Youth Unemployment is rocketing up the to-do list…

Over the past year, I had the opportunity to point-out the sky-high and still-rising Youth Unemployment as being the biggest issue the “developped world” has to face, and in particular in Europe… remember the warning: watch the next elections…

Well, it has definitely evolved and is now seen by all as THE issue. Likely the spin-doctors of politics in many places have now noticed through their contuinuous polling that the biggest concern of voters is… unemployment, and especially that of the youth.

One point of really good news is to see that some of the major Corporations (in Europe) are coming up with plans and commitments to play a larger role by creating jobs and developping better skills in the workforce; and that is spontaneous, without any arm-twisting or claims for counterparties… very good news indeed!

Gemany will take-in apprentices from Spain, and of course Brussels will come up with some “plan”. Interestingly, no details about that plan yet, except that it already has a committed amount, EUR 7-8 billion, though over the next three years.

Arguably that is petty cash compared to the size of the problem and throwing money down such a deep hole will not help but maybe soothe the pain a (very small) bit.

Other proof that it is Priority #1? President Obama visits Berlin and in his speech raises (Youth) Unemployment as the biggest issue to tackle… no doubt that the NSA must have been scrutinizing this blog and briefed President Obama accordingly (yeah, right!). No less than the Pope raised it as well in Rio during the World Youth Day 2013… Difficult to put the point higher on the world’s agenda!!

So again: watch the next elections and the rhetoric of the various candidates….

The better news (see previous blogs again) is that there seems to be a strong will to tackle fiscal-loopholes. The press has been bending backwards to talk about holding structures in some remote islands and all the bad behaviors people imagine… In fact, holding structures to optimize money-flows AFTER taxes have been paid are fully legitimate and do ensure some fairness in taxation.

What is to be looked at is the fiscal set-ups that are abusive by enabling to not pay fair taxes where the profits are really made; between Intellectual Property set-ups, Management Services contracts and other tricks, this has been very much abused over the past decades and will need to be addressed to restore fiscal fairness; and in the end  make profits fairly taxed in the community that makes those profits possible… that is how the game should be played!

So only good news on this front: Unemployment is the number one concern and fiscal abuses are being tackled to restore income of States that make profits possible…

Of course, I am assuming that it will happen and that the forces pulling in the wrong direction will be overcome… and the latter are not exactly negligeable!!!

Simon Q.

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The reactions to NSA’s spying are… surprising!

Now that was quite something. The world is getting all upset because the NSA spies on everyone. Well, no kidding, you mean they happen to be doing their job, no? And in the intelligence business, you need to use any means and technology you can lay your hands on…

So I thought that was actually reassuring news, as a matter of fact. Number one because if anyone says they do not think this “intrusion” by the NSA is acceptable, they’re being impossibly naive. By the way, the Russians, the Chinese, the French, the Brits and most certainly anybody else who can, does it to…. It’s just that the Americans do it in a bigger way, maybe.

The disturbing part is that they outsourced it!!! To Booz-Allen (!) who then messes up the whole thing…. Supposedly, this should happen through some thorough super-serious and professional process with all kinds of fool-proof procedures rather than ending-up with some obscure employee getting access to some really confidential procedures, making copies and walking out with them…. very serious indeed!

Scary! Though it is so silly, that maybe it is all part of a broader machivellian plan and was all planned ahead…..

For sure we’ll wait with gruelling interest to see what will come out in the media who received copies of some of the information… What I would like to claim for myself is the right to use those super-snooping tools for a couple of days. That would undoubtedly be quite amusing!!

Simon Q.


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A missed communication opportunity for the Muslim community…

I am assuming that many saw on the internet the video of one of the murderers of an innocent UK soldier killed in the street who goes on a rant about their reasons and the Jihad and all that crap, talking to someone who pulled out his smartphone to record it…

The video is disturbing. Watch it again (here is the CNN news version)! Did you notice the lady pulling her shopping-caddie and just walking around the “hero” of that video to get on with her day…. very disturbing!

What media-coverage this got and how it was used by all was quite revolting.

The next day, spontaneous muslim groups were in the streets of London, protesting with well made signs against anyone who would think of ostracizing Islam and the Muslim community… Looking up who these movements are and who finances them is also disturbing…. The latter are clearly not only involved in buying Real Estate and football teams.

Well, a far more impactful thing to do would have been for the leaders of the Muslim community, especially those from where the murderers come from, to get together and pay a visit to the police station where they were being held. Then ask for the murderers to be handed over to them; they would then march them up to the roof of the highest building around and give them the choice: “Or you jump by yourself or we’ll push you..”. The whole thing would be filmed and put on YouTube. That would have been far more efficient to relay the message of what Islam values of peace and respect really are and how perpetrators of such actions should be treated. From an impact perspective, that video would have been a real smash on YouTube, likely exceeding the number of views Psy got with his Gangnam Style clip…..

Just saying…

Simon Q.

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Why is the EU expansion getting less press?

While for the two waves of EU expansion I had experienced so far, in 2004 to get to 25 and in 2007 to reach 27 member-States, there was a huge hoopla around it, sometimes for years beforehand, it seems now that it has lost its media-appeal.

Clearly, the fact that in 2004 and 2007 it was expanding to old foes of the Cold War era might have been a good reason to gloat about it, but how come the latest EU entry made zero noise?

So, what happened with Croatia? Honestly? I tend to be reasonably well-informed, but I read about their entry (a warm welcome, by the way!) in the papers the day after! Not one article before the big day?

I thought it was surprising!

Simon Q.

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So… where were we?

Though I have said this before, time does fly…. it’s been over three months since my last post and lots has been happening since.

The last post on this blog was on the fury over Cyprus’ bailout plan. How has that evolved since March? Well, first they will not touch the “under EUR 100K” savers, which has as a key benefit: it takes people off the streets and gives the impression only the “rich” will get harmed.

And to “block” things, they have implemented “capital controls”, i.e. strict limits on money that can leave the country, which is normally illegal within the Euro-zone!! We’ll see quite some lobbying on that one to see who can get around those rules. Let’s hold tight and see how it will end. My bet is that somehow some of the deposits will in fact leave the country under some strong political interference (guess from who?), then they will not have enough left to fulfill the comitment and then….. a further bailout plan?

So far the program has been bogged-down in paperwork and red-tape and is not getting very far… but guess what? It is bringing to light evidence as to how some in the banks’ senior management and above had their hands in all cookie jars while building up the Cyprus banks to fit their ambitions of becoming “big”….

Interestingly and very “classically”, one can suspect that not seeing the plan implemented as is or at least taking some revenge on the culprits that brought this mess will be high on the agenda of the “special interests” that are likely to take a big hit on their “savings”, and they do have the means to sling some mud around…

Talking about super bail-out plans and their applicability, I can only note the articles on the IMF, where they themselves admit to have “bent or broke its own rules” on the Greek bail-out, where it is now openly admitted that 3 out of 4 rules had been broken…. now this is encouraging, isn’t it? OK, today I shall focus on the good news, so in this case, the good news is that they did respect one of their rules… Seriously! Just for the consistency of my blogs at least, take a look at a previous blog on the competence of the IMF (click here).

Another big deal within the French political landscape was the “lie” by the now ex-Budget-Minister Cahuzac about his Swiss bank account. What happened is that when being accused by the media of having a Swiss bank account, he claimed in an official parliamentary session not to have one and then the evidence of it popped-up… so he lied and is heading for a load of judiciary and fiscal trouble…

Big deal, however the most interesting thing is what he said in his first post-resignation interview, asking what is the biggest lie, the one on his bank account or “lying to the Parliament on order from the President about the reality of France’s economic situation and the fact that the goals fixed in the budgetary plans are unachieveable?”… So good news again: the politicians do know how bad the situation really is! (But still dont have the guts to talk about it!)

Note for the non-French: the myth of the “Swiss bank account” is really big in the French psyche, and has lurred many from France to have one, rather than being a bit smarter and having it in a far more discreet place….

Talking about France, the row with China over Solar Panels that was threatening their wine exports to China seems to have been solved. Of course the EU would claim that the prices of the panels were in fact dumping, which the Chinese denied. I was just wondering how this fits with the fact that the biggest solar panel manufacturer in the world (who is in China) went bust…. We’ll see, but too bad that it was resolved, as there goes the wish of a cheaper and broader supply of French wines within Europe!

Simon Q.

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Shall it become known as “Savers’ Spring”?

Well, three days into spring and I cannot not write about what is going on in Cyprus.

A rescue-plan which consists of simply taking a cut of people’s savings…. and not a small cut either. When I first heard this, it was on the French main channel’s evening news. Though they did talk about it for quite a while, they only wanted to talk about the “noise” it was starting to create and did not even get to the key piece of information that would be the obvious question for any professional journalist to raise: how much? Well, the first plan was just under 7% from all deposits and 9.9% for the higher amounts!!

Wow, that was a real bomb. The riot police in Cyprus had to deal with some pretty upset people, among which bank employees who had heard the rumour that their bank would be closed in a few hours and had hit the streets to protest. And those protesters are only warming up.

That first plan was rejected by parliament (yeah, big surprise!) and now they have until tomorrow to come up with something different. Guess what that now is: 20% on deposits at one of the nation’s biggest banks (Bank of Cyprus) and 4% on all uninsured deposits in all banks, including foreign ones. Yes, you read that right, some might get 24% shaved off their deposits.

Now that is quite something. So on the theory side, the people who were dumb enough to save money and even more foolish to deposit it in a bank will have to pay: UNBELIEVABLE! This is “le bouquet”…. really way over the top! Historically, quite some governments simply confiscated the savings of their people in the past, but this is going to be a historic precedent of “substantial” consequences.

On the practical side, a lot of that money in Cyprus is let’s say… shady. It is rumored that there has been quite a flurry of meetings at the highest level at the Kremlin over the past week (official Russian deposits figure in Cyprus is around USD 30 billion). And no less than all-mighty Gazprom has jumped in with a proposal to pump in some money. For the record it would be through its bank, officially majority-owned by their pension fund (Gazfond) but managed under mandate by a Saint-Petersburg bank co-founded by friends of Vladimir Putin. No further comment!

Hmmm, the mess this will create among Russian oligarchs is going to be really interesting to follow. Many legitimate business people will get hurt as well, but the implications such a move will have are potentially enormous. And some will not forgive and put their considerable means into action to throw oil on the fire…

Talking about Russians and their ways to settle scores, I shall slip-in the fact that Boris Berezovsky was found dead in the UK yesterday. Police qualifying it as “unexplained” at this moment. Let’s see what the autopsy will bring up….

Now what will be the next ideas to find money? God knows… Maybe we shall soon be talking about the “Savers’ Spring of 2013”, where people who have money saved anywhere will take to the streets and trigger some kind of revolution…. yeah, dream on!

This is certainly the beginning of something…. and does not smell like good news if you want my opinion!

Hold on tight and watch the next elections…

Simon Q.


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Should optimists and pessismists give way to realists…

Interestingly, some ideas are going around about what could be done, if anything, to stop the economic slide Europe has now been in for (at least) four years. Of course, the various austerity plans all missed their targets for 2012, though none are anywhere close to be sufficient and usually give a time horizon of anywhere between 2016 and 2018, unsurprisingly aligned with electoral calendars depending of the wiggle room politicians think they’ll need. And those plans are not for budgetary equilibrium, but to get under 3% of GDP, which would not solve much anyway.

Quite a few voices, many in the financial technocracy business claim that we should be doing the opposite of austerity, with ambitious plans to boost growth. Let’s just remember that in the initial phase of the present crisis many governmental programs aimed to do so, by widening the budget deficit to promote economic growth. And what happened? Well, for example an “injection” of 4-5% of GDP spending (read: additional deficit) would bring maybe one, maybe one and a half percentage points of (artificial) growth…. not exactly wise neither efficient. Again, governments do not create jobs or growth, neither does consumption, it is employnment that does…

And here we are really facing a problem! I did like Mrs. Merkel’s comments recently that employment should be the EU’s top-priority, with the youth unemployment reaching 60% is some countries and above 25% in average (did I ever mention that I am a fan of Mrs. Merkel?). And we are not talking about high-school drop-outs here; and those who do find a job do so for meager pay, to put it politely…

As it will likely get worse, what will be the reaction of such a large part of Europe’s future (its youth), as with no hope and no future in the present “system”, they will still want to build one: watch the next elections!

Another worrying piece of news coming out in some EU countries is the increasing percentage of their population living at or below official levels of “poverty”; it is rising fast, very fast, and those official figures rarely take into account the realities of the societies they assess. Historically, when poverty hit various parts of Europe it triggered large emigration waves. That could be interesting, especially as I wonder where the young europeans would go?

In the ranking of countries missing their austerity plan targets, however insufficient those plans might be, and with one of the worst “starting positions”, it appears that the United-Kingdom is ahead of all. Interestingly, it is the first big country to go bust in my book, triggering the socio-economic meltdown that has in fact started some years ago already.

Boy do I hope to be wrong…. so what can and should be done? Some previous blogs do propose possible solutions, however also raising how difficult, if at all possible it would be to push those measures through.

As we are almost at the end of 2013’s first quarter, let’s see what spring will bring us this year…

Simon Q.


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What to wish for in 2013…

OK, first of all I realize I have not posted a blog for a month and a half… shame on me! Time flies and I did happen to be a bit busy… So I’m taking advantage of bad weather in the Swiss Alps to write instead of skiing today.

To put things into perspective, I’ll try to sum-up in just a few points what direction things should be taking to go down the right path next year and beyond…

Would anyone disagree, I’ll be more than happy to take any questions and comments. I promise to reply to all, whatever the tone or content.

First, some points to mention:

Yes, if the European economic crisis does not get solved, it is the whole world that will take a beating, like it or not. And things are not getting better…

Regarding possible solutions, keep in mind that public recognition of the reality of the crisis has not yet even started, be it from politicians or the media.

Macroeconomic realities are never exposed and the only voices echoed throughout the media and the political circles are those of the banking & financial services’ industry lobbies! I am not kidding, go out there and check….

The direction things are taking is NOT good. Unemployment is rising in beyond alarming proportions (esp. for the youth), without mentioning the financial precariousness of people who do still have a job. This will feed the extremes in political views: watch the next elections.

Obama got reelected (to my American friends I am not sure you heard how loud the sigh of relief was throughout the world) and take note that I cannot think of any incumbent who did get reelected anywhere in the past two years… oops sorry, I forgot Chavez and Putin (though the latter was technically not a re-election – another Russian twist on “democracy” I guess). My point is that Politics is crumbling into ever more demagogic electoral promises and the escalation is just starting: watch the next elections…

So what to keep in mind as solutions for 2013 and beyond?

It is not consumption that creates growth, it is employment! And Governments do not create jobs! The best way for Governments to create jobs is to increase taxes on corporate profits and do so in the simplest way possible, i.e. by increasing the tax rate and slashing the “deductibles”. One must absolutely avoid inventing yet another ton of fiscal paperwork to reward job-creation by those corporations, and trust me, that is what they will lobby for, not more taxes, but less against jobs created. Taxing profits makes an investment of that profit into new ideas and jobs cheaper and “cheaper” is what corporations like, so increase the taxes and they will create new jobs… It cannot get simpler than that and I am ready to debate about it anytime….

Yes, the EURO-Zone needs to find solidarity in guaranteeing members’ debt, however that goes with strict enforceability of yet-to-be-defined rules on fiscal discipline and of automatic sanctions would they be breached; i.e. members need to give-up sovereignty to be part of that solidarity-club, and that is so far off that the whole situation might blow-up before the need of it is recognized and accepted. That is what History tells us, though I hope History will be proven wrong…. 

New State revenues (read taxes) need to be “invented”, which will promote economic activities that serve the common good by taxing those that don’t. That is why the Tobin tax would be a great move, along with a severe clampdown on the fiscal set-ups the cyberworld has made possible (see the taxes paid by the likes of Amazon, Google, etc) and many other fiscal structures that unduly reduce taxes to maximize profits of corporations (see Starbucks). This by the way takes us back to the previous comment on corporate profit tax rates and the need for drastic simplification.

By doing the math on the two previous points, the revenue boost would be enormous and it would create jobs as well. Simplicity has many charms….

Now of course, the “right ways” need to be promoted by enlightened politicians who would not only understand the situation, be visionary enough to see the solutions, carismatic enough to get elected on such ideas and then manage to implement them….

That is why I think we are running in circles. Promoting the “right ways” will not make you many friends and in any electoral rhetoric, you would be creamed by opponents promising the moon, backed with enormous financial means provided by the many economic interests which do not want changes to occur. Back to my initial fear: it will have to blow up before reason prevails.

Am I missing something here? Any ideas? If yes, be LOUD please!!!

Happy New Year! 

Simon Q.

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Will IMF-lending be the last straw?

Remembering my university days when we learnt about the IMF, the institution born in Bretton Woods, which had steered the World economies through the post-war decades and was then (early eighties) mainly used to help developping nations grow in a sustainable way, I couldn’t refrain from thinking of what it has become over the past few years and where it might be heading.

The IMF is involved in advising many governements on their ailing finances and economies;  today it is not only the developping nations, but many among the supposedly most developped ones. And though the general public opinion trusts that they know what they’re doing, memories come back of my years in Eastern Europe, where I held board positions in various “Economic Interests'” bodies and I remember meeting IMF delegations to talk about the macroeconomic situation and required policies’ adjustments and evolutions to improve a country’s economy (no names). To be blunt, I was flabbergasted by their utter ignorance of real-life economic realities.

Their mission consisted of spending a few days in the capital’s best five-star hotel, briefed mainly by governement officials who were not overly enclined to see any problem (provided they had any clue) and even less to abide to any plan to “change their ways” (read: cronyism, corruption, abuse of position, …); and that would serve as the basis of their “expert-opinion” on which the IMF assistance plan would be based (cf. the “Criticims” section in Wikipedia’s chapter on the IMF for a broader reference).

Maybe I was just unlucky? I particularly remember one IMF representative (quite senior, may I add) who was a “political appointee” from the USA (read: big donor to the then president’s campaign, and yes it was Georges W. at the time) who clearly had a level of understanding of economics in the real-world comparable to the level of mine on metaphysics… boy oh boy, was I stunned!

The IMF’s key role beyond advising is to act as creditor to countries in need who can’t get the money elsewhere, and that is why they are being “sucked-in” everywhere right now. Historically many of the IMF Loans were reimbursed, though quite a chunk would regularly be written-off; the latter amounts would be relatively insignificant and part of a “broader plan” to restructure an economy. As the IMF is now being brought in to save the developped world, what amounts of possible future “bad loans” might we be talking about? That is anybody’s guess, though you can bet they will be “far beyond significant”.

Anyway, my point is that when the IMF lends, it is in the IMF’s currency, i.e. “Special Drawing Rights”, which is basically a virtual currency composed of a basket of world currencies “contributed” by all the members, weighted by the relative importance of such contributions versus the total (Ok, I am simplifying a bit, just to make it short).

So the IMF would be lending virtual money coming from already struggling contributors to many of those same contributors who might not repay? Where it starts to be funny is that it doesn’t matter, as a contribution to the IMF is not an expense, but comparable to an “equity investment”, so giving money you don’t have (by “printing” it!) doesn’t cost you anything. Then the loans are given out and you do not take any loss on them… marvelous, provided losses remain small. Now what would happen if the whole thing blows up? Well, who knows, but for sure it would be a mess…. and that is exactly what is the “trigger” in my book. So lending from the IMF could be the straw that breaks the camel’s back.

To illustrate the absurdity of it all, I can’t resist mentionning this recent piece of news: Japan came up with EUR 60 billion equivalent in extra contributions to the IMF to help out the EURO-Zone. So Japan who is the most broke of all (see previous blog) gives money they don’t have (but they don’t care as it doesn’t really cost anything) to see it being lent to borrowers who can’t repay!

Got it? Seriously, that is what’s going on…..

Hold on tight everyone!

Simon Q.

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A Short Press Review 3/3…

Between travelling, household things to do and taking care of the kids while my wife had some professional fairs to attend, I have been struggling a bit over the past weeks to find time to write, but as I still collected some topics from various news sources, I thought it would be best to simply give you a little compilation of my thoughts on them… here goes (split in three posts):

Swiss Prepare Army for Euro Zone Fallout:

This one was all over the Internet, mostly with sarcastic comments on those crazy Swiss. Well, maybe the Swiss Army commanders simply read my book?!

Interestingly, the Swiss army has been all about protecting the country WITHIN its borders for a long time now and that is what the exercise was all about, how to avoid civil unrest and preserve peace in likely very troubled times.

So they did think it through and figured out that would something drastic happen, what would be the army’s role and how to prepare for it. Maybe more should think it through rather than mock…

U.S. Suspects Iran Was behind a Wave of Cyberattacks (NYT, Oct. 13th):

So here we go, the cyber wars are heating up. This is brought by the US Defense Secretary himself and as the masters so far have been the US themselves, it  reminded me of the sequence of the Technology Meltdown described in my book (remember TWLBTSSPBTS? a freebie for the first reader who remembers what it stands for)

More fun ahead on that topic, for sure. Remember that Cyber-Space did not even exist 15-20 years ago and its expansion is exponential, so yeah, interesting times to come…

Note that Iran simply cut off all Internet connections some weeks ago and only remain with what we could call an Iran-Intranet. It won’t work to protect them on the long run, but will help on the short-term, especially as they obviously have some pretty good techies of their own.

The return of a great idea, the tax on financial transactions (Tobin tax):

There are gazillions of financial transactions driven by computer softwares executed for the minutest of profit; the proportion of transactions that have any real economic reason is microscopic. Why? Because of the quasi zero cost of executing those transactions. So what would bring some sense to it all and calm all down? The Tobin tax!

I still remember when Jacques Chirac, then President of France, put it on the table some years ago: all were laughing at him. Now it sounds like a great idea. Sure, in times of direly needed extra income a new tax is a must , the key is to raise the “right tax” and not the dogmatic ones “à la Hollande” (see Short Press Review 1/3). Note that Tobin did win a Nobel Prize in Economics, so he must have had some kind of a clue – at least it gives more credibility to the idea than when coming from Chirac.

And this one would work marvels and be perfect in the days we are living. The key would be to put the tax low enough (and that is indeed the idea so far) to discourage transactions that are purely speculative, and in no way prevent any “legitimate” transaction to take place. Plus, this one tackles a large part of a problem through taxation at the right place with the right spirit, “punishing” the bad behaviour by making you pay for it, i.e not forbidding, but making you pay for it. Exactly how things should be in my mind…

But gosh, this would bite into the banks trading profits! Well, that is too bad isn’t it. It would mainly reign-in behaviours that regulations would never tackle and bring some sense back into the “global financial system”. On this one, expect a battle of titans from all lobbyists, who themselves will “smell the money” from banks overly eager to not see that happen, or at least try to write the rules themselves….


Have a great weekend!

Simon Q.

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