Spanish Government makes official the Looting of Pension Funds

September 29, 2012

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 29, 2012

It did not take too long for the Spanish government to dip into the rapidly disappearing pension fund reserves. After presenting its 2013 budget, the Finance Minister Cristobal Montoro announced that the government led by Mariano Rajoy will make use of Social Security, retirement and other supplemental funds to help with the liquidity problems the central government faces as it becomes more expensive for Spain to meet its obligations.

The Executive now counts the 3,063 million from the Social Security Reserve Fund as part of its budget, which it now has stolen from Spanish people who saved and paid into the system for decades. The Social Security Fund has become the piggy bank to obtain quick cash after the Social Security administration itself had tapped into the reserve at the beginning of September, because it did not have enough money to make the payments to its contributors. Ironically, the government has also announced an increase of 1% in pension payments for 2013, which makes one wonder where will the money come from if the system cannot even afford to send the checks out now.

The Government approved the reform plan imposed by the European Union which is a commitments from the Memorandum that opens the door to ask for financial assistance in the form of credit to bailout Spanish banks with a maximum of 100,000 million euro, but that consultants estimate will be of around 53,000 million euros.

The State Budget for 2013 is included in the so-called Spanish Strategy for Economic Policy and a plan that includes up to 43 laws specified in the Official State Gazette (BOE).

The macroeconomic conditions used to create this new budget have not changed from the last time which was filed with the same spending ceiling. Thus, the official forecast remains that GDP will contract by 0.5% in 2013. This is a very optimistic figure when compared to other analysis services such as the one issues by Citi, who expects a decline of 3.3%.

State spending will grow in 5.6% in 2013, mainly due to interest on the debt in the next year, which will amount to some 10,000 million euros. The total amount to be paid in interests for loans requested by the Spanish government will reach nearly 38,000 million euros.

The Deputy Prime Minister, Soraya Saenz de Santamaria, said that this budget contains more spending adjustments than changes in income. In it, 58% corresponds to expenditures, while 42% refers to income. She said that the government remains committed to social spending, which will represent 63.6% of total expenditure. The only items that increase are: pensions, grants and debt interests that make up the increase in government spending.

According to the budget, tax revenue projections for this year will be met fully. For 2013, it is expected that non-financial income will increase to 4% over budget, and 2.6% on budget execution.

The government expects to collect 4.375 million euros with the implementation of new tax measures, increasing taxes and fees included in the 2013 budget. The greatest impact on revenue will come from corporate taxes, the document says, by eliminating the deduction for depreciation for large companies, which will provide 2.371 million euros.

It creates a new 20% tax on lottery prizes, which will affect 40% of the prizes that exceed 2,500 euros. In total, the tax will add 824 million euros to the state coffers. Taxes on net worth will collect 700 million euros. These 1524 million euros will join together with 90 million euros that the government will obtain from eliminating the tax deduction on the purchase of primary residences, which was announced last July.

With these figures, the government has assured Europe that it will comply with its goal to keep the deficit below 4.5% of GDP for 2013.

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The ‘Spanish Autumn’ Begins now

September 26, 2012

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 26, 2012

The ‘Spanish autumn’ is here. The same pictures we saw months ago in Greece and Portugal, are now popping up in Madrid. The Spanish people went out by the thousands on Tuesday to tell their government they are angry and that the people cannot take it anymore. Spain is being pushed to the limit and unfortunately it is just the beginning.

The discontent of the Spanish citizens due to the cuts and their distance from the political class flooded the streets of Madrid on Tuesday. Thousands of people, many of which arrived from other regions, came to support activists who gathered outside Congress to show their dissatisfaction about the way the Spanish government is handling the crisis.

Although the organizers insisted until the last moment that the protest was a peaceful one, Spanish police launched themselves against them, which increased the tension between the two groups. According to police records, 26 protesters were detained while 64 others were wounded. A total of 16 people were taken to the hospital due to their serious lesions. Among the injured are 27 police agents.

Riot police tried to disperse the protestors once again at 9:00 pm after they entered the square near Congress.

Many congregants tried to flee by running through streets surrounding the Congress. Police said some violent demonstrators started throwing bottles, batteries and other items. Some participants in the protests in Madrid beat police agents after they found themselves trapped between two police security rings. The police then charged against protesters, which rendered many of them with bloodied heads.

Throughout the evening, attendees attempted demonstration as close as possible to Congress, which is surrounded by 13 small streets. The Delegate, Cristina Cifuentes, insisted that demonstrations were prohibited during Congress sessions.

The main goal of the protest, carried out under the name ‘Surround Congress’ was to express people’s concern about the current economic conditions in Spain and to start a constitutional process, said organizers of the protest. The frustration of many of the protesters was visible.

“I came to show my suffering face to the politicians,” said Mamen GuBas, an unemployed 41-year-old man from Bilbao. Among those attending were outraged but also unemployed students, housewives and elderly people from Andalusia, Aragon, Catalonia, Valencia and Galicia.

Protesters were harassed by police even before they arrived to their last stop in Madrid. The bus they were traveling in was approached by police to identify the occupants. “I ask our representatives to look after the people and protect financial markets,” said Joaquin Sanchez, a priest from Murcia.

More than 1,300 policemen from 30 regions of the country were sent to Madrid to watch over the protesters. Most of them belong to Police Intervention Unit (PIU) an organ of the National Police.

In total there were three security rings around Congress, two of which were closed and bolted before six o’clock. A group of dog handlers plus some cavalry units completed the operation.

Spanish Government still not listening

The government led by Mariano Rajoy not only ignores the calls of the people to stop the handover of Spain to the European bankers, but it seems it actively continues to negotiate the so-called ‘financial rescue’. A report by the Financial Times of London reveals that both the European Central Bank and the European Commission are advising the Spanish government on how to request the rescue.

The ‘Times’ says in an editorial that these negotiations are “politically understandable” and notes that “Madrid is keen to avoid the humiliation involved in having the European bailout conditions being dictated by the bankers.” It seem then that the Rajoy administration has been lying throughout the whole process.

At first, Rajoy had said that the rescue would not be necessary, but his comments have been changing ever since Spanish ‘communities’ began requesting financial aid. Spain will then introduce more painful fiscal and structural reforms as a package developed ‘in house’, when in reality those will be conditions imposed by Brussels in a complete loss of sovereignty.

If those Spanish protesters think they are living in difficult times now, they have seen nothing. The pain to come will be greater once Spain requests and approves the financial rescue package now being discussed between their leaders and the European bankers.

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German Court Greenlights European Stability Mechanism

September 12, 2012

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 12, 2012

The constitutional court in Karlsruhe has decided that the German participation in the permanent mechanism for bailing out European nations is totally legitimate, but that their participation is limited to 190,000 million euros.

As expected, the German Constitutional Court on Wednesday approved the German participation in the European Stability Mechanism (ESM). The only condition is that Germany will not be an open checking account to rescue all other nations. That condition was the unexpected part of the decision.

The total proposed amount for the fund reaches 700,000 million euros, so theoretically Germany will split that amount with already indebted nations who are keen to provide funds for countries like Spain and Italy, and who are already providing money to other nations such as Greece and Portugal. The word from the court is not the final though, as the 190,000 million euros can be increased to whatever the German Parliament decides is necessary, explained the presiding judge, Andreas Vosskuhle in Karlsruhe.

The use of ESM funds to bailout European nations was initially scheduled for last July, but the need for ratification by at least 90% of participants had not been achieved until Germany issues its support, which has now happened.

Germany had requested some time to study and ratify the ESM last July, so the Constitutional Court could analyze in depth the claims for interim measures made ​​by different social groups, and the party of Eurosceptics who reported that adherence to these treaties involved a transfer of sovereignty and would require the revision of the German Constitution to weaken the supervisory capacity of the German Parliament about money of German taxpayers. The German Court has now approved of such surrender of sovereignty by accepting Germany’s participation in the fund.

The decision by the Court also requires that major decisions have the approval of ESM Bundestag either in full or a through a special committee, just as it happened with the temporary rescue fund. The President of the Board, Andreas Voßkuhle, acknowledged that some discussions were “very intense and complex.” With its decision, Germany will be the last of the seventeen countries in joining the euro rescue fund or ESM.

The impact that this decision has is less complex than the discussions mentioned by Voßkuhle, because the bankers will simply choose to make these so-called difficult decisions in private. In laymen’s terms, all responsibility has now been handed to the European bankers to spend the money of the European people as they please and with unlimited power.

The German Constitutional ruling, which also gave the green light for the Fiscal Pact, has been very well received in the markets. The Spanish risk premium (or yield spread required for Spanish 10-year bonds versus German) has decreased below the 400 basis points (4 percentage points) for the first time since April. The Spanish stock market has shot upward and the euro has also marked its highest against the dollar since May.

This means that the markets still do not understand that more debt will make it things worse. Like a drug addict, government leaders and financial market managers continue to see the consumption of more drugs (debt) as the only solution to the addiction problem.

The ruling will allow the bailout fund to become operational in the short term and therefore it will be seen as a loss publicly for German Prime Minister Angela Merkel, who in public always showed to buying sovereign debt from failing and bankrupt countries. Now, the German president, Joachim Gauck, will have to sign a legislative package that includes the ESM and the fiscal pact, the last obstacle before the fund can begin its operation.

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France announces tax increases to collect € 33,000 million

September 10, 2012

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 10, 2012

The President of France, François Hollande, announced at last night a new plan to increase government revenue by 33,000 million euros, the highest increase of the last decades. Most of the money the government intends to collect will come from taxes increases, which will render between 15,000 and 20,000 million. Hollande spoke last week about his plan to “reduce the deficit to 3 percent by the end of 2013″. During his talk, the leader described the plan announced last night as “the largest tax effort of the last thirty years.”

Last night, Hollande explained that the so-called adjustments to the French population. The French President explained last week some of the main points of his plan, which does not provide – according to him — for a general increase but a “rational and consistent with the ability of each individual,” he said. “Everybody will contribute according to their means,” Hollande added without providing further details and argued that “having future generations pay today’s deficit sounds like an anomaly.” He also stressed that the crisis does not justify everything. Sounds reasonable, doesn’t it? The unreasonable part is that the government should not be financing its gargantuan budget or deficit by stealing money from people who have worked hard to earn it.

Although Hollande had announced a 75% increase in taxes on the wealthiest, some french media outlets have announced that Hollande may backtrack on that initiative. It was almost predictable that the French president would make the poorest pay for government expenses and that his plan to tax the richest was just a smoke screen to gain confidence from the gullible population. The so-called exceptional tax of 75% on large fortunes, would have soften the burden on the poorest taxpayers, focusing mainly on large companies, as in the tax levy, which could be 67%.

According to Le Figaro, the proposal presented by Hollande during the election campaign, which raised the possibility to impose a tax of 75% for taxpayers with incomes above one million euros, would be “reduced to a minimum.” This proposal has become particularly relevant after news that the richest man in France, Bernald Arnault, announced his intention to apply for dual Franco-Belgian nationality.

Arnault, who leads companies such as Louis Vuitton, Givenchy and Moët & Chandon, has a personal fortune of 41,000 million euros. Specifically, the Government has decided that the exceptional tax only includes the gross income from work, leaving out capital gains and properties. Also, in the case of couples, the threshold would be raised to two million euros.

Once again, the French people have been duped by the supposed socialist leader whose socialist skills only work in favor of the wealthiest people in France.

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How Long Will the Dollar Remain the World’s Reserve Currency?

September 4, 2012 1 Comment

RON PAUL | THE REAL AGENDA | SEPTEMBER 4, 2012

We frequently hear the financial press refer to the U.S. dollar as the “world’s reserve currency,” implying that our dollar will always retain its value in an ever shifting world economy. But this is a dangerous and mistaken assumption.

Since August 15, 1971, when President Nixon closed the gold window and refused to pay out any of our remaining 280 million ounces of gold, the U.S. dollar has operated as a pure fiat currency. This means the dollar became an article of faith in the continued stability and might of the U.S. government.

In essence, we declared our insolvency in 1971. Everyone recognized some other monetary system had to be devised in order to bring stability to the markets.

Amazingly, a new system was devised which allowed the U.S. to operate the printing presses for the world reserve currency with no restraints placed on it– not even a pretense of gold convertibility! Realizing the world was embarking on something new and mind-boggling, elite money managers, with especially strong support from U.S. authorities, struck an agreement with OPEC in the 1970s to price oil in U.S. dollars exclusively for all worldwide transactions. This gave the dollar a special place among world currencies and in essence backed the dollar with oil.

In return, the U.S. promised to protect the various oil-rich kingdoms in the Persian Gulf against threat of invasion or domestic coup. This arrangement helped ignite radical Islamic movements among those who resented our influence in the region. The arrangement also gave the dollar artificial strength, with tremendous financial benefits for the United States. It allowed us to export our monetary inflation by buying oil and other goods at a great discount as the dollar flourished.

In 2003, however, Iran began pricing its oil exports in Euro for Asian and European buyers. The Iranian government also opened an oil bourse in 2008 on the island of Kish in the Persian Gulf for the express purpose of trading oil in Euro and other currencies. In 2009 Iran completely ceased any oil transactions in U.S. dollars. These actions by the second largest OPEC oil producer pose a direct threat to the continued status of our dollar as the world’s reserve currency, a threat which partially explains our ongoing hostility toward Tehran.

While the erosion of our petrodollar agreement with OPEC certainly threatens the dollar’s status in the Middle East, an even larger threat resides in the Far East. Our greatest benefactors for the last twenty years– Asian central banks– have lost their appetite for holding U.S. dollars. China, Japan, and Asia in general have been happy to hold U.S. debt instruments in recent decades, but they will not prop up our spending habits forever. Foreign central banks understand that American leaders do not have the discipline to maintain a stable currency.

If we act now to replace the fiat system with a stable dollar backed by precious metals or commodities, the dollar can regain its status as the safest store of value among all government currencies. If not, the rest of the world will abandon the dollar as the global reserve currency.

Both Congress and American consumers will then find borrowing a dramatically more expensive proposition. Remember, our entire consumption economy is based on the willingness of foreigners to hold U.S. debt. We face a reordering of the entire world economy if the federal government cannot print, borrow, and spend money at a rate that satisfies its endless appetite for deficit spending.

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