"Merkel said Europe's plight was now so "unpleasant" that deep structural reforms were needed quickly, warning the rest of the world would not wait. "That will mean more Europe, not less Europe," she told a conference in Berlin."
This Italian crisis which follows the previous Greece and Ireland crises may be now finally facilitating the initial move towards the next step in European political and/or fiscal integration. No details yet of course, and whatever the path, it probably won't be "pretty" as the EU leadership remains hopelessly out of MMT paradigm.
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Lately US multinational companies have been trying to get congress to rush through a bill to reduce their taxes on profits stored in foreign banks so they can bring money home.
This got me to think the companies might be nervous about the European banks with all the recent news.
According to Wikipedia, Deposit insurance in Europe, is offered by each country's gov't and the amounts are quite limited.
Watching bonds and stocks, it pretty obvious the EU banks are stressed. Everyone knows they bought bonds from their governments that are now worth less and expect more haircuts as the governments unofficially default avoiding the CDS insurance. Now the insolvent banks are unwilling/able to buy more bonds so the governments can't fund themselves and the first bank to fail could start a chain reaction to counterparty banks to which the governments can't stop because they lack the currency to back the depositors.
Germany said today they won't allow the central bank to backstop governments until they demonstrate discipline.
So this brings me back to Google, Apple, GE and other multinationals that do the double irish, dutch sandwich and other tax evasion schemes where they keep giant sums of money tucked away in Europe until congress lowers taxes each decade. They could be devastated by this Euro mess.
The treasury and fed has worked in the last few months to ensure our banking system, investment banks and money market funds remain insulated. But this time, the multinationals might be in more danger because they keep huge portions of their current accounts in European banks. Just a thought, I don't know, I could be over estimating the systemic risk between banks.
TB,
Tom has made a statement that I sometimes call "Hickey's Law", and I believe Tom states it as, "A currency must stay within it's currency zone".
So the one thing that baffles me about these "foreign profits" is how can the Cos. 'bring the profits back' when they are in foreign currency?
I looked into this a while back and talked to a person who administers the ITA reports at BEA and she said that all of the foreign profits of foreign divisions of US Cos. are not even counted in the ITA reports because they are in foreign currency, not USDs. So they dont care about them so to speak...
So this is how moron the CEOs of these companies are: These profits of the foreign divisions probably are reported to shareholders via GAAP, but they are not reported for tax accounting because they are not in USDs. But the CEOs see the USD equivalent in the GAAP and think their Cos. really have those USDs sitting offshore... but they dont!
Again these are high order morons we a talking about here who only really know how to rob the shareholders and backdate the stock options, etc.. you know the drill...
So they are going thru all of this trouble with the propaganda in the media to get tax relief to "bring the profits home", lobbying, thinktanks, etc.. then when/if they get it, they will call the head of their foreign divisions and say "ok, we got the tax break, now 'send the dollars'..." and the head of the foreign division will have to tell the morons: "we dont have any!" LOL!
I think Ive read JKH on this where JKH said something like: if these Cos. really want to bring these profits back in USDs, then they are going to first have to get another EXTERNAL entity to trade them their foreign currency for USDs in a transaction EXTERNAL to the US. So that is hard to see how that would even work... maybe if China or Japan wanted to get out of all of their trillions of USD holdings???
Resp,
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