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Jihad against tax havens is economic madness

The current jihad against tax havens and hedge funds is somewhat troubling as there is clearly no documented causality with the recent crisis. No informed observer disputes the fact that it is regulated financial institutions that managed to expand their balance sheet beyond any metric imaginable to hedge funds. As to tax havens, the link is even more spurious. If this type of reasoning continues we may soon hear that illegal downloading of copyrighted music precipitated the world into a new Depression.

Politicians are either conveying the crass financial illiteracy of their advisers or giving in to debauched demagoguery. The worrying aspect about the latter is that it is highly reminiscent of other witch hunts that took off in the wake of the last Depression. It will soon become clear to some of the less-challenged politicians that that risk-taking vehicles such as hedge funds will be increasingly solicited to participate in the rescue of banks (through programmes such as the public/private investment programme) and of corporates (via the funding of debtor-in-possession financing to bankrupt companies).

Tax havens play a key role in optimising the recycling of savings into the productive sector. Were it not for these distributions channels, the weighted average cost of capital of companies across the world would rise substantially, and banks would no longer derive any cheap funding from the trillions in fiduciary deposits placed, among others, by Swiss banks. The reason is simple; most countries follow tax policies that discourage substantial investments in financial assets. Some exemptions exist, but they are often wiped out by the drawbacks of wealth taxes or the complexities of capital gains taxation. Fundamentally, the state sector tends to support the consumption bulimia that leads to fat value added tax receipts which, in turn, fuels an orgy of wasteful expenditure.

Investments in real estate are also favoured because they also constitute a source of recurring tax income (transactional and value-based). Western tax authorities will never wean themselves from this manna. Whether G20 participants like it or not, tax havens are a form of uncapped individual retirement accounts that play an essential role, not only in providing a safety valve to excessive taxation but also as a means to re-injecting savings efficiently into the productive sector.

Dit commentaarstuk van Philippe Manet, naast investeringsbankier ook een persoonlijke kennis, verscheen eerst in de Financial Times.

Meer over belastingparadijzen op www.freemontgroup.com.

5 Reacties:

At 10:28 Vincent De Roeck said...
Deze reactie is verwijderd door een blogbeheerder.  
At 10:29 Vincent De Roeck said...

Mijn relatie met deze Philippe Manet

Enkele weken geleden ontmoette ik in Luxemburg een interessante Zwitserse libertariër, Philippe Manet genaamd, die eind jaren 1990 na enkele hoge kaderfuncties bekleed te hebben bij HSBC in Londen, UBS in Genève en AIS in Zurich de overstap maakte naar de ondernemerswereld en zelf een investeringsmaatschappij uit de grond stampte. Manet is als klassiek-liberaal en - hij is Zwitser, dus hoe kan het ook anders? - Euroscepticus aangesloten bij het "Liberales Institut in Dienst der Freiheit" in Zurich. Een ganse avond heeft Philippe Manet mij in Luxemburg geboeid met zijn ideeën en standpunten. Vooral de strijd van de EU tegen belastingparadijzen en de inzet van niet-geoorloofde middelen zoals de Duitse fiscus in Liechtenstein waren bij hem kop van jut. Kort daarop was ik zeer verheugd toen bleek dat hij zijn ideeën toch ook in een lezersbrief in de "Financial Times" had kunnen gieten. En natuurlijk verbaasde de inhoud van zijn tribune mij helemaal niet: "Jihad against tax havens will cut off a ready source of cheap funding." Manet bewijst met zijn cv ook dat volbloed-liberalen helemaal geen ivorentorenfilosofen moeten zijn, maar ook carrière kunnen maken in de reële economie.

 
At 10:30 Vincent De Roeck said...

Een update over Libertas in de Benelux

Enkele weken geleden heb ik meerdere dagen het Libertas-veldkantoor in het "Grand Hotel Cravat" van Luxemburg-Stad bemand en van daaruit getracht om in Luxemburg een lokale partijafdeling op te richten. Dit zonder succes overigens, net als België. De gesprekken met de Burgerlijst van Aly Jaerling en de ADR-partij van Robert Mehlen leidden tot niets, net als de verwoede pogingen om het oude liberale Europarlementslid Jub Weber bij onze partij te krijgen. Tenslotte faalden we om de kandidatenlijst rond een Ierse en een Belgische klokkenluider door de kiescommissie erkend te krijgen. De bureaucratische molen maakte het ons onmogelijk om de 500 door ons verzamelde steunhandtekeningen (de wet vereiste er 250, dus hadden we er toch aardig wat op overschot...) tijdig door de 116 gemeentebesturen te laten aftekenen. In de Benelux neemt Libertas dus enkel maar in Nederland deel aan de EU-verkiezingen van juni.

 
At 12:22 Vincent De Roeck said...
Deze reactie is verwijderd door de auteur.  
At 12:23 Vincent De Roeck said...

Global Warming Revisited
An article by Professor Michael Heberling

In the May 2001 Freeman I published “Unprecedented Global Warming?” which noted that climate change (global warming and global cooling) is a continuing phenomenon and that what we’ve witnessed in the last 25 years is “by no means unprecedented.” The Medieval Warm Period (800-1300), which took place without SUVs, power plants, or factories, was warmer than it is today. Crippling our economy to solve a minor (or nonexistent) future problem struck me as a serious mistake.

That article was tantamount to heresy among those who devoutly believe in anthropogenic (manmade) global warming. A physics professor responded, “Heberling’s commentary is the latest in a long list of junk-science commentaries about climate change. Heberling, who is not a scientist, but rather the president of a small business school, repeats several old and misleading ideas.”

Of course, Al Gore, the Nobel laureate who has made global warming his cause, is not a scientist. He has a B.A. in government. For the record, I have a B.S. from Cornell University, where I took courses in physics, chemistry, geology, and meteorology. However, this makes little difference because my sin was to downplay the severity of global warming, and too many people and organizations are tied financially to the “crisis.”

As MIT atmospheric physicist Richard Lindzen puts it, “Ambiguous scientific statements about climate are hyped by those with a vested interest in alarm, thus raising the political stakes for policymakers who provide funds for more science to feed more alarm to increase the political stakes. Indeed, the success of climate alarmism can be counted in the increased federal spending on climate research from a few hundred million dollars pre-1990 to $1.7 billion today.”

The Government Accountability Office says that for over 15 years the federal government has funded programs to study the earth’s climate and to reduce emissions of carbon dioxide and other greenhouse gases linked to climate change. A review of the number of government agencies and the amount of government money devoted to “climate change” is staggering. Nine of the 15 cabinet-level departments receive significant funding for climate-change activities. A 2007 White House press release boasted, “The President has devoted $37 billion to climate-change-related activities since 2001.” The U.S. Global Change Research Program, which has 13 federal agency participants, has made the largest scientific investment in climate change research at $20 billion over a 13-year period. The federal organizations with the largest budgets devoted to climate-change activities include NASA, the National Science Foundation, the Department of Energy, and the National Oceanic and Atmospheric Administration.

For those who embrace big government and centralized planning, the global-warming crisis has been a godsend. Under the mantra “preventing global warming,” government has greatly expanded into our daily lives. Mandates have superseded consumer choice in the areas of energy, transportation, and appliances. For example, when compared to the traditional light bulb, the new government-mandated compact fluorescent light bulb is far more expensive, loaded with mercury, and takes time to illuminate. To compensate for this delay, consumers leave the lights on. How does this help the environment or curtail global warming?
And the Horse You Rode In On

Given the billions of federal dollars at stake, it is not surprising that there would be resistance to any free flow of ideas that might question the crisis. If we don’t have a crisis, then we won’t need the government to ride in on a white horse throwing billions around to save us. It therefore becomes imperative to squelch or marginalize dissent. Name-calling, shooting the messenger, and the use of such show-stopper statements as “We have consensus” and “The debate is over” usually do the trick.

In the name-calling category, we find the following epithets: “climate-change denier,” “flat-earth advocates,” and “tools or stooges of Big Oil.”

Jeff Kueter of the Marshall Institute says that scientists who challenge global warming “are quickly labeled as having received money from the petroleum industry. The media consider their findings and their opinions to somehow be tainted because they’ve got a financial relationship.” Why is there never any suspicion in the other direction, when a researcher has a financial relationship with the government and its agenda for more regulations, more mandates, a carbon tax, and the nationalization of the energy sector? Why don’t the media ever call such a researcher a “tool of big government”?

What about the consensus we hear so much about? Gregg Easterbrook expresses the mainstream sentiment: “The consensus of the scientific community has shifted from skepticism to near-unanimous acceptance.”

The late author Michael Crichton had this response:

I regard consensus science as an extremely pernicious development that ought to be stopped cold in its tracks. Historically, the claim of consensus has been the first refuge of scoundrels; it is a way to avoid debate by claiming that the matter is already settled. Whenever you hear the consensus of scientists agrees on something or other, reach for your wallet, because you’re being had. Let’s be clear: the work of science has nothing whatever to do with consensus. Consensus is the business of politics. Science, on the contrary, requires only one investigator who happens to be right, which means that he or she has results that are verifiable by reference to the real world. In science consensus is irrelevant. What is relevant is reproducible results. The greatest scientists in history are great precisely because they broke with the consensus. There is no such thing as consensus science. If it’s consensus, it isn’t science. If it’s science, it isn’t consensus. Period.

One of the biggest tragedies of consensus science is the chilling effect it has on those who fall outside of this consensus. “Scientists who dissent from the alarmism have seen their grant funds disappear,” Lindzen says. “It’s my belief that many scientists have been cowed not merely by money but by fear. Alarm rather than genuine curiosity, it appears, is essential to maintaining funding. And only the most senior scientists today can stand up against this alarmist gale and defy the iron triangle of climate scientists, advocates and policy makers.”
Threat Level Whatever

The problem with public policy based on alarmism is that it’s hard to sustain. There are three reasons for this. The first is overselling the crisis. The general public has become numb and cynical about the endless barrage of ills all tied to global warming. (Even the disappearance of the Loch Ness Monster has been attributed to it.)

The second reason is clear and convincing evidence to the contrary. This is what did in the last climate-change crisis. A New York Times headline on May 21, 1975 blared: “Scientists Ponder Why World’s Climate is Changing: A Major Cooling Widely Considered to be Inevitable.” But it was hard to continue the hype about global cooling when it got hot outside. While the current global warming debate may be over, Mother Nature is, unfortunately, not cooperating. Contrary to the infallible computer climate-model predictions (which I call high-tech crystal balls), global temperatures peaked ten years ago, in 1998. There was no appreciable temperature increase for the next eight years. However, for the last two years the temperatures have actually fallen. The past two winters have been brutally cold. This painful realization may help to explain the sense of urgency in Congress to pass climate-change legislation–right now! Rep. Henry Waxman said at the opening of the 2009 congressional hearings on global warming that he plans to move “quickly and decisively” to push through climate legislation before Memorial Day (Or does he mean before it gets even colder?)

The final reason is that the alarmist crisis gets run over by a real crisis. With the financial turmoil, the housing crisis, the stock-market crash, and rising unemployment, it is hard to get excited about global warming. In the January Pew Public Survey Poll, global warming came in 20th out of 20 on the list of Top Priorities for America. The top five were: the economy, jobs, terrorism, Social Security, and education.

The global-warming crisis was tailor-made to simultaneously advance the agendas of the environmentalists, big government, and those who vilify the oil industry and business in general. There is far too much at stake to have this crisis die peacefully. As a result, there will be extensive efforts to keep it alive. For starters, the phrase “global warming” is being used less frequently (if at all). It’s been replaced with the nebulous, but error-free, “climate change.” Given that the earth’s climate has been changing for millions of years, “climate change” covers all bases (both warming and cooling). The problem with this approach, however, is that the public won’t buy it. It is hard to get excited about the dangers of “climate change.”

Be prepared for more talk about “energy security” and “energy efficiency.” This will lead to more government-mandated products and less consumer choice. There will still be a push for a carbon tax–or a cap-and-trade scheme, President Obama’s preferred policy. However, without the global-warming hysteria, this will be a harder sell.

Carbon dioxide will continue to be demonized as a “greenhouse gas.” Even though it is harmless to humans and is needed by all plant life, it will be called a toxic pollutant by the media, militant environmentalists, and politicians. Yet carbon dioxide makes up less than 4 percent of all greenhouse gases. Water vapor accounts for 95 percent.
Shut Off the Alarmists

What’s to be done? First, we should abandon all efforts and discussions related to cap-and-trade, carbon offsets, carbon footprints, and carbon taxes, which would never go away if implemented and won’t measurably change the temperature.

Second, we should stop government from funding climate change science. As John Tierney of the New York Times writes: “[Government] officials running the agencies have their own agendas . . . which can be [met] by supporting research demonstrating that there’s a terrible problem for the agency to solve.” Climatologist Patrick Michaels states, “[N]o one ever received a major research grant by stating that his or her particular issue might not be a problem after all.”

Third, we should demand that lobbyists for expanded government power disclose their financial backers.

Finally, we need to accept that climate change, both global warming and global cooling, will continue. Ironically, of the two we should wish for warming. Mankind has prospered in warming periods because agricultural production increased at higher latitudes and elevations. The opposite was true with global cooling. I’ll take global warming over another Ice Age. My request to Washington: Please don’t pass legislation to make Michigan any colder than it already is.

 

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