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Price Inflation Hits a 31-Year High as Janet Yellen Insists It’s No Big Deal | Mises Wire

Posted by M. C. on November 11, 2021

Nonetheless, it is entirely possible that inflation rates could quickly turn downward again in coming months. That could occur if recession sets in with businesses and households unable to pay off their debts. If that happens, monetary deflation will set in and demand will decline, leading to a real drop in price inflation. Of course, that won’t exactly do wonders for real wages, either.

https://mises.org/wire/price-inflation-hits-31-year-high-janet-yellen-insists-its-no-big-deal

Ryan McMaken

The Bureau of Labor Statistics reported Wednesday morning that prices rose 6.2% on a year-over-year basis in October. That’s the highest YOY rate since December 1990 when the CPI was also up 6.2 percent.

October’s rate was up from 5.3 percent in September, and remains part of a surge in the index since February 2021 when year-over-year growth was still muted at 1.6 percent.

cpi

Not surprisingly, producer prices surged in October as well. The producer price index for commodities in October was up 22.2 percent, year over year, reaching a 48-year high. We must go back to November 1974 to find a higher PPI increase—at 23.4 percent.

Asset price inflation has naturally continued unabated at well, with the result being rising housing costs. In addition to the CPI’s 31-year high, home prices in the second quarter surged near to a 42-year high. According to the Federal Housing Finance Agency’s home price index, home price growth reached 11.9 percent in the second quarter of this year. Since 1979, only the second quarter of 2005—also with 11.9 percent growth—showed home-price growth as high.  

This is troubling information indeed, given that average real weekly earnings have turned negative this year, with inflation-adjusted earnings down 0.5 percent from September to October.  It is increasingly clear that wages are not keeping up with rising prices for a great many Americans.

None of this means policymakers will diagnose the problem properly, however. We should expect the discussion around inflation in Washington to keep missing the point and denying any connection to the central bank or to monetary inflation. 

For example, rising prices are so obvious now that not even the administration can ignore them anymore. Today, the White House released a statement in which President Biden admitted: “… today’s report shows an increase over last month. Inflation hurts Americans pocketbooks”

Yet the administration continues to be very much in denial about the causes of price inflation. The Biden statement continues:

I have directed my National Economic Council to pursue means to try to further reduce these costs, and have asked the Federal Trade Commission to strike back at any market manipulation or price gouging in this sector.

As if “price gouging” were the cause of nationwide price inflation!

If it were “gouging,” we’d be seeing increases only in the areas where so-called gouging is taking place. Moreover, that would mean a decline in spending—and thus price deflation—in areas where the gouging isn’t taking place. The overall effect would be price stability.

Similarly, the administration has also tried to blame inflation on a lack of childcare.  In an incoherent series of non sequiturs, Secretary of Transportation Peter Buttigieg this week claimed that paid family leave is “part of [the administration’s] tool kit to fight inflation.” Buttigieg simultaneously claimed that paid family leave means more people can take time off from work, and yet this somehow will also translate into more people going back to work. While it’s true more workers could help temper—to some extent—upward pressure on prices, more paid family leave would contribute nothing to this “solution” to price inflation.  Rather, it’s apparent the memo went out at the administration that every policy must now be tied into some kind of plan to fight inflation—no matter how tenuous the connection.

Yet we should expect more of this sort of blind grasping at excuses for our economic malaise as time goes on. The same strategy was used by the Ford administration in the dark days of the mid1970s and the “Whip Inflation Now” campaign. The administration then claimed that the American public should fight inflation through strategies such as planting a vegetable garden at home.

Then, as now, the regime refused to admit that rising monetary inflation had anything to do with rising prices. Instead, we’re told it must be a lack of daycare services or “price gouging.”

A Second Strategy: Total Denial

But some in the administration are sticking to their narrative that there’s nothing at all to see here. Janet Yellen, for example, declared on Tuesday that “I’d expect price increases to level off, and we’ll go back to inflation that’s closer to the 2% that we consider normal.” She insists the Fed is very much in control of the situation and won’t allow 1970’s style inflation to occur. 

What Yellen fails to mention is that even if inflation rates of, say, four to six percent, last only a year, middle class workers won’t make up these losses later just because inflation falls again at some point to “to the 2% that we consider normal.” After all, this year’s declines in real average weekly wages means real hardship for many people, even if Janet Yellen will be just fine with her private driver shuttling her from her luxury home to opulent cocktail parties all the while.

But not everyone is as uninterested in the effects of inflation as Janet Yellen. As MSNBC reports:  

“For now, inflation is going to continue to run above very solid wage growth,” said Joseph LaVorgna, chief economist for the Americas at Natixis and former chief economist for the National Economic Council during the Trump administration. “This is why when you look at consumer confidence, it’s really taking a beating. Households do not like the inflation story, and rightly so.”

For at least one MSNBC columnist, though, people don’t know how good they have it. On Monday, James Surowiecki insisted everyone is better off and discussion of inflation amounts to little more than fear mongering. He writes:

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Doug Casey on Insider Trading… Why Politicians Can Do it and You Can’t

Posted by M. C. on October 21, 2021

Doug Casey: As I said before, the only way you can end the practice is to get the government 100% out of the economy. Let me reemphasize this point. The government is supposed to have essentially zero to do with the economy. But today, it’s the main thing that government does.

https://internationalman.com/articles/doug-casey-on-insider-trading-why-politicians-can-do-it-and-you-cant/

by Doug Casey

International Man: What exactly is insider trading? Is it inherently unethical?

Doug Casey: The term insider trading is nebulous and as open to arbitrary interpretation as the Internal Revenue Code. A brief definition is to “to trade on material, non-public information.” That sounds simple enough, but in its broadest sense, it means you are a potential criminal for attempting to profit from researching a company beyond its public statements.

Is the use of insider information ethical? The government says, “No!” I say, “Absolutely, whenever the data is honestly gained, and no confidence is betrayed by disclosing or using it.” The whole concept of inside information is a floating abstraction, a witch hunter’s dream, and a bonanza for government lawyers looking to take scalps.

When the SEC prosecutes someone, it can cost millions of dollars in legal fees to defend against them. And as with most regulatory law, concepts of ethics, justice, and property rights never even enter the equation. Instead, it’s a question of arbitrary legalities.

Whether someone is prosecuted of insider trading is largely a question of who he is. A maverick researcher and a powerful government official will tend to get very different treatments. It’s also a question of the psychology and motives of the prosecutor. Insider trading is generally a non-crime that can be used in a Kafkaesque manner by upward-mobile prosecutors.

Insider trading should, at best, be the basis of a tort suit by a company if a board member betrays a trust. It shouldn’t be a crime prosecuted by the State.

Any ethical problem shouldn’t be about how information is used or who profits but whether it’s acquired honestly. Whether information is “inside” has no moral significance as long as it is honestly acquired. The market is a register of information, and impeding the free flow of knowledge in any way makes it less efficient. A morass of regulation only opens the door to real corruption. This is nothing new. Tacitus correctly said “The more numerous the laws, the more corrupt the State.”

In addition, the very concept of insider trading is ridiculous from a practical point of view. Someone always gets the information first. If an announcement is made, the people in the room who hear it first act on it first. By the time it’s published, it’s old news. It’s physically impossible for everyone to get information at the same time.

Insider trading has never cost shareholders a penny. Other actions taken by management insiders have, however, cost shareholders many billions. Regardless of the rhetoric, the name of the game in hostile takeovers and proxy battles is often management versus the shareholders. But that’s a story for another time.

International Man: In the past, politicians in Congress and elsewhere have allegedly engaged in insider trading with impunity.

Meanwhile, the penalties inflicted upon regular citizens can be severe. The maximum criminal penalty for insider trading is 20 years in prison and a $5 million fine.

What is your take on this?

Doug Casey: Congress is in a unique position to treat itself well. They control almost unlimited amounts of both power and money. Politicians really are a favored class.

The people in control of making regulations and printing money can tip off their pals subtly. This naturally lends itself to corruption. Congress critters know who’s going to get the big contract. They don’t have to buy or sell a stock themselves; a discreet tip to a trusted crony is safer. The Federal Reserve sets interest rates and controls the amount of money and credit entering the markets; they’re in a position to take advantage of this situation as well. And I have no doubt they do.

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Billionaire Plutocrat Jamie Dimon Wants to Ditch the Debt Ceiling | Mises Wire

Posted by M. C. on October 15, 2021

Consequently, Dimon’s position is essentially this: “Abandon all checks and balances if it threatens Wall Street portfolios!” What Wall street wants is to know for sure that the regime will keep the money flowing. That leaves no room for meaningful opposition.

https://mises.org/wire/billionaire-plutocrat-jamie-dimon-wants-ditch-debt-ceiling

Ryan McMaken

At a meeting with Joe Biden and other CEOs last week, JP Morgan Chase CEO Jamie Dimon predicted a global catastrophe if the debt ceiling is not raised.

Dimon was echoing the words—nearly verbatim—of Biden’s Treasury secretary Janet Yellen in using the most extreme language possible, with words such as “complete catastrophe.” Dimon also repeated Yellen’s lie that the US has never defaulted, claiming a default “would be unprecedented.” Dimon then went on to demand that the debt ceiling be abolished altogether so that the US government would no longer be encumbered by inconvenient impediments to endless amounts of federal debt and spending.

This sort of thing, of course, is precisely what we’ve come to expect from billionaires and other captains of the financial sector who have made a living out of turning inflationary monetary policy into big profits for themselves and their fellow corporate cronies.

[Read More: “The Debt Ceiling: An Affectionate History” by David Howden]

Wall Street and the financial sector have become increasingly dependent on inflationary monetary policy to prop up their portfolios, and huge amounts of deficit spending have been key to this equation.

After all, as federal deficits (and the debt overall) have ballooned, the regime in Washington has relied more and more on deficit spending to keep paying the bills. Yet with more than $25 trillion in debt on the books, debt service would prove to be crippling to the regime were it not for the central bank’s monetization of debt.

[Read More: “How the Fed Is Enabling Congress’s Trillion-Dollar Deficits“ by Ryan McMaken]

In other words, the federal government would have to pay double or triple the amount of interest it now pays—thus forcing big cuts to popular government programs—were it not for the fact that the central bank is buying up enormous amounts of government debt. Indeed, the Fed’s holdings of Treasury debt have multiplied many times over during the past decade, rising from “only” a half trillion dollars in 2008 to $4.6 trillion today, more than half of the Fed’s total portfolio in 2021.

These assets have been purchased using newly created money, which when spent on Treasurys enters the economy through the financial sector. That means fat fees and a huge advantages for the financial sector, as it is able to spend newly created cash on assets and goods before prices adjust to reflect the realities of an increasingly inflated currency.

[Read More: “The Plutocrats of Wall Street and Silicon Valley Are Scamming America“ by Ryan McMaken]

Moreover, this need for low interest rates on federal debt drives an overall dovish monetary policy committed to ultralow interest rates. This, as shown by Karen Petrou in her book Engine of Inequality, has disproportionately benefited the financial sector and the ultrarich.

So we shouldn’t be surprised when representatives of the ultrawealthy Wall Street class like Dimon apparently don’t see much downside to having federal deficits continue to spiral upward. The deficit-spending game has been great for them. 

Nonetheless, their efforts at defending the status quo are remarkably ham-fisted at times. In his efforts to end the debt ceiling altogether, Dimon listed his three reasons why huge deficits must continue:

“Number one is really a morality point: We all teach our children that we are supposed to meet obligations and I don’t think the nation should be any different. Number two, we should never even get this close—there are huge economic costs already being borne … [and] it’s already affecting the stock market,” Dimon said, and “number three, we should get rid of this debt ceiling—we don’t need to have this kind of brinksmanship every couple of years.”

The first point, of course, is laughable coming from any representative of corporate America. Corporate leaders in America hardly eschew bankruptcy as a method of avoiding paying one’s debts—when it helps the bottom line. It’s standard practice, and one never witnesses much hand-wringing about whether or not we’re sending a good message to “the children” when a business declares bankruptcy. Dimon’s attempt to put a patina of moralism on paying debts should be regarded as cynical in the extreme. Moreover, by engaging in policies that lead to price inflation—whether in assets prices or goods prices—the regime is already embracing the schemes of a deadbeat. It’s paying off its debts in deliberately devalued dollars. 

The second point merely illustrates the tunnel vision with which Wall Street operates. Ever since the early days of the Greenspan Put in the late 1980s, central bankers and Wall Street have increasingly all agreed that asset price inflation in the stock markets is somehow synonymous with American prosperity overall. Yet, as repeatedly shown by David Stockman in his book The Great Deformation, Wall Street and Main Street are absolutely not the same thing, and we ought not treat them as such. Moreover, a disproportionate amount of these “huge economic costs” that would be borne in case of default would be largely felt by the regime itself and by the investor class. While default would finally rein in government runaway spending—while freeing up much of the budget for things other than debt service—holders of government debt would no doubt suffer. But, as Rothbard notes, these people took that risk willfully. The taxpayers, on the other hand, have no say in the matter and ought not be forced to endlessly pay the bills which they have never consented to. 

And finally, there is Dimon’s condemnation of “brinksmanship.” Yet, what Dimon here calls brinkmanship is what opponents of monarchical tyranny once called “dissent” or “freedom.” After all, parliamentary government—so far as it was a check on executive power—was created in practice for purposes of brinkmanship. That is, the legislative’s body control over government spending was there precisely to hold the executive—usually a monarch—accountable by withholding tax revenues until the monarch agreed to concessions of various types. Usually, the executive would attempt to force some sort of crisis—often a war-related crisis—to frighten the legislators into caving to his or her demands. It’s a time-honored political tactic. Much of the time, however, only by refusing to blink during periods of ”brinkmanship” do opponents of executive power succeed.  The fact that the current crop of legislators is largely motivated by goals of partisan advantage is immaterial. Thus has it always been. That’s not a reason to straighten the regime’s path to yet another round of ripping off the taxpayers.  

Consequently, Dimon’s position is essentially this: “Abandon all checks and balances if it threatens Wall Street portfolios!” What Wall street wants is to know for sure that the regime will keep the money flowing. That leaves no room for meaningful opposition. 

Also an Ideological Problem

It is unlikely, however, that Dimon is motivated strictly by the prospects of a bigger payday. Supporting runaway spending is simply the dominant ideology today in financial sector boardrooms and in business schools. While conservatives were shortsightedly obsessing over “electing the right people” or winning the next election, interventionist ideologues were taking over business schools and university faculty offices. They ensured that the next generation of business leaders and economists would embrace the ideas of endless spending, large-scale government intervention, and inflationist monetary policy. So, when the Jamie Dimons of the world push for abolishing the debt ceiling—or having the central bank monetize another trillion in government debt—its likely not just a cynical ploy. This is especially unsurprising for someone like Dimon, who sat on the board of the New York Fed from 2008 to 2013. The thinking here is likely far more nuanced than a mere scramble for profits.  In other words, these people are probably true believers. This is, after all, what they learned from their economics professors. Author:

Contact Ryan McMaken

Ryan McMaken is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first.

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What We Have to Gain from a National Default | The Libertarian Institute

Posted by M. C. on October 6, 2021

The reality, however, is quite something else. While a failure to raise the debt ceiling would no doubt cause short-term disruptions, the fact is the medium- and long-term effects would prove beneficial by reining in the regime’s chokehold on the American economy and financial system.

Ultimately, when a media pundit or Janet Yellen predicts the end of the world if debt doesn’t continue to skyrocket ever upward, they are simply calling for a continuation of the status quo.

https://libertarianinstitute.org/articles/what-we-have-to–from-a-national-default/

by Ryan McMaken

The Biden administration’s rhetoric on the debt ceiling has become nothing short of apocalyptic. The Treasury Department has announced that a failure to increase the debt ceiling “would have catastrophic economic consequences” and would, as NBC news claims, constitute a “doomsday scenario” that would “spark a financial crisis and plunge the economy into recession.”

Apparently, the memo went out to the debt peddlers that they are not to hold back when sowing maximum fear over the thought that the U.S. might government might pause its incessant debt accumulation even for a few days.

The reality, however, is quite something else. While a failure to raise the debt ceiling would no doubt cause short-term disruptions, the fact is the medium- and long-term effects would prove beneficial by reining in the regime’s chokehold on the American economy and financial system.

This is explained in a recent column by Peter St. Onge in which he examines just how much of a problem default really is:

In 2021 the U.S. government plans to spend $6.8 trillion. Of which about half is borrowed—$3 trillion. So if they can’t raise the ceiling, they’d have to cut that $3 trillion.

Mainstream media, naturally, claims this is the end of the world. CBS estimates it would cost 6 million jobs and $15 trillion in lost wealth—comparable to the 2008 crisis, which was also caused by the federal government. CNN, more colorfully, claims cascading job losses and “a near-freeze in credit markets.” They conclude, falsely, that “No one would be spared.”

Considering the source, we can guess these predictions are overblown. So what would happen?

Well, $3 trillion is a lot of money—roughly 15% of America’s GDP. But we have to remember where that $3 trillion came from. The government, after all, doesn’t actually create anything, every dollar it spends came out of somebody else’s pocket. Whose pocket? Part of the $3 trillion was bid away from private borrowers like businesses, and the rest was siphoned from peoples’ savings by the Federal Reserve creating new money.

This means that, yes, GDP would decline sharply. But wealth would actually grow, perhaps substantially. The businesses would be able to buy things they need, while the savers keep their money that was doing useful things like paying their retirement.

So GDP drops, wealth soars.

Now, there will be near-term pain, simply because the GDP drop comes before the private borrowing ramps up, while those retirement savings are no longer being siphoned to pay for parties at strip clubs or, say, another trillion for farting cows.

So, yes, it will be a sharp drop in GDP. But so long as government stays out of the way, choosing the prudent 1920 response of doing nothing, the recovery will be very rapid. Why would they do nothing? After all, governments don’t like staying out of the way these days. Because a government that suddenly loses half it’s budget is going to find a lot of things not worth doing. Given a choice between defunding government workers’ pensions or defunding economy-crushing Green New Deals, governments will choose their own.

So that’s short-term: pain, but less than it seems. And that’s where the magic begins. Because ending deficits fundamentally reduces governments’ long-term ability to prey on the people’s wealth.

This is because debt and money printers are much less obvious than taxes, which are painful and make more enemies. So a default becomes a “back door” to move government back towards its traditional “parasite” role rather than the “predator” role it’s taken on since Nixon unleashed the money printers. Especially since COVID-19, when lockdowns were bought with fresh money and deficits. I wrote about this predatory evolution a few months ago, but the bottom line is government default is a tremendous investment in our future prosperity.

Ultimately, when a media pundit or Janet Yellen predicts the end of the world if debt doesn’t continue to skyrocket ever upward, they are simply calling for a continuation of the status quo.

And what does the status quo mean? It means a world in which the U.S. government continues to spent trillions of dollars it doesn’t have, made possible through monetizing massive amounts of debt and forcing taxpayers to devote ever more of their own wealth and income to paying off an ever-more-huge chunk of interest.

It also means more government spending, which—regardless of whether it’s funded by debt or by taxes—causes malinvestment and, through the redistribution of wealth, rewards the politically powerful at the expense of everyone else. In other words, its keeps Pentagon generals and Big Pharma executives living in luxury while the taxpayers are lectured about the need to “pay America’s bills.”

Rather, as Mark Thornton noted in 2011, the right thing to do is lower the debt ceiling. Thornton explains the many benefits, ranging from effective deregulation to freeing up capital for the private sector:

If Congress passed legislation that systematically reduced the debt ceiling over time, the economy could be rebuilt on a solid foundation. Entrepreneurs in the productive sectors would realize that an ever-increasing proportion of resources (land, labor, and capital) would be at their disposal, while companies that capitalized on the federal budget would have an ever-declining share of such resources.

Congress would have to cut the pay and benefits of its employees (FDR cut them by 25 percent in the depths of the Great Depression) as well as the number of such employees. Real wage rates would decline, allowing entrepreneurs to hire more employees to produce consumer-valued goods.

Congress would have to cut back on its far-flung regulatory operations, which are in fact one of the biggest drags on the economy due to the burden and uncertainty that Obama and Congress have created in terms of healthcare, financial-market, and environmental regulations. A recent study by the Phoenix Center found that even a small reduction of 5 percent, or $2.8 billion, in the federal regulatory budget would result in about $75 billion in increased private-sector GDP each year and the addition of 1.2 million jobs annually. Eliminating the job of even a single regulator grows the American economy by $6.2 million and creates nearly 100 private-sector jobs annually.

Under a reduced debt ceiling, the federal government would also have to sell off some of its resources. It has tens of thousands of buildings that are no longer in use and tens of thousands of buildings that are significantly underused—about 75,000 buildings in total. It also controls over 400 million acres of land, or over 20 percent of all land outside of Alaska, which is almost wholly owned by the government. There is also the Strategic Petroleum Reserve and many other assets that could be sold off to cover short-term budget shortfalls.

Of course, reducing the debt ceiling would force the government to stop borrowing so much money from credit markets. This would leave significantly more credit available for the private sector. The shortage of capital is one of the most often cited reasons for the failure of the economy to recover.

Lowering the debt ceiling would force federal-government budget cutting on a large scale, and this would free up resources (labor, land, and capital) and force a cutback in the federal government’s regulatory apparatus. This would put Americans back to work producing consumer-valued goods.

Unfortunately, the public has been fed a steady diet of rhetoric in which any reduction in government spending will bring economic Armageddon. But it’s all based on economic myths, and Thornton concludes:

Passing an increase in the debt ceiling merely perpetuates the myth that there is any ceiling or control or limit on the government’s ability to waste resources in the short run and its willingness to pass the burden of this squander onto future generations.

This article was originally featured at the Ludwig von Mises Institute

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Biden Proposes Globally-Imposed Corporate Tax Rates | The Libertarian Institute

Posted by M. C. on June 3, 2021

Americans should be as hostile to a global minimum corporate tax as they would to a global minimum price for computer chips, lumber or steel. Higher corporate taxes mean businesses have less money to invest in new facilities, develop products, hire workers, pay dividends and command higher stock prices.

Janet Yellen made her aim all too clear: “It is important to work with other countries to end the pressures of tax competition,” Eliminate tax LOWERING competition.

https://libertarianinstitute.org/articles/biden-proposes-globally-imposed-corporate-tax-rates/

by Brian P McGlinchey

In a move that would primarily benefit the world’s largest economies and most bloated governments, the Biden administration has proposed that all the world’s countries agree to impose corporate taxes at a rate no lower than 15%. Biden also proposes punishing countries that don’t adopt the minimum, by imposing heavier taxes on U.S. subsidiaries of companies headquartered in those countries.

In describing the initiative, Treasury secretary Janet Yellen made her aim all too clear: “It is important to work with other countries to end the pressures of tax competition,” she said in a speech to the Chicago Council on Global Affairs.

Though we’re conditioned to view them as something else, taxes are prices—albeit ones associated with no small amount of coercion. In that light, Yellen’s public opposition to tax competition should be just as jarring as if a corporate CFO said “it’s important to work with other companies to end the pressures of price competition.”

Aside from being an act of imperious, central-planning arrogance, the U.S.-led drive to fix the minimum corporate price of government is just the latest example of government pursuing an activity that’s illegal for private actors.

Plan Aims to Make Biden Tax Hike More Palatable

It’s no coincidence that Biden’s proposal comes alongside his drive to hike the U.S. corporate tax rate from 21% to 28%. While that would still leave it below the 35% level where it stood before a GOP-led 2017 cut, it would weaken America’s position in international competition for corporate investment.

According to the Tax Foundation, Biden’s corporate tax increase would lift the U.S. federal-state combined rate to 32%, which would be the highest among the 38-member Organization for Economic Cooperation and Development (OECD).

To the extent it encourages companies to shift investments and operations to more tax-friendly locales, the tax hike would be at least partially self-defeating. Thus comes the Biden administration’s campaign for a 15% global minimum.

Notably, that rate wasn’t the administration’s first choice—it originally floated a 21% floor. The administration likely sees a 15% pact as a precedent-setting foundation for eventually pushing a higher minimum.

Begging credulity, Biden told reporters he wasn’t concerned that higher taxes could prompt U.S. companies to relocate. “There’s no evidence of that…that’s bizarre,” he said.

Though proposed as a global minimum, the initial focus is on persuading the G7 countries: Canada, France, Germany, Italy, Japan, United Kingdom and United States. Reuters has reported that G7 finance ministers will soon announce their commitment to the idea.

Plan Would Benefit Largest Governments at Expense of the Smallest

The sledding will get a lot tougher after moving beyond that group of the world’s wealthiest economic heavyweights to the G20, OECD and beyond.

Indeed, OECD member Ireland, which boasts a 12.5% corporate tax rate, has already declared its opposition to the scheme—a scheme that threatens to widen the divide between larger and smaller economies.

Smaller countries often use lower tax rates to heighten their appeal as they compete with larger, more advanced economies: The 24 largest European economies average a 20.8% corporate tax rate, compared to 14.5% for the 24 smallest.

Given Ireland’s 12.5% rate has spurred high-tech investment and prosperity in the country, it’s easy to see why it would promptly reject an invitation to surrender it for the benefit of the United States and other economic giants.

“We do have really significant reservations regarding a global minimum effective tax rate status at such a level that it means only certain countries, and certain size economies can benefit,” said Ireland finance minister Paschal Donohoe.

In a separate statement, the Irish government said could support a 12.5% minimum, “which is fair and within the ambit of healthy tax competition.”

Alas, to big-government proponents of a minimum corporate tax, “healthy tax competition” is an oxymoron: Yellen has decried a downtrend in corporate tax rates as a “30-year race to the bottom” that must be stopped.

Corporate Taxes Affect Everyone

Americans should be as hostile to a global minimum corporate tax as they would to a global minimum price for computer chips, lumber or steel. Higher corporate taxes mean businesses have less money to invest in new facilities, develop products, hire workers, pay dividends and command higher stock prices.

The ripple effect is potent. According to a study by the Organization for International Cooperation and Development, “corporate taxes are found to be most harmful for growth, followed by personal income taxes, and then consumption taxes.”

Some will scoff at the idea that higher stock prices and dividends are good for the public. However, via 401(k) plans, IRAs, mutual funds and direct stock investments, 55% of Americans are corporate shareholders of one type or another.

Though routinely vilified by demagoguing politicians, businesses are part of an economic ecosystem in which all of us live. When government increases the tax burden of either businesses or individuals, both groups are affected.

Feeding Washington’s Spending Addiction

Having said all that, let’s not let the latest tax debate divert our attention from an essential fact: The U.S. government doesn’t have a revenue problem—it has a spending problem. And it’s poised to grow even worse.

Biden has requested a staggering $6 trillion federal budget for the coming fiscal year—that’s nearly a third higher than pre-pandemic levels. As a percentage of GDP, the president’s plan for the coming decade would see sustained spending at levels unseen since World War II.

When that war ended, spending subsided. Today, as the government-exacerbated Covid-19 crisis winds down, Biden and congressional allies are proposing to spend even more, content to watch trillion dollar deficits become routine, and the federal debt mushroom even after hiking rates on individuals and businesses.

That’s the real race to the bottom, Ms. Yellen.

This article was originally featured at Stark Realities

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The Real Reason Behind Janet Yellen’s Global Tax…

Posted by M. C. on April 15, 2021

No matter what they call it and what method they use, bankrupt governments are trying to prevent money from leaving for greener pastures.

https://internationalman.com/articles/real-reason-behind-janet-yellen-global-tax/

by Jeff Thomas

International Man: Recently, Secretary of Treasury Janet Yellen called for a global minimum tax rate because it would reduce the likelihood of US companies moving offshore.

It seems that the US government recognizes that its confiscatory tax policies are driving productive people and companies out and is looking to make sure they have nowhere to run.

What is really going on here?

Jeff Thomas: For many years, I’ve heard businesspeople, particularly American businesspeople, complain that their government is making all the wrong moves; that neither increased taxation nor capital controls are going to help business succeed and thrive in America. I’m afraid that they’re looking at this the wrong way round. They’re making the assumption that the government’s primary objective is to serve the American people. It is not. Governments don’t see themselves as existing to serve the people, they see themselves as feeding off the people. They are essentially parasitical organizations that produce nothing and consume what they can successfully take from the populace. Once that concept is understood, such moves as the present one become easier to understand.

Government could help business simply by downsizing government and lowering taxes. Business would then thrive. But that would dramatically diminish the take by government. Governments operate through coercion. So, when business leaves a country in response to greater taxation, government reacts by force. In this case, that means an attempt to eliminate the freedom that exists in another country. Rather than declare war on that country and take it over, it’s more palatable to create economic warfare “for the greater good.” So, yes, Ms. Yellen’s call for a global tax rate is intended to eliminate places for American business to run. In essence, this is The Land of the Free seeking to eliminate freedom worldwide as it has at home.

International Man: The Organization for Economic Co-operation and Development (OECD) has long tried to end financial privacy and impose regulations on countries with low (or no) taxes.

In light of Yellen’s comments, do you think the next step is a big push to try to harmonize global tax rates?

Jeff Thomas: The OECD’s goals have never been broadly understood. They’ve always presented themselves as a “helping hand” organisation, but from the beginning, they’ve had two primary goals: 1) The regulation of tax compliance worldwide and 2) The elimination of tax havens through global tax uniformity. The first effort has been pursued by periodically creating “Minimum International Standards.” The implication has been that the nations of the world have all agreed on these, but in fact, the standards are arbitrary, created solely by the OECD and announced to the world, imposing them on not all countries but on a selection of targeted tax havens under the guise of the prevention of money laundering, terrorism, etc. This latter ploy is used in order to gain public acceptance of what is essentially an attempt at selective global economic control.

The second effort is one that they’ve kept under wraps for decades, but it has always been the top priority. Until recently, it would not have been either palatable or achievable, but it is being put forward now, amid the confusion over COVID – a time when it may be able to grow some legs.

The claim is that the goal is to harmonise tax rates worldwide, but that’s not the real intent. The goal is to neutralise tax havens in order to trap their own citizens.

International Man: Will it work?

Jeff Thomas: Yes and no. They’ll succeed to some extent, but there will be massive blow-back by the tax havens and their investors. Until now, progress for the OECD has been slow, as tax havens have been very adept at dodging bullets and finding work-arounds for OECD demands. In addition, most tax havens cannot simply change their national policies; they’d need to change their constitutions to bring about dramatic change. So, elections would need to be fought over those changes, and there would be a considerable variety of outcomes, accompanied by endless delays. Don’t forget: No tax haven will voluntarily commit economic suicide just to please the OECD. This will be dragged out as long as possible, and the outcome will be far from uniform.

This brings up another important point in answer to your question. In addressing the “Great Reset,” we don’t doubt the determination of The Powers That Be to achieve this, which often leads us to assume they will ultimately succeed. Yet we know that the First World countries that are at the forefront of the New World Order have entered the crisis stage; it’s unlikely that they’ll survive the crisis intact. At some point, they’ll crash and will be unable to fund all their agencies, such as the OECD. It’s quite likely that the effort to eliminate tax havens will fall apart in mid-transformation since it will be a drawn-out affair. Tax havens will certainly be hard hit, but that doesn’t mean they won’t survive.

International Man: No matter what they call it and what method they use, bankrupt governments are trying to prevent money from leaving for greener pastures. What do you think is the next scam they’ll try?

Jeff Thomas: Well, this is it: the recent announcement by Ms. Yellen. I’ve been waiting for this one for a very long time, and this is the big one: the OECD’s main objective, as I mentioned. I don’t think they’ll be as patient with this one as they have with the effort to regulate the tax havens. They’re running out of time and will have to fast-track this before their whole power base visibly unravels. I’ve talked to many people in the tax shelter industry about this, and they unquestionably fear this development becoming a major force. But I personally welcome the fast-tracking. The quicker they attempt to rush the effort, the more likely that it will fall apart midstream. People will only tolerate so much loss of freedom at one go.

See the rest here

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‘Global Taxes – Global Stagnation’ – Ron Paul’s 12 Apr. Column

Posted by M. C. on April 13, 2021

The goal of those supporting global minimum taxes enforced by a global tax agency is to prevent countries from lowering their taxes. Lowering corporate and other taxes is one way countries are able to attract new businesses and grow their economies. For example, after Ireland lowered its corporate taxes, it moved from being one of the poorest countries in the EU to having one of the EU’s strongest economies. Also, American workers and investors benefited from the 2017 tax reform’s reduction of corporate taxes from 35 percent to 21 percent.

https://mailchi.mp/ronpaulinstitute/globaltax?e=4e0de347c8

Apr 12 – Treasury Secretary Janet Yellen has proposed that governments around the world require payment of at least a uniform “global minimum corporate tax.” A motivation for Yellen’s push for a global minimum corporate tax is fear that the Biden administration’s proposed increase in the US corporate tax will cause some American corporations to flee the US for countries with lower corporate taxes.

President Biden wants to increase corporate taxes to help pay for his so-called infrastructure plan. The plan actually spends more on “progressive” priorities, including a down payment on the Green New Deal, than on infrastructure.

Much of the spending will benefit state-favored businesses. For example, the plan provides money to promote manufacturing and electric vehicles. So, the idea is to raise taxes on all corporations and then use some of the received tax payments to subsidize government-favored businesses and industries.

The only way to know the highest valued use of resources is by seeing what goods and services consumers voluntary choose to spend their money on. A system where the allocation of resources is based on the preferences of politicians and bureaucrats — who use force to get their way — will be less efficient than a system where consumers control the allocation of resources.

Thus, the greater role government plays in the economy the less prosperous the people will be — with the possible exception of the governing class and those who make their living currying favor with the rulers.

Yellen’s global corporate tax proposal will no doubt be supported by governments of many European Union (EU) countries, as well as the globalist bureaucrats at the Organization for Economic Cooperation and Development (OECD). For years, these governments and their power-hungry OECD allies have sought to create a global tax cartel.

The goal of those supporting global minimum taxes enforced by a global tax agency is to prevent countries from lowering their taxes. Lowering corporate and other taxes is one way countries are able to attract new businesses and grow their economies. For example, after Ireland lowered its corporate taxes, it moved from being one of the poorest countries in the EU to having one of the EU’s strongest economies. Also, American workers and investors benefited from the 2017 tax reform’s reduction of corporate taxes from 35 percent to 21 percent.

Yellen and her pro-global tax counterparts deride tax competition between countries as a “race to the bottom.” In fact, tax competition is a race to the top for the countries whose economies benefit from new investments, and for the workers and consumers who benefit from new job opportunities and new products. In contrast, a global minimum corporate tax will raise prices and lower wages, while incentivizing politicians to further increase the minimum.

A global minimum corporate tax will also set a precedent for imposition of other global minimum taxes on individuals. This scheme may even advance the old Keynesian dream of a global currency. The Biden administration is already taking steps toward a global currency by asking the International Monetary Fund to issue more special drawing rights (SDRs).

Global tax and fiat currency systems will only benefit the world’s political and financial elites. In contrast, regular people across the world benefit from limited government, free markets, sound money, and reduced or eliminated taxes.



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Biden and Janet Yellen Are Pushing a Global Minimum Tax Rate. The EU Is Very Pleased. | Mises Wire

Posted by M. C. on April 8, 2021

So, for at least a decade, EU politicians have openly complained that tax competition is “a threat to the European Union.” The regimes in the west don’t like having to deal with smaller, poorer regimes that can offer lower taxes to employers, investors, and producers.

https://mises.org/wire/biden-and-janet-yellen-are-pushing-global-minimum-tax-rate-eu-very-pleased

Ryan McMaken

It has long been a dream of central planners and interventionists to set global, uniform tax rates for all regimes. These globalists know that so long as sovereign states have the ability to freely set their own tax rates, some regimes are tempted to engage in “tax competition” in order to attract capital. When this happens “tax havens” allow companies and individuals to “shop around” in terms of where to put their productive wealth.

The antidote to this “problem,” we are told, is so-called tax harmonization. Under tax harmonization schemes, all governments are forced to impose a certain minimum tax rate so that high-tax countries need not compete with low-tax countries. Noncompliance comes with sanctions.

Without tax havens, of course, regimes have more freedom to raise taxes to ever higher levels because the gap between the high-tax regimes and low-tax regimes is significantly lessened.

So, it should surprise no one that President Biden’s Treasury secretary Janet Yellen is now pushing for a global minimum corporate tax, and for an increase to the US corporate taxes:

U.S. Treasury Secretary Janet Yellen on Monday urged the adoption of a minimum global corporate income tax, an effort to at least partially offset any disadvantages that might arise from the Biden administration’s proposed increase in the U.S. corporate tax rate.

Citing a “30-year race to the bottom” in which countries have slashed corporate tax rates in an effort to attract multinational businesses, Yellen said the Biden administration would work with other advanced economies in the Group of 20 to set a minimum.

Naturally, such a scheme doesn’t work without a means to punish countries that don’t cooperate. According to Reuters,

The U.S. plan envisages a 21% minimum corporate tax rate, coupled with eliminating exemptions on income from countries that do not enact a minimum tax to discourage the shifting of jobs and profits overseas.

In other words, “Biden’s corporate tax measure would also penalize other countries without a minimum corporate tax by more heavily taxing their subsidiaries in the U.S.”

A Long War on Tax Competition

The US’s new attack on tax havens and tax competition comes after years of attempts by the EU and the Organization for Economic Co-operation and Development (OECD) to impose enforceable minimum tax rates. The OECD is currently in the process of negotiating what Daniel Mitchell calls a “global high tax cartel.”

Moreover, the European Commission has been complaining for many years about low-tax member states within the bloc.

In early 2019, for example, European Commission president Jean-Claude Juncker pushed the idea of ending the ability of EU members to veto changes in tax policy so as to make tax rates across EU countries more equal. Ireland and Hungary, which have adopted low tax rates to attract businesses, have long opposed such effortsMalta has vehemently objected as well.

In the EU, France and Germany—the largest and most powerful states in the bloc—have pushed for an EU-wide corporate tax policy for years. Germany and France have already announced plans to bilaterally pursue a common corporate tax policy, but this is just the first step. The next step is to impose minimum tax rates on the rest of Europe as well.

Europe isn’t the only place where regimes have hoped to attract capital with low tax rates. Small island nations in the Caribbean also function as tax havens and have earned the ire of the European Union’s leadership.

In many ways, the effort to achieve tax harmonization is also a war on small countries, waged by big, powerful countries.

After all, small countries have limited tools in attracting capital. All else being equal, small countries that use small-time local currencies are at a disadvantage in a world of competing fiat currencies. Small countries also potentially have less access to ready labor and other inputs necessary for production. Finally, small countries are at a disadvantage when they are physically located far from other centers of capital. This is the case for many Caribbean and eastern European countries.

East vs. West and Rich vs. Poor

One way small countries can compete is by lowering corporate tax rates. This is partly why Ireland, Malta, and Hungary have all pursued low-tax policies. In fact, in 2019, Hungary slashed its corporate tax rate to 9 percent from 19 percent. Ireland—which has long been at the periphery of Europe and was considerably poorer than the rest of Western Europe as late as the early 1990s—has now become known for its relatively low corporate tax rate, which now stands at 12.5 percent. In contrast, France’s corporate tax rate as of 2020 was 32 percent. Germany’s rate was 29.9 percent. Indeed, it is no coincidence that the old established economies of the EU—France, Germany, Spain, Italy, and the Low Countries—all have higher corporate tax rates compared to the old Iron Curtain countries.

In Poland and Czechia, for example, the corporate tax rate is 19 percent. It’s 16 percent in Romania. Naturally, after the end of the Soviet Union, these countries sought to raise their standards of living and enter the global marketplace. One way to attract capital was to make their economies more attractive to foreign capitalists.

The rich west of Europe has never approved of this strategy.

So, for at least a decade, EU politicians have openly complained that tax competition is “a threat to the European Union.” The regimes in the west don’t like having to deal with smaller, poorer regimes that can offer lower taxes to employers, investors, and producers.

Now, it looks like the US is joining this effort to force smaller, poorer countries to raise their tax rates. The Trump administration threw a bit of a wrench in the EU’s plans to harmonize taxes when Trump was able to win approval of a corporate tax cut from 35 percent to 21 percent. That presented an indirect threat to the Franco-German plan to turn the industrialized world into one big high-tax bloc. But now with Biden in the White House, the US looks like its “ready to help” by raising US rates to a France-friendly 28 percent, and by also pushing for a new global tax regime. 

The high-tax regimes of the world will be more than happy to join in.  Author:

Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power&Market, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado and was a housing economist for the State of Colorado. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.

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Old Yellen

Posted by M. C. on April 6, 2021

May be a cartoon of 2 people and text that says 'Are companies leaving because the taxes in theUS are too high? 冊 @a No, it's because the taxes in 101 other countries are too low'

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Erie Times E-Edition Article-Yellen backing global corporate tax

Posted by M. C. on April 6, 2021

Raising everyone else’s tax so companies won’t bail on US. How does eveyone paying more for taxes help you?

This is why David Stockman described Yellen as a simpleton.

Here is a radical thought. Lower all taxes. Make everyone (except maybe Raytheon) happy.

https://erietimes-pa-app.newsmemory.com/?publink=2959a2d03

Yellen backing global corporate tax

Christopher Rugaber

ASSOCIATED PRESS

WASHINGTON – Treasury Secretary Janet Yellen on Monday urged the adoption of a minimum global corporate income tax, an effort to offset any disadvantages that might arise from the Biden administration’s proposed increase in the U.S. corporate tax rate.

Citing a “30-year race to the bottom” in which countries have slashed corporate tax rates in an effort to attract multinational businesses, Yellen said the Biden administration would work with other advanced economies in the Group of 20 to set a minimum.

“Competitiveness is about more than how U.S.-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen said in a virtual speech to the Chicago Council on Global Affairs. “It is about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods.”

The speech was Yellen’s highest-profile so far on international affairs, and came just as the spring meetings of the World Bank and International Monetary Fund began in a virtual format.

“It is important to work with other countries to end the pressures of tax competition and corporate tax base erosion,” Yellen said.

President Joe Biden has proposed hiking the U.S. corporate tax rate to 28% from 21%, partially undoing the Trump administration’s cut from 35% in its 2017 tax legislation. Biden also wants to set a minimum U.S. tax on overseas corporate income, and to make it harder for companies to shift earnings offshore.

Also on Monday, Biden said he was “not at all” concerned that a higher corporate tax rate would cause some U.S. companies to relocate overseas, though Yellen’s proposed global minimum corporate tax is intended to prevent that from happening.

“There’s no evidence to that … that’s bizarre,” Biden said in response to a question from reporters.

According to the Tax Foundation, the Trump administration’s corporate tax reduction lowered the U.S. rate from the highest among the 37 advanced economies in the Organization for Economic Cooperation and Development to the 13th highest. Many analysts have argued, however, that few large U.S. multinationals paid the full tax.

“We have 51 or 52 corporations from the Fortune 500 who haven’t paid a single penny a day for three years?” Biden said. “Come on.”

Yellen also noted that many developing nations are lagging in vaccinating their populations, and have also experienced harsh economic consequences from the pandemic. As many as 150 million people worldwide will fall into extreme poverty this year, Yellen said.

The Biden administration supports the creation of $650 billion in new lending capacity at the IMF to address such issues, she said. Many Republicans in Congress oppose the new allotment, arguing that much of the funding would flow to relatively better-off developing countries, such as China.

Yellen acknowledged that the additional credit would be distributed to each IMF member, but argued that “significant resources will go to the poorest countries most in need.”

Treasury Secretary Janet Yellen says advanced countries should cooperate on a minimum corporate income tax.

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