In the clearest indication yet, a high French government official confirmed last week that an FTT — Financial Transaction Tax — will be implemented by the European Union by the end of 2012, a year earlier than planned. Jean Leonetti, France’s minister for European affairs, said on television that “This is on the program for the next European summit [on January 30th]. Nicolas Sarkozy and Angela Merkel have decided on this and it will be put in place before the end of 2012.”
The tax would be levied, initially at least, on every financial transaction taking place by any entity with a connection to the Eurozone, and would be levied at the rate of 0.1 percent on shares of stock and bonds, and 0.01 percent on all derivatives transactions. It is estimated that the FTT would cover about 85 percent of all transactions between financial institutions such as banks, investment firms, insurance companies, pension funds and hedge funds. It is expected to raise, in the beginning, about $70 billion annually to help fund the EU.
It’s being touted as punishment for the banks that were allegedly instrumental in causing the economic meltdown, but would have no impact on ordinary citizens or small businesses. According to the European Commission, the FTT “would help to reduce competitive distortions in the single market, discourage risky trading activities [such as high frequency trading and highly leveraged derivatives contracts] and complement regulatory measures aimed at avoiding future crises.”
The announcement from the German Economy Ministry over the weekend confirmed that the long-awaited European recession has officially begun: German factory orders dropped to the lowest level in three years, down nearly five percent in the past month. The ministry also revealed that orders from outside the EU dropped by 10.3 percent.
Said Jennifer McKeown, an economist at Capital Economics Ltd. in London, “It’s quite clear that we’re heading into a pretty sharp downturn in Germany, which has been one of the strongest of the euro zone’s economies. Orders are very clearly on a downward trend, as is industrial production itself.”
The German economy is the fourth largest in the world, generating nearly $3.5 trillion in goods and services annually. Most of its trade is inside the eurozone, resulting in its position as the second-largest exporter in the world. Despite its strong economy relative to its neighbors, its debt-to-GDP ratio is 142 percent, and it is running an annual deficit of almost nine percent of GDP. It nevertheless retains its AAA rating from the three major credit rating agencies, which is strong enough compared to its eurozone partners to have caused a strange anomaly in the markets: yields on its six-month bonds have gone negative.
After nearly three years in existence, the Tennessee Tea Party disbanded Thursday, according to a message sent to members from the leaders of the group, Robert and Tami Kilmarx. While there yet remain other Tea Party-affiliated groups in the Volunteer State, the end of even one of them may augur a decline in the electoral influence of the Tea Party.
This perceived de crescendo of the Tea Party symphony is distinctly different from the loud and animating drumbeat that helped march scores of Tea Party-backed candidates into Washington in 2010.
There is no question that the Tea Party wasn’t without failure in the 2010 midterm elections (for instance, the defeats of Sharron Angle and Christine O’Donnell), but Sarah Palin became a household name and legitimate constitutionalists such as Rand Paul now sit in Congress, faithfully protecting the Constitution from enemies, foreign and domestic.
The voting trends developing in the presidential election campaign reveal the rapidity of the decline in Tea Party clout, however.
When Barnes & Noble announced its awful earnings per share losses on Thursday, it didn’t help any that its losses were so much worse than the company had projected just a month earlier. In October, Barnes & Noble estimated losses for its fiscal year at between 30 and 70 cents per share.
Its latest numbers, revised downward to between $1.10 and $1.40, shook investors who pushed shares to $11, down from $17 in early November. The one critical number which investors look at primarily, called EBITDA — earnings before interest, taxes, depreciation, and amortization — fell from $281 million last year to $163 million this year, a decline of more than 40 percent.
It’s easy to say that technological change and market preferences are pushing Barnes & Noble to the edge of bankruptcy, but its position is vastly different from that of its former competitor, Borders, which disappeared in September. What’s more accurate is to say that Barnes & Noble saw the change coming but waited before responding to it. Succeeding brilliantly in the 1990s by providing a vast array of discounted books, games, and accessories, it innovated by opening Starbucks cafes in its stores and providing its customers with comfortable chairs and couches in informal reading areas. In 1998, it anticipated the change from print to digital and purchased NuvoMedia, the maker of the Rocket eBook reader. But in 2003 it exited the digital business, concluding that there was no profit in it.
After 131 years, it appears that Eastman Kodak will be declaring Chapter 11 bankruptcy before the end of the month, according to the Wall Street Journal. It is currently seeking to sell off some of its 10,000 patents in order to stave off the inevitable, but the company is burning through its remaining cash reserves and credit lines rapidly. The last time Kodak was profitable was 2007 when its stock traded at $30 a share. On Friday, its last trade was at $0.37 a share. It’s in the process of being de-listed from the New York Stock Exchange, and Moody’s has downgraded the company’s credit to junk status.
In the mid-1990s the company had a virtual monopoly on photographic film that was enormously profitable and may be have been part of the cause of its failure to adapt to changes in the marketplace and in consumers’ tastes. Ironically, its success in developing the first digital camera in 1975 was heralded by its developer, Steve Sasson, as an invention that could “substantially impact the way pictures will be taken in the future.” There was no way he could have known then just how close to the mark he was, or the negative impact such an invention would have on his own company. He called it “film-less photography” which took a “year of piecing together a bunch of new technology that ran off 16 nickel-cadmium batteries, an unstable imaging array, and some parts stolen from a digital voltmeter.” It took 23 seconds to record an image to a cassette tape which was then placed in a reader that displayed it on a black-and-white TV set.
Gov. Jerry Brown unveiled a new budget plan Thursday that calls on California voters to approve $6.9 billion in new taxes that would apply to sales purchases and income on the state’s high earners (those making over $250,000 a year). The budget was inadvertently published on the state’s Department of Finance website, leaving the Governor’s office scrambling to arrange a news conference Thursday to detail the plan.
In hawking his 2012 budget proposal, Brown warned voters that without the temporary new taxes, which would be scheduled to expire in 2016, the state would have to drastically reduce its education budget — which, the Governor noted, would likely shorten the school year by three weeks. If voters accept his proposal, Brown suggested, the state could undergo serious debt reduction while reversing recession-era cuts to K-12 schools, which have already shortened the school year and inflated student-teacher ratios.
"With the tax program, we will eliminate the budget deficit finally, after years of kicking the can down the road," Brown contended.
If the tax increases are not implemented, state officials cautioned, the reductions to public education would automatically go into effect, including $4.8 billion in cuts for public schools and community colleges and another $400 million in cuts for higher education. In addition, California courts would suffer a $125-million reduction and spending would be reduced for firefighting in public forests.
A failed southeast Georgia ethanol factory was sold Tuesday for pennies on the dollar after squandering tens of millions in federal and state tax dollars. Range Fuels, a bankrupt U.S. cellulosic ethanol company, sold its only factory, located in Soperton, Georgia, to LanzaTech, a biofuel company based in New Zealand.
Backed by California billionaire Vinod Khosla, who also bankrolled Range Fuels and lobbied for its federal loans, LanzaTech paid a meager $5.1 million for the deal — a tiny fraction of the financial support it received — and plans to convert the ethanol plant into a factory that will generate chemicals from biomass, in another effort to "transform" the alternative energy industry.
"We have been doing a lot of work on steel mill gases and other gases to ethanol mostly, but in the laboratory we have shown that we can make chemicals," LanzaTech CEO Jennifer Holmgren said Tuesday in a phone interview. "We don’t have any assets where we can control the feedstock that are large and are able to help us scale up." While the company plans to use the factory to produce biochemicals, it has partnerships in Asia that deal mainly with converting steel mill gases into ethanol, Holmgren added.
The latest skirmish in the war over labor has touched ground in Indiana, where Republican and Democratic state representatives are sparring over whether to adopt a right-to-work law which would prohibit union contracts in private-sector work environments to mandate dues or other fees to a union. The highly contentious squabble provoked Democrats to boycott the Indiana House floor on Wednesday, preventing the Republican majority from conducting business.
Dozens of Indiana Democrats barricaded themselves inside a Statehouse conference room for over three hours Wednesday, which marked the first day of the 2012 legislative session. Behind closed doors, the lawmakers tossed around ideas about how to defeat the controversial labor bill, which they effectively snubbed last year as they fled the state for a five-week boycott.
The Washington Post’s editorial celebrating the ending of ethanol subsidies iterated the same free-market positions taken by Rep. Ron Paul (R-Texas) and other Austrian school economists about those subsidies. Calling the 45-cent-per-gallon tax credit supporting U.S. corn-based ethanol production and the 54-cent-per-gallon tariff on imported ethanol “two of the most wasteful subsidies ever to clutter the Internal Revenue Code,” the Post estimated that ending those subsidies will save the U.S. taxpayer approximately $6 billion this year.
In more than half of the 50 states, a worker has the option of not joining a union in order to hold a job. In those states where such an elementary freedom exists, the economic condition is more vibrant than in states where union membership, once it is gained at a place of business, is mandatory.
Indiana legislators want to make their state the newest right to work state. But state law requires two-thirds of the 100 House members to be in session before business can be conducted. The current makeup at the Indiana state house has 60 Republicans — seven short of the two-thirds quorum mandated in state law — and 40 Democrats. So, because enough Democrats who are customarily in Labor's back pocket decided to stay away from their jobs, the plan to enact right to work legislation has been stymied. The tactic is reminiscent of Wisconsin's Democrat state senators fleeing to Illinois to stymie legislation in their state earlier this year. Eventually, the Wisconsin senators did not succeed.