinton’s enormous collaborative team of investors has been operating with funds that have been fused with offshore accounts from around the world. Giving Hillary a direct link to one of the biggest offshore accounting scandals.

Two of the leading partners in the Clinton financial family, Canadian business executive known for his mining and filmmaking endeavors Frank Giustra and the Chagoury family in Nigeria, have been using the law firm Mossack Fonseca, the center of the Panama Paper investigation, to move and exchange their assets. Giustra, one the largest financiers to Hillarys financial foundation, gave more than $25 million. Whereas, the Chagoury family has committed to giving $1 billion.

Giustra used Mossack Fonseca back in 2005 to created UrAsia Energy, a company that acquired uranium concessions in Kazakhstan with the aid of Bill Clinton. UrAsia Energy was one of the companies responsible for sending a section of the 20 percent of American uranium production into the hands of the Russian Government. In 2010, UrAsia Energy sold the uranium assets they had acquired in the United States to the Russian State Nuclear Academy.  Hillary Clinton as Secretary of State had to sign off an approval before the control of large amounts of uranium were turned over to the Russian government.

This is not the first time that the Clinton’s financial contributors have been linked to offshore accounts. Two years ago it was discovered, by a Swiss whistleblower, that up to $81 million has been given to the Clinton Foundation by means of Swiss accounts.

Contributors who financed the Clintons through their Swiss accounts were Richard Caring, a British businessman, who donated $1 million in 2005.Frank Gisutra also had a Swiss account and donated up to $10 millionbetween 2006 and 2007. Eli Broad an American entrepreneur donated over $1 million to the Clintons from his Swiss account.

With Mrs. Clinton’s donors and contributors not able to hide away their assets anymore, who will be funding her campaign?

Original
Dieter Huthmacher
www.w-t-w.org/en/dieter-huthmacher

Hall of Fame Gender Ratio by Fast Company

Fast Company currently operates a number of franchises such as “Most Innovative Companies”, and “Most Creative People”. For their Most Innovative Companies feature, Fast Company assesses thousands of businesses to create a list of 50 companies it considers the most creative.^[1The Most Creative People in Business is a list of 100 people from different industries.

FastCompany.com operates as a network of sites. It comprises three sites: Co.Design, Co.Exist, and Co.Create. Co.Design covers innovation and design. Co.Exist covers environmental and social issues. Co.Create covers creativity, marketing, and culture.

The Franco-German powerhouse took the helm of ongoing ambitions to modernize the EU’s trade defense system, with a joint letter to Malmström on “reforming” trade defense, sources in Berlin and inside the Commission confirmed. A spokesperson for the German economic ministry said,  “We need to boost our trade defense measures by switching from an approach under which the Commission can only launch an investigation after a company claims to be discriminated, to a new scheme under which the Commission can take the initiative on its own,” he said. “And we need to speed up these investigations.”

Discussions among trade ministers will likely touch on the so-called “lesser duty rule,” which limits levying of duties on dumped imports and stalled the debate on EU trade defense in 2014. Originally, the goal was to eliminate this rule entirely, but this has been modified to abolishing it in certain circumstances only.

Some 546 MEPs voted in favor of the resolution, with 28 against and 77 abstentions. “This vote sends a strong signal that the European Parliament will not accept any measures that weaken our ability to defend ourselves from unfair Chinese competition,” said Socialist MEP David Martin, the lawmaker who pushed the resolution.

There are enough powerful countries on board for turning the EU-Canada deal into a “mixed agreement,” meaning that not only the Council and European Parliament, but also the national parliaments would have a say in approving it. However, the final decision is not expected before late June, after the Commission has said how it wants to apply the deal. And that’s the really interesting question.

Brussels exchanged long-awaited market access offers with the South-American trading bloc Wednesday, with the EU withdrawing its initially planned offer of a 78,000-ton beef quota and excluding ethanol. Both are described by the EU as “sensitive” areas, but might pop up later in the negotiations.

“Agricultural products are included in the offer the EU is making … just like beef, pork, dairy and grain,” said Rodolfo Nin Novoa, the foreign minister of Paraguay, which now holds the Mercosur presidency. “What’s not in there is the quota for beef, but [the offer] says they are determined to follow up on that, which gives us the certainty that this is part of the negotiation and we will obviously negotiate on that.”

Meanwhile, on the European side, other criticism remains. “It’s a first step excluding beef [quotas]. But we are still concerned about poultry, where lowering [import] restrictions towards Mercosur could have a detrimental effect for our agriculture industry,” a senior European diplomat said. Pekka Pesonen, secretary-general of the farmer’s lobby Copa-Cocega, criticized the Commission for including sensitive products in the offer “before any clarification was done in terms of removing red tape and other unnecessary non-tariff barriers to trade which stop our exports from entering these countries.”

Stefan Gerlach writes:  Eighty-five years ago this month, Credit-Anstalt, by far the largest bank in Austria, collapsed. By that July, banks in Egypt, Germany, Hungary, Latvia, Poland, Romania, and Turkey had experienced runs. A banking panic hit the United States in August, though the sources of that panic may have been domestic. In September, banks in the United Kingdom experienced large withdrawals. The parallels to the 2008 collapse of the US investment bank Lehman Brothers are strong – and crucial for understanding today’s financial risks.

For starters, neither the collapse of Credit-Anstalt nor that of Lehman Brothers caused all of the global financial tumult that ensued. Those collapses and the subsequent problems were symptoms of the same disease: a weak banking system.

In Austria in 1931, the problem was rooted in the breakup of the Austro-Hungarian Empire after World War I, hyperinflation in the early 1920s, and banks’ excessive exposure to the industrial sector.

Similarly, in 2008, the entire financial system was overextended, owing to a combination of weak internal risk management and inadequate government regulation and supervision. Lehman Brothers was simply the weakest link in a long chain of brittle financial firms.

Could a crisis like those triggered by the Credit-Anstalt and the Lehman Brothers collapse happen today? One is tempted to say no. After all, the global economy and the financial system appear to be on the mend; risk-taking in the private sector has been reduced; and huge, though burdensome, regulatory improvements have been undertaken.

The problem with this reasoning is that financial crises tend to reveal fault lines that were not visible before. Indeed, the financial sector manages the risks that it recognizes, not necessarily all the risks that it runs.

Unable to rule out a new crisis, how well are we equipped to cope with one? The short answer is: not very.

In fact, if a financial crisis were to occur today, its consequences for the real economy might be even more severe than in the past. Of course, because central banks now recognize that their responsibilities extend beyond stabilizing prices to include the prevention and management of financial tensions, they would undoubtedly be quick to respond to any shock with a battery of market operations. But, in the event of a crisis, the tools available to central banks to prevent deflation and a collapse of the real economy are severely constrained, especially today.

In the early twentieth century, central banks could all devalue their currencies against gold.. Today, however, currency depreciation is a zero-sum game.

Without the joint-depreciation option, central banks responded to the 2008 crisis with interest-rate cuts that were unprecedented in scope, size, and speed, as well as massive purchases of long-term securities (so-called quantitative easing, or QE). And those efforts were effective. But interest rates remain extremely low, and are even negative in some countries, and QE has been taken close to its limits, with public support for the policy waning. As a result, these tools’ ability to cushion an economy against further shocks is severely constrained. While forward guidance by central banks has also helped, it, too, is unlikely to be able to provide an effective buffer against a new shock.