Detroit and Stockton are mere microcosms compared to the almost unimaginable debt obligations held by the United States government. … Read More
Detroit rock bottom: City announces $2.5bn debt default
Detroit Emergency Manager Kevyn Orr said the city would stop making payments on its unsecured debt in a bid to “conserve cash” for vital services like police and firefighters. He further said pension benefits both present and future along with healthcare would face cuts, while control over the city’s water and sewage would be turned over to an independent body. “We’re tapped out,” Orr was quoted by WWJ-TV as saying. “We need to come up with a plan to restructure our debt obligations and our legacy obligations going forward — that is: pension, other employee benefits, healthcare, so on and so forth.” Orr continued that $1.25 billion would be set aside over the next decade, $750 million of which will go towards public safety, including funds for police, fire, streetlights and other endeavors. The remaining $500 million will be for blight removal. The emergency manager spent two hours with about 180 bond insurers, pension trustees, union representatives and other creditors holding Detroit debt on Friday in an effort to fix fiscal problems which have left the city insolvent. One bond holder present at the meeting who asked not to be identified told Reuters Orr’s proposal was likely more than debt holders would be able to accept. “It’s just too much. It is an unprecedented amount to ask.” If creditors reject the plan, Detroit could be forced into what would be by far the largest-ever municipal bankruptcy in US history. Orr said there is a “50:50” chance the city will be forced into bankruptcy and that decision would likely happen in the next 30 days. “Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past 45 years have brought Detroit to the brink of financial and operational ruin,” Orr said. In a report issued to creditors on Friday, Detroit’s skyrocketing debt, pension and healthcare obligations will sell to almost 65 percent of total city revenue by 2017, up from the current level of 42.5 percent. Detroit has also experienced a 26 percent decline in population since 2000, while unemployment surged from 6.3 percent in June 2000 to 18.3 percent in June 2012, further shrinking the city’s revenue base. Meanwhile, the city’s budget deficit is likely to exceed $380 million by July 1. Orr, who was appointed three months ago by Michigan Governor Rick Snyder to salvage the city’s finances and operations, has been met with skepticism by local residents who have accused him of exaggerating the current situation. “We feel that the bankers and the creditors who are here today with the emergency manager are not going to negotiate in the best interest of the people of the city of Detroit. And we are saying that the same financial institutions that Mr. Orr is negotiating with today are responsible in large part for the crisis that exists in Detroit,” Abayomi Azikiwe, a protester outside the meeting told PBS. Leaders of some of Detroit’s 48 public sector unions were also upset by the proposals, with water and sewage workers vowing to strike over the privatization plans. … Read More
Cutting offshore businesses key to reviving global economy – Putin
The need to ammend the IMF structure and learn to live by ones means were among other remedies the President suggested for the struggling economies across the globe. Ahead of the two key economic events – G8 meeting in Great Britain at the start of the next week and St. Petersburg International Economic Forum later on June 20-23 – Russia’s President Vladimir Putin gave a broad interview to the RIA Novosti information service. QUESTION: Increasing transparency of the global economy and abandoning the active use of offshore zones was declared by Great Britain as one of the priorities of its G8 Presidency. What tools for global economy deoffshorisation will be proposed by Russia? In this regard, will Russia make a proposal at the summit to examine the problem of the British Virgin Islands, which are under the jurisdiction of Great Britain, more thoroughly? VLADIMIR PUTIN: Deoffshorisation is an important condition for eliminating structural imbalances in the global economy. It is no secret that it is in offshore zones that considerable amounts of speculative and sometimes blatantly criminal capital are accumulated. And the countries and territories where it is registered often have very little understanding of the money owners or its origin. Sudden emergence and uncontrolled movement of these funds has an extremely negative effect on the global financial system. The outflow of capitals to offshore zones reduces tax base, decreases tax revenues and threatens national fiscal sovereignty. Against such a background, it is difficult to talk about building a fair taxation system. We have all seen not so long ago the head of Apple answer awkward questions from senators about the fact that his company keeps tens of billions of dollars earned in the United States outside the American tax boundaries. The fight against tax evasion through offshore zones is a very difficult and laborious task. To that end, it is important to use not only national, but also international regulatory tools. As one of deoffshorisation measures, Russia proposes to conclude bilateral agreements with offshore and low-tax jurisdictions. Such documents should be aimed at countering illegal schemes of minimising taxation, involve the exchange of tax information and implementation of universal recommendations developed within the framework of the OECD. Strengthening international cooperation on tax issues has become a priority for the G20 after the onset of the global financial crisis. The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes is engaged in active and useful work. It assesses the legislation of this forum’s member states in order to identify whether it complies with international information disclosure standards. Regarding the situation with offshore zones on territories under the jurisdiction of Great Britain, the host of the G8 summit David Cameron was among those who drew attention to this problem. The British prime minister has been consistently working to increase transparency in taxation (including the issues of tax evasion and aggressive optimisation) not only in the world as a whole, but also at home. I hope that his call to enhance interaction on exchanging tax information and facilitating access of supervisory authorities to the data on ultimate beneficiaries will be heard. QUESTION : The issue of IMF reform has been already discussed for several years during the meetings of both G8 and G20. However, these discussions come to nothing due to unwillingness of the Fund’s “founding fathers” to share power and influence. Do you think it’s time to take some more radical steps, for instance, to dissolve the IMF, start from scratch and establish a new organisation taking into account modern financial and political realities? VLADIMIR PUTIN: The IMF needs a thorough reform. This view is shared by all the shareholders of the Fund. The problem is that the IMF frequently fails to keep pace with the rapidly changing situation in global financial markets, first of all, when making efficient and timely decisions. Their implementation leaves much to be desired as well. A good example is the global financial crisis, which the IMF system failed to prevent. I believe it is a wrong approach to think that the new councils, funds or other international institutions will become a panacea for all the problems. It is important, drawing upon the unique experience of co-operation within the IMF, to take further action to improve its work. We should be talking about the Fund’s overall reorganisation, ways to adjust it to current economic realities. And here it is most important to revise the existing IMF quota and voting system, to enhance the role of developing countries, including our BRICS partners. It is true that negotiations on these tracks are not going smoothly. I would say that they have actually come to a standstill since 2010. We will make maximum effort to persuade our partners to reach a compromise and find mutually acceptable solutions in the run-up to the G20 Summit in St Petersburg. I would like to stress that changes in the IMF represent only a part of the global financial architecture reform. Its other priorities include lending and public debt management policy, as well as enhanced collaboration between regional financial mechanisms and the IMF. QUESTION : Another priority announced by Great Britain for its G8 Presidency is the revitalisation of international trade. How urgent is the problem of trade barriers, in your opinion? How reasonable are the efforts of the states with radically different economic environments to find a common ground for their countries in order to revitalise international trade? VLADIMIR PUTIN: The development of international trade is one of the key sources of economic growth. That is why we cannot help being concerned about the negative trend in the growth rates for world trade which declined to 2% in 2012. Estimates for this year (a 3.3% growth) do not seem very optimistic either. This means that in spite of the crisis we should focus our joint efforts on developing trade and not on introducing protectionist measures. Protectionist lobbies within some countries have become more active which is the evidence that this threat persists. It was in the spirit of joint actions that we proposed to our G20 partners to extend the moratorium on protectionist measures in trade and continue monitoring the implementation of such measures. In this respect, I would like to emphasise that we consider the WTO to be the foundation on which the whole system of world trade rules is based. Unfortunately, we can see that there is certain stagnation right now within the WTO. However, this is not the reason to tear this structure down. We need to work to strengthen and develop it. We are actively trying to persuade our partners to conclude as soon as possible the Doha Round that has already been going on for 12 years. We hope that some progress will be made on this matter during the Ministerial Meeting scheduled for this December. Now about the differences in the economic environments of the countries. They necessitate the establishment of common and clear for all market “rules of the game” in trade which would allow the countries to avoid biased approaches and protectionist barriers. The WTO creates a common legal framework and provides effective leverage against offenders. All this serves to make the world trade predictable and stable and ensure its more rapid development. At the same time we have to look at the issue of liberalisation of trade and investment in a broader perspective. Integrated associations are becoming ever more important and free trade zones are being established. We are actively promoting the project of the Eurasian Economic Union that includes Kazakhstan and Belarus. This is a good example of barriers really lifted and trade revitalised. It is important that integration agreements correspond to the WTO requirements and regulations. We ensure this within our Customs Union, even though Kazakhstan and Belarus have not yet joined the organisation. QUESTION: Russia has been a WTO member for a year now. One of the arguments in favour of the WTO accession was our intention to assure that Russia plays by the “rules of the game” same as for therest of the world. In your opinion, wasthis goalachieved? VLADIMIR PUTIN: Last yearwe completed theWTO accession. Our domestic legislation and hundreds oftariff lines were agreed on andbrought in linewith WTO rulesin the course ofa long and uneasy negotiation process. This does not mean that afterRussia’s accessionto the WTO rapid changes and new “rules of the game” will be introduced. We have been using the WTO norms and standards for quite a long time now. And the fact that all WTO members approved Russia’s accession to the organisation confirms that Russianeconomy is ready forthe new working conditions. Russia’s accession to the WTO allows it to fully participate in the development and improvement of international trade rules.We are yet to learn how to take full advantage of the acceptable instruments to support domestic producers, resolve trade disputes and protect Russian goods in foreign markets. Russia has one of the highest legislative transparency standards among WTO participants, as well as detailed external trade regulations.Of course, some claim that Russia does not fully comply with its WTO obligations.However, I would like to stress that we can make the same claims regarding our partners.We believe that Russian goods are unreasonably denied access to the domestic markets of mineral fertilisers, chemicals, petrochemicals and automotive fuel, as well as to pipe and metal industry in a number of countries.Nevertheless, it is a normal working process:the US, China, India, the EU and other international trade participants are settling the same disputes. I would like to point out once again that we must take full advantage of WTO instruments to protect our trade and economic interests and prevent our partners from using unfair competition practices. QUESTION: One of the issues to be discussed at the upcoming SPIEF is whether the welfare state can be economically competitive in the modern world. In your view, does the European model of a welfare state have a future? Does it bother you that Russia can repeat the path of Europe that is affected by economic inefficiency? VLADIMIR PUTIN: I think the question is incorrect. How can we link economic efficiency of a state, its competitiveness with the renunciation of all its social obligations? One of the main functions of the state is to take care of its population and ensure its social protection. A potential refusal from this function would endanger the existence of the institution of state as such. The problem has a different nature, which was clearly shown by the crisis in certain European countries. The key word here is inefficiency. It is not the social policy that leads to the consequences Europe is facing today, but rather living beyond the means, losing control of the general economic situation and structural distortions. Moreover, many European countries are witnessing a rise of dependency mentality when not working is often much more beneficial than working. This type of mentality endangers not only the economy but also the moral basics of the society. It is not a secret that many citizens of less developed countries come to Europe intentionally to live off welfare, like they call it in Germany. For Russia, such approach is unacceptable. A social state is not something that we simply want. It is a necessity. We are working on striking a balance between decent salaries in the budgetary field, an appropriate pension system, quality public services, including medical and educational services, and a reasonable budgetary policy and measures to stimulate the economy. Otherwise, people cannot be confident in the future, cannot trust the government, while it is essential for stable economic growth and national development. We can easily recall such a situation in the 1990s when many social obligations were not fulfilled and poverty was growing at a threatening pace. We made our choice long ago. We will not renounce our social obligations. Today, the main economy stimulating factors in our country are income growth, consumer spending growth and growth of bank lending. The government allocates large funds for raising employment, creating jobs and implementing employment programs. And the real wage is constantly growing. Pensions and social benefits are adjusted in time; the pension system as a whole is being modernised. As a result, for the first four months of 2013 the unemployment rate in Russia remained rather low at 5.7%. We pay a lot of attention to improving the demographic situation and developing the healthcare system. We are implementing the corresponding projects and programs. As for Europe, we see that leading European countries carry out structural reforms to raise the competitiveness of their economies, and fight unemployment. At the same time, due to stronger coordination between budgetary and economic policies, the approach to budgetary discipline is getting more flexible. And these countries recorded their obligations in the EU strategy of social and economic development up to 2020. Therefore, we should not reject the European social model. QUESTION: This year the SPIEF traditionally provides an opportunity to focus on the issues of sustainable economic growth and Russia’s role in global affairs. What does Russia see as new sources of global economic growth and what will Russia itself use as catalysts for changes? VLADIMIR PUTIN: Today, it is important to evaluate the internal reserves of each country carefully and look for new sources of growth there. First of all, it is essential to improve public administration, develop human capital and competition, as well as increase investments in social sector, education, science and infrastructure. These are the keys to economic growth, innovative technology and job creation. Therefore, the issue of financing long-term investments has been put at the top of agenda under Russia’s G20 presidency this year. Before the summit in St Petersburg we are going to propose specific actions aimed at creating conditions for enhancing investment in real economy and increasing the number of effective tools for co-financing investment projects. Booming international trade is yet another significant source of growth. Modern situation clearly illustrates that certain states or groups of states, no matter how big they are, have reached their potential in regulating economies and financial systems. We need to adopt a unifying agenda. Global challenges and threats can only be countered through consolidated efforts of all States. Further progressive and sustainable economic growth, apparently, requires harmonisation of economic policies on a global scale, transformation of international monetary and financial system and financial regulation and supervision system, investment promotion, higher level of trust and enhancement of transparency and predictability of markets, including energy ones. Such work has already begun. It is important to accomplish it and to complement the steps already taken with full-fledged universal agreements. Russia which has assumed the G20 presidency for this year will actively promote such agenda at the forthcoming summit in St Petersburg. … Read More
Russia and China are ready for a new crisis – Deutsche Bank
Back in 2008, emerging markets coped with the effects of the global financial crisis without “structural damage,” although a small number of countries received liquidity support from the International Monetary Fund, Deutsche Bank’s emerging markets analyst Markus Jaeger says in the survey. They adjusted to shocks to their capital and current accounts by currency depreciation, liquidity support from central banks and by the contraction of their economies. The banks’ economists analysed countries’ external financing requirements (EFR) to study their exposure to a sharp slowdown in capital flows. EFR shows the ratio of short-term debt, medium-and long-term debt amortizations and the current account in relation to foreign exchange reserves. Generally, EFR below 100 percent mean the country is able to withstand external shocks while those above show vulnerability. Judging by EFR, South Korea, Poland and South Africa have much stronger positions now compared to 2008, while India and Indonesia have “slightly weaker, but still solid, positions,” according to Deutsche Bank. China and Russia showed the best results with EFR ratio below 50 percent. In addition, the two countries have a surplus in their current accounts and short-term debt of the two countries is less than half of the state reserves, according to the survey The only developing country that is not prepared for the crisis is Turkey – its need for foreign financing has grown since 2008 and is now more than 100 percent of FX. Overall, emerging markets are more solid than they were five years ago, as many have put in place regulations that limit the extent to which banks can run foreign currency risks, according to Markus Jaeger. The study supports the Russian authorities when they say Russia is ready for the crisis. Russian President Vladimir Putin said that the “safety margin” of the Russian economy is formed by high oil prices and large state reserves. Russia’s foreign exchange reserves are the fourth largest in the world topping $515bn, Reuters reports. … Read More
Major-league environmental advocate suing State Department over Keystone XL analysis
The lawsuit will be filed following the group’s unsuccessful Freedom of Information Act (FOIA) attempt to acquire information on the consulting firm that was hired to assess the Canadian-US oil pipeline. Critics of the pipeline project argue that TransCanada has not been upfront about the risks posed by transporting heavy tar sands oil, and more broadly criticize the widening tar sands industry in Canada and elsewhere for its environmental impact. The Sierra Club, along with many other environmental organizations that oppose construction of the pipeline, maintain that the company that conducted the government’s impact report had a significant conflict of interest as it had “financial ties to the pipeline company and the American Petroleum Institute, one of Keystone XL’s most active and vocal lobbyists.” The Environmental Protection Agency has also called into question the report. In April, EPA Assistant Administrator for Enforcement and Compliance Cynthia Giles wrote to the State Department to say that that agency’s March 2013 environmental impact report was “insufficient.” A major portion of the pipeline requires a cross-border permit, and the environmental impact report produced by Environmental Resources Management will be key in finalizing the State Department’s review of the project. The State Department signaled via a draft review in summer 2011 that it intended to grant the project a passing environmental grade. Unlike the section of the pipeline that will cross the Canada-US border, the Oklahoma-to-Texas section does not require special permits, and has already been laid down. As Inside Climate News reported only a few days ago, sections of that new pipeline, which is not yet operational, were recently dug up after TransCanada identified 40 “anomalies” along a 60-to-70 mile stretch in east Texas. Mohammad Najafi, a civil engineering professor at the University of Texas at Arlington and editor-in-chief of the Journal of Pipeline Systems Engineering and Practice, tells Inside Climate that such anomalies point to “something unusual” on the pipeline which could cause big problems in the future. As for the presence of 40 anomalies, Najafi says that is “very unusual” and “shows that something is wrong.” “That’s not a good sign…it doesn’t necessarily mean it’s dangerous, but it means [TransCanada] may have missed something,” he adds. According to additional reports from local residents owning land traversed by the pipeline, they have seen evidence on repair sites indicating more than 40 ‘anomalies,’ though their seriousness is difficult to gauge. In response, TransCanada spokesman Shawn Howard has said the repairs on Keystone XL are “out of an abundance of caution” to ensure that it operates at a “much higher degree of design and safety than any other pipeline.” Construction on the Oklahoma and Texas section of Keystone XL is now more than 75 per cent complete. The northern segment, to run from Alberta, Canada to Steele City, Nebraska, still requires a cross-border permit from the Obama administration before it can proceed. Last week a former TransCanada employee testified before a Canadian Senate committee as a whistleblower against its practices. Evan Vokes, an expert in pipeline welding, told Canadian officials that the Canadian company suffered from a “culture of noncompliance” and “coercion,” with “deeply entrenched business practices that ignored legally required regulations and codes” and carries “significant public safety risks.” “It’s organized crime,” Vokes, an expert in pipeline welding and now whistleblower against his ex-employer, told the Huffington Post after the hearing. “The source of revenue is legal, but how they go about it isn’t legal.” Vokes provided the Canadian Senate with evidence supporting allegations of shoddy safety practices, including managerial pressure to retract a welding code violation on a natural gas line feeding a tar sands project in Alberta, as well as the use of “substandard materials.” The damning testimony by the five-year former employee quickly brought about a response from TransCanada. “We take great exception to the claims by Mr. Vokes that we do not take safety and compliance issues seriously,” company spokesman Shawn Howard said to Huffington Post Canada. “Our track record and the safety of our energy infrastructure network shows that we do,” he added. … Read More
It’s official: Google confirms acquisition of Waze
Following weeks of speculation, Google has now officially confirmed the acquisition of Waze. No financial details were given but previous reports put the figure at $1.3 billion with a requirement to keep the company a separate entity, based in Israel, for at least three years. … Read More
Booz Allen biggest 4-month stock fall after its employee Snowden leak
Stock of the firm based in McLean, Virginia had its biggest fall in New York since January 30, according to Bloomberg. Three months ago the company hired 29-year-old Edward Snowden to fill a position in Hawaii. On Sunday he revealed the US National Security Agency’s Prism programme had direct access to the systems of Google, Facebook, Apple as well as other internet giants. Snowden had been working for NSA for the past four years for various outside contractors. Previously he worked in information technology during a stint at the CIA. As the US government provides for about 99% of revenue for Virginia-based firm, Booz Allen is now struggling to distance itself from its employee. “News reports that this individual has claimed to have leaked classified information are shocking, and if accurate, this action represents a grave violation of the code of conduct and core values of our firm,” Booz Allen said in a statement issued Sunday night. In 2012 the publicly – traded Booz Allen won government contracts worth more than $4 billion, the US government data said. Its long – term contracts were estimated at $11.8 billion as of the end of March. Given such a strong financial dependence on the Government, the shocking revelation can now deeply eat into the firm’s bottom line. “If our relationships with such [U.S. government] agencies are harmed, our future revenue and operating profits would decline,” Booz Allen said in a filing. Snowden said he came forward to make people open their eyes and protect them from the government’s invasion of privacy. “I really want the focus to be on these documents and the debate which I hope this will trigger among citizens around the globe about what kind of world we want to live in. My sole motive is to inform the public as to that which is done in their name and that which is done against them,” the Guardian quotes Edward Snowden as saying. … Read More
