A little-noticed tax exemption law turned Israel into a criminals’ paradise

Israel in 2017 is a country of contradictions. The economy is strong, but the cost of living relative to income is the second highest in the OECD. The high-tech sector is booming, but so is a massive fraudulent online trading and scam industry, which threatens to undermine Israel’s economic reputation and stoke anti-Semitism. Tel Aviv has become a beautiful, world-class, vibrant city, as well as increasingly unaffordable to all but the well-heeled. Meanwhile, a former prime minister is in jail for corruption, an ex-chief rabbi is headed there, and the current prime minister is under several corruption investigations, with each evening’s news broadcast seeming to bring fresh revelations from the police grillings of our elected leader or one of his family members.

Is there a single thread that runs through these disparate trends? Why has Israel become so rich, yet seemingly corrupt? How can it be so successful while 80 percent of income earners can’t afford an apartment unless they have family money?

It would be ridiculous to suggest a single, pat answer. Yet some observers point to the year 2008 as a time when Israel made a sharp turn onto its current trajectory, or perhaps when trends that already existed in Israeli society began to accelerate. 2008 was the year of the global financial crisis. It was the year the United States began its crackdown on Swiss banking secrecy. It was the year when Israeli apartment prices began their steep climb, rising 114 percent in fewer than 10 years. It was the year Israel’s first major binary options company, Anyoption, was founded.

And 2008 was also the year Israel passed an unprecedented tax law amendment that its critics say was essentially a nudge and a wink to would-be tax evaders and money launderers worldwide to settle in Israel and launder their money here.

Ostensibly a piece of legislation meant to encourage aliyah (immigration to Israel) by Jews living abroad, Amendment 168 to the Income Tax Ordinance was signed into law in September 2008 by prime minister Ehud Olmert. The change (which was retroactively applied starting January 1, 2007) grants a 10-year tax exemption on income earned abroad to olim hadashim (new immigrants) as well as toshavim hozrim vatikim (returning residents who have lived abroad for at least 10 years) and other eligible new residents. In addition, the amended law gives a 10-year exemption on reporting earnings abroad to people in these categories.

View of Tel Aviv at sunset (istock-slidezero_com)

View of Tel Aviv at sunset (istock-slidezero_com)

But while the amendment has probably helped some struggling new immigrants get on their feet during their early years in the country, that wasn’t it’s original intent, charges Bar-Ilan University economist Avichai Snir.

“The idea was to encourage aliyah to Israel of wealthy people by turning Israel into a tax haven,” Snir told The Times of Israel. “The new law definitely gave a nudge and a wink to people who had dirty money and wanted to launder it.”

‘Milchan Law’

Since Amendment 168 gives a 10-year tax exemption and tax reporting exemption on income from abroad to new immigrants and returning residents, under the right circumstances, a beneficiary can end up paying no income tax whatsoever. It’s an extremely generous tax benefit, and The Times of Israel had difficulty finding beneficiaries with a bad word to say about it.

“It helped me get on my feet in Israel,” said a writer of moderate means who immigrated in 2007. “The fact that I didn’t have to pay taxes on my freelance income from abroad made a big difference.”

Minister of Immigration and Absorption Sofa Landver pictured arriving at a weekly cabinet meeting in Jerusalem on January 4, 2014. (Marc Israel Sellem/POOL/Flash90)

Minister of Immigration and Absorption Sofa Landver pictured arriving at a weekly cabinet meeting in Jerusalem on January 4, 2014. (Marc Israel Sellem/POOL/Flash90)

Experts interviewed about the amendment believe there was probably one or more wealthy Jew living abroad who spearheaded the legislative initiative, but no one has ever come forward and identified themselves as such. The amendment itself was introduced by the Ministry of Immigrant Absorption and backed by the Israel Tax Authority, the Jewish Agency, Nefesh B’Nefesh and MKs Sofa Landver (Yisrael Beitenu), Ze’ev Elkin (Likud) and Yuli Edelstein (Likud).

Who else was behind the move? In a 2008 Knesset hearing on the amendment, a Jewish Agency representative mentioned that a group of unnamed Israelis living abroad had spearheaded it. Pinhas Rubin, a lawyer for billionaire movie producer Arnon Milchan, as well as other tycoons, was a strong proponent, but never revealed which client or clients he was acting to benefit. Nevertheless, the amendment was nicknamed “the Milchan law” by the Israeli press at the time.

“It’s named after Milchan because he was the first well-known billionaire to take advantage of it,” said Snir. Milchan’s name has been frequently in the news lately in connection with corruption allegations against Prime Minister Benjamin Netanyahu.

Arnon Milchan (center) with Shimon Peres (left) and Benjamin Netanyahu, March 28, 2005. (Flash90)

Arnon Milchan (center) with Shimon Peres (left) and Benjamin Netanyahu, March 28, 2005. (Flash90)

The amendment is also frequently and derisively referred to as a tax benefit for Russian oligarchs. Some of its backers, including Yuli Edelstein and Sofa Landver, have reportedly helped Russian oligarchs, on other occasions, obtain Israeli passports. An expose on Israel’s Russian-language Channel 9 claimed both MKs signed dozens of recommendations each for Russian oligarchs who do not actually live in Israel to receive Israeli passports, which are useful to them in their business affairs.

During hearings in the Knesset Committee for Immigration, Absorption and Diaspora Affairs, prior to passage of the law in 2008, proponents argued that it most decidedly wasn’t a narrow tax exemption for the rich.

“This law targets rich and poor,” said Yehuda Nasradishi, who was then director-general of the Israel Tax Authority. “In my opinion it includes everyone who immigrates to Israel.”

But Nurit Elstein, the Knesset legal adviser, said that while the proposed legislation was not illegal, it violated the principle of equality in taxation. “These tax benefits are essentially meant for the wealthy. They will help a very strong group that is represented by powerful lobbyists.”

Danny Overman, a representative of the non-profit organization Nefesh B’Nefesh, responded that “in our humble opinion this legislation is the biggest thing to happen to encourage aliyah from North America since Israel’s victory in the Six Day War.”

“I understand the Knesset legal adviser’s objections,” he continued, “but this is a matter of Zionist values, of encouraging aliyah. And with all due respect, maybe at some point in the future, we can address the issue of inequality, but today encouraging aliyah and strengthening the State of Israel is paramount.”

Representatives from the Ministry of Immigrant Absorption predicted the amendment would lead to a 30 percent increase in new immigrants and a 50% spike in returning residents.

Knesset Speaker Yuli Edelstein seen in the Knesset January 17, 2017. (Miriam Alster/FLASH90)

Knesset Speaker Yuli Edelstein seen in the Knesset January 17, 2017. (Miriam Alster/FLASH90)

MK Edelstein told the committee he foresaw “Israeli Ph.D. students and entrepreneurs in Silicon Valley” potentially returning to their homeland and improving the country’s “human capital.”

One of the lone voices of dissent during the Knesset committee hearings was University of Haifa tax law professor Yoseph M. Edrey.

“It’s one of the most shameful amendments that the Knesset has ever legislated,” he wrote later in a blog post. “It will not encourage young scientists to return to Israel. It will not bring productive enterprises or encourage investment here. What it will do is attract wealthy individuals, both Jews and non-Jews, whose sources of income are murky.

“These people will come to Israel so they can evade taxes in other countries.”

Who was right?

Were the proponents of the legislation, who said Amendment 168 would promote immigration and reverse Israel’s brain drain, correct, or were the naysayers, who said the amendment would attract tax evaders and worse, borne out in their predictions?

The Times of Israel contacted several government ministries and other organizations to discover what effect the amendment had actually had on immigration.

“We don’t have any data on that,” said Sabine Hadad, a spokeswoman for the Interior Ministry’s Population Immigration and Border Authority.

A spokesman for the Ministry of Immigrant Absorption also said he did not know.

Israeli Prime Minister Benjamin Netanyahu speaks as new immigrants from USA and Canada arrive at Ben Gurion Airport on August 04, 2009. The immigrants are part of Nefesh B'Nefesh (soul to soul) organization that brings immigrants from western countries to Israel. (Kobi Gideon / FLASH90)

Israeli Prime Minister Benjamin Netanyahu speaks as new immigrants from USA and Canada arrive at Ben Gurion Airport on August 04, 2009. The immigrants are part of Nefesh B’Nefesh (soul to soul) organization that brings immigrants from western countries to Israel. (Kobi Gideon / FLASH90)

“Not sure how much of an impact it has had on aliyah as we don’t have data of that specific kind. We definitely have olim in the 55+ age group who ask about it,” said Yael Katsman, spokeswoman for Nefesh B’Nefesh.

Israel’s Central Bureau of Statistics did not have specific data either, but sent a link to general immigration data for the past 10 years.

AliyahToIsraelPerYear

The results are inconclusive. While aliyah appears to have hit a slump in 2008, the year the amendment was passed, with only 13,701 new arrivals that year, the numbers rose slowly until 2014, when they hit 24,112, then hit 27,908 in 2015 and 25,010 in 2016. Did this increase in new arrivals have anything to do with Amendment 168? Maybe, maybe not. But the spike only began in 2014, five years after the law was passed.

When it comes to returning residents, the statistics do show an upward trend since 2008. In 2007, 21,100 left the country for more than a year and 9,300 returned, for a net loss to the country of 11,800 people. By 2014 the net loss had decreased to only 6,800 people. Does this improved ratio of returnees versus those who leave Israel have anything to do with Amendment 168? Only a more detailed study could provide answers.

Meanwhile, a widely reported 2016 study by international consultancy New World Wealth suggests that there is one cohort of people who have moved to Israel en masse and that is millionaires. The company’s survey of millionaire migration describes Israel as the fourth most popular destination worldwide for migrating millionaires in 2015, after Australia, the United States and Canada. The survey claims that 4,000 high-net-worth individuals relocated to Israel in 2015. Two thousand of them moved to Tel Aviv. The survey defined high-net worth individuals as people with over a million dollars in assets beyond their primary residence. Since the number of immigrants in 2015 was 28,000 and the number of returning residents was likely around 9,000, that would mean that approximately one in nine new arrivals to the country was a millionaire. However, local Israeli organizations that work with new immigrants have disputed the survey’s estimates, saying that in their experience immigrants to Israel are not that wealthy.

Leaving and returning Israel residents (Source: CBS)

Leaving and returning Israel residents (Source: CBS)

Tax lawyer Ori Drucker and CPA Tal Flembaum of the Israeli law firm of Dr. M. Drucker & Co. told The Times of Israel that, in their estimation, the number of millionaires who moved to Israel following passage of Amendment 168 is “several thousand.”

“We did not collect statistics,” said Drucker, “but from our experience a lot of Jews came from Western Europe and from North America. Some of them were fleeing anti-Semitism and others are wealthy Israelis who lived abroad for many years and wanted to come back here with their kids.”

In many cases, Drucker believes, the new immigrants and returning residents had thought about coming to Israel anyway and the tax exemption gave them an extra push.

Drucker compared Amendment 168 to the tax exemption the UK offers non-domiciled foreigners on foreign income. Russian oligarch Roman Abramovich, for instance, best known as the owner of the Chelsea Football Club, is thought to have benefited from non-domiciled status in the UK.

“Those tax breaks were good for the UK. When wealthy people enter your economic system they start to consume, they invest, they hire lawyers, accountants, bankers and advisers, and all these people pay taxes to the government.”

Teddy Sagi, pictured with supermodel Bar Refaeli (YouTube Screenshot)

Teddy Sagi, pictured with supermodel Bar Refaeli (YouTube Screenshot)

Drucker said that his wealthy clients, some of whom are extremely wealthy, have made tremendous contributions to Israel. Many invest in startups, helping boost Israel’s high-tech sector, while one new immigrant he knows of has launched an Olympic sports team here. Many also engage in philanthropy.

Asked to name some of his clients, Drucker politely declined.

“They are wary of the media,” Drucker’s associate Tal Flembaum explained. “From their point of view, there is no good publicity. Because then people will start asking, ‘why are they so rich?’ They have no incentive to be interviewed.”

According to media reports in Israel’s Calcalist daily and other publications, some of the wealthy people who moved to Israel as a result of Amendment 168 include the late Israeli shipping magnate Sami Ofer, film producer Milchan, online gambling and online trading tycoon Teddy Sagi, high-tech entrepreneur Shai Agassi, real-estate billionaire Sol Zakay, gambling tycoon Yigal Zilkha and porn payment processor Nathan Jacobson.

Singer Mariah Carey strolls hand-in-hand with her significant other, Australian businessman James Packer, in Capri, Italy, in June 2015. (screen capture: YouTube)

Singer Mariah Carey strolls hand-in-hand with her significant other, Australian businessman James Packer, in Capri, Italy, in June 2015. (screen capture: YouTube)

Interestingly, James Packer, the Australian gambling billionaire, whom Channel 10 News reported had wined and dined Prime Minister Netanyahu’s family and given them valuable gifts of cigars and champagne, is reported to be seeking permanent residency status in Israel, despite not being Jewish, so he can benefit from a tax exemption on his foreign earnings under Amendment 168. Packer’s friendship with the Netanyahu family, as well as that of his friend Milchan, has been the subject of media scrutiny in the context of several ongoing police corruption probes against the prime minister. Netanyahu denies any wrongdoing.

A tale of two cities

Has the influx of millionaires into Israel contributed to the rise in apartment prices? Since 2007, apartment prices in Israel have risen 114 percent, putting home ownership out of reach of 80% of Israeli wage earners who do not have large amounts of capital to begin with. Some observers have asserted that the sharp spike in prices is due, at least in part, to foreign money used to purchase investment apartments.

Tax lawyer Ori Drucker is quick to defend Israel’s millionaire newcomers from such accusations.

“Yes, they buy apartments, but they tend to buy high-end, luxury real estate. It’s a separate market.”

Luxury riverside apartments in London (dimitar_hr/iStock)

Luxury riverside apartments in London (dimitar_hr/iStock)

Both supporters and detractors of Amendment 168 have pointed to the UK, and specifically London, as an example of what happens when you attract a lot of foreign wealth into your country.

London is a global financial hub with top-notch lawyers and accountants as well as many oligarch-friendly laws on the books. It has been widely reported in British media that wealthy kleptocrats, and shady foreign tycoons are snatching up London real-estate, in many cases to hide the origins of their assets. The Financial Times has reported that the UK’s National Crime Agency believes hundreds of billions of pounds are laundered through the UK every year.

“The flood of offshore cash into the UK has had a highly damaging impact particularly on the London housing market,” George Turner, the UK-based director of Finance Uncovered, explained.

View of the luxury towers in the HaTzameret neighborhood of Tel Aviv. September 22, 2016. (Miriam Alster/Flash90.)

View of the luxury towers in the HaTzameret neighborhood of Tel Aviv. September 22, 2016. (Miriam Alster/Flash90.)

“In London, average house prices are now over 12 times average incomes,” he said. “This can only mean one thing, that the large amount of money buying up housing in the capital from abroad is pushing prices beyond the means of local residents.”

Turner said that often the homes are left empty, even as the city suffers a deep and prolonged housing crisis.

“In addition, the UK is increasingly seen as a haven for corrupt money and corrupt people. This does little for our international reputation.”

Could Tel Aviv be suffering a problem similar to that of London, and could the culprit for rising housing prices be foreign money, some of it dirty, entering the market?

Dr. Snir, economist at Bar-Ilan University, published a paper on this question in October 2014.

Snir used the modified cash-deposits ratio method, an approach employed by economists to assess the size of a country’s shadow economy, based on how much cash is in circulation, and calculated that between the years 2008 and 2014, Israel’s off-the-books economy grew from approximately 22% to 28% of the country’s GDP. This is an astounding jump, made all the more worrisome because the size of a country’s shadow economy is correlated with corruption.

Off-the-books transactions can be relatively innocent, albeit illegal, as when a babysitter is paid without a receipt, or they can point to criminal activity such as prostitution and drug sales. In both cases, attempts to disguise the source of income so you can spend it without government scrutiny are known as money laundering. Snir hypothesized several possible reasons for Israel’s massive increase in off-the-books transactions.

A view of the luxury apartments neighborhood of Mamila in Jerusalem, on October 27, 2015. Most of the luxury apartments are owned by foreign residents or by Israelis who use them as vacation homes.The city with the largest number of phantom apartments is Jerusalem, with an estimated 10,000 empty residential units. (Lior Mizrahi/Flash90)

A view of the luxury apartments neighborhood of Mamila in Jerusalem, on October 27, 2015. Most of the luxury apartments are owned by foreign residents or by Israelis who use them as vacation homes.The city with the largest number of phantom apartments is Jerusalem, with an estimated 10,000 empty residential units. (Lior Mizrahi/Flash90)

Snir first hypothesized that following the large-scale 2011 social justice demonstrations over the high cost of living in Israel, the average citizen became more price-conscious and perhaps sought ways to avoid paying the obligatory 17 or 18% value-added (sales) tax. Snir also hypothesized that organized criminal activity may have increased during this period, and found some evidence of this, but no smoking gun.

Finally, he turned his attention to the real-estate market. Snir concluded that foreign residents evading taxes abroad by purchasing Israeli real-estate likely accounted for only 2% of purchases between 2008 and 2014. His most surprising finding, however, was that a full 27% of Israeli residents who were buying an investment apartment (one that did not serve as their primary residence) had a reported household income of less that NIS 10,000 ($2,667) a month.

This income is so close to the poverty line that no bank would give them a mortgage, Snir wrote, concluding that many of these purchasers either had undisclosed assets or were serving as a front for people in Israel or abroad who wished to hide the fact that they were purchasing the property, an activity that constitutes a red flag for tax evasion and money laundering. Snir concluded that at least NIS 15.3 billion ($4 billion) of black money changes hands in Israel’s real estate industry each year and that the figure is probably much higher.

A graph by Noam Gruber of the Shoresh Institute showing how demand for apartments has changed (Courtesy Shoresh Institute)

A graph by Noam Gruber of the Shoresh Institute showing how demand for apartments has changed (Courtesy Shoresh Institute)

Meanwhile, a 2015 study of Israel’s housing market by Dr. Noam Gruber of the Shoresh Institute reveals that much of the increase in demand for Israeli apartments occurred from 2008 onward and that most of that demand came from buyers of investment apartments. Gruber believes this spike in demand has to do with low interest rates in the wake of the global financial crisis. Nevertheless, if as Snir suggests, the investment apartment market is swimming in black money, this could contribute to an explanation of the rise in housing prices.

Criminal aliyah?

Last November, Israeli police arrested 35 individuals for allegedly running a network of scam boiler rooms. The 35 people, from the ringleaders to the simplest salespeople, were charged with money laundering, aggravated fraud, conspiracy to defraud and misrepresenting their identity. They had allegedly operated secret call centers inside residential apartments in the cities of Ashkelon, Ashdod and Netanya, defrauding people in Europe and North America by a variety of ruses. One method was the CEO scam, where the alleged fraudsters impersonated senior executives in a European company and persuaded employees to wire money to the fraudsters’ bank accounts. Other employees allegedly called companies in Europe selling goods and services that never materialized. Some employees also allegedly lured customers into fraudulent forex and binary options investments.

“This is an elaborate and complex global affair that involves a very large number of suspects,” a government prosecutor told a judge during a hearing for two of the alleged salespeople, Hinaneet Williams and Melinda Knafo.

A Facebook ad for an Israel-based binary options firm posted April 19, 2016 (Screenshot)

A Facebook ad for an Israel-based binary options firm posted April 19, 2016 (Screenshot)

“The phenomenon has become a national scourge in both Israel and abroad. It is causing damage to the reputation of the state of Israel as well as to Jews in other countries.”

What was surprising about these arrests is that many of the suspects — salespeople, accountants, computer programmers and managers of the alleged scam operation — had such poor Hebrew that an interpreter was required to be present at their hearings. Many were recent immigrants to Israel from France and North America.

A lawyer for one of the suspects — Ben Hoffman, a 27-year-old new immigrant from the United States, who was suspected of providing IT services for several boiler rooms — pleaded with the judge at one of his hearings:

“My suspect is a new immigrant. His parents are in California and he has no family here. This is his first arrest. It’s hard to describe how difficult it is for a person who experiences the doors of jail closing on him for the first time. His Hebrew is weak and he is unable to cope with the smallest difficulties in jail.”

As readers of The Times of Israel may be aware, the arrest of 35 alleged Internet scammers by the Israeli police is the tip of the iceberg. Each day, thousands of Israelis — many of them young, many of them new immigrants — wake up and go to work in hundreds of call centers where they commit precisely the same crimes as the 35 boiler room suspects: misrepresenting their identities and conspiring to defraud customers abroad. The police has yet to arrest these thousands of scammers but there is no reason to assume they will not. Some of these call centers operate from apartments and pay their employees in cash. Others have offices and issue legitimate pay slips. Some sell fraudulent forex investments, others sell binary options, investments in “diamonds” or dodgy Green Card, locksmith and moving services.

French trader Arnaud Mimran arrives at the Paris courthouse on July 7, 2016 for deliberations in his trial over an alleged carbon tax scam.(AFP PHOTO / BERTRAND GUAY)

French trader Arnaud Mimran arrives at the Paris courthouse on July 7, 2016, for deliberations in his trial over an alleged carbon tax scam.(AFP PHOTO / BERTRAND GUAY)

Not to mention that one of the worst fraud cases in French history, dubbed “the sting of the century,” in which over 1 billion euros was stolen between November 2008 and June 2009 from French government coffers, was largely carried out from a Tel Aviv office, according to a Haaretz investigative report last June, by recent arrivals from France. Twelve defendants were tried last year in Paris for trading in carbon credits and collecting over a billion euros in value-added tax, which they stole, rather than handing it to the French government. Six of the defendants were tried in absentia and are believed to be living in Israel.

Within Israel’s community of recent immigrants (olim) from France, it is an open secret that a small percentage, perhaps several hundred, of the tens of thousands of immigrants who have arrived in recent years are underworld figures who moved to Israel with the express intention of continuing their criminal activity here. Many of these criminals set up call centers selling forex, binary options, or investments in fictional diamonds. These call centers then employ other immigrants, mostly young people, who moved to Israel with no intention of becoming criminals but are lured in by the high salaries.

In a May 2016 interview with The Times of Israel, Laurent Combourieu, director of investigations for the the Autorité des marchés financiers (AMF), France’s securities authority, said that there is overlap between the French-Israeli citizens who were involved in carbon-VAT fraud carried out against the French government from Israel, and the perpetrators of the current wave of online trading fraud targeting French speakers. In the past six years, the Paris prosecutor said in March, French citizens had lost 4.5 billion euros to online trading and CEO scams. Many of these, the AMF told The Times of Israel, though not all, were perpetrated from Israel. So far, a small number of alleged French call center scammers have been arrested, like the group of 35 people in November, but most continue to operate with impunity.

Laurent Combourieu, Director of Investigations for the AMF (Courtesy)

Laurent Combourieu, Director of Investigations for the AMF (Courtesy)

Could Amendment 168 have anything to do with the fact that a large number of French criminals decided to relocate to Israel since 2008? And the fraudsters are not just from France. A review of Israeli binary options firms that appear in the Panama papers reveal a large number of Israeli and Israeli-Arab owners, but many French, Russian and North American names as well.

Anecdotally, The Times of Israel has been told that among second-generation Israelis from Los Angeles who recently moved back to Israel, more than half work in binary options, some in senior roles. Several Italian immigrants to Israel told The Times of Israel that a large percentage of the several hundred young Italians who move here each year go to work in forex or binary options, and some even come to Israel with the intention of working in scam industries.

“It’s taboo in Israel to say anything against the Law of Return and encouraging aliyah,” said Moran Harari, director of Tax Justice Network Israel. “There’s a feeling we have to do whatever it takes to bring as many Jews here as possible.”

Moran Harari, director of Tax Justice Network Israel (Courtesy)

Moran Harari, director of Tax Justice Network Israel (Courtesy)

Nevertheless, Amendment 168, in its current formulation, makes Israel attractive to would-be criminals, she said.

Dr. Avi Nov, a tax lawyer and frequent blogger on tax issues believes there is a connection between people who moved to Israel from abroad and started binary options companies and Amendment 168.

“People don’t speak of it, but there certainly is a connection,” he told The Times of Israel.

“The entire binary options industry is offshore and this legislation integrates well with offshore companies. It gives you an option not to report your activity, which does not exist in any other country. In France or Italy, you have to report your earnings.”

Nov said that the amended law actually encourages newcomers to Israel to launch companies in the British Virgin Islands or the Cayman Islands as opposed to Israel.

“The law is telling them, don’t do your activity in Israel, if you do it in israel you’ll pay taxes. The law is saying, ‘go create companies in tax havens and we won’t tax it.’”

Canceling the exemption

Alarmed that Amendment 168 was giving rise to increased criminality in Israel, Israel’s state comptroller decided to do a random sampling of the bank accounts of new immigrants who had moved to Israel between 2008-2012.

Out of 600 bank accounts, 100, or one in six were found to have irregular activity that caused the bank to flag them for suspected money laundering.

In the conclusion to his 2014 report on the issue, the state comptroller wrote:

“The exemption from reporting and paying taxes given to immigrants and returning residents on the basis of amendment 168, has the ability to contribute to immigration and return to Israel. At the same time, granting a broad exemption from tax reporting is problematic, because it can provide an incentive to launder money or to use money that was laundered abroad, activities which may encourage crime and damage the integrity of Israeli society and the economy.”

Tax lawyer Dr. Avi Nov (LinkedIn)

Tax lawyer Dr. Avi Nov (LinkedIn)

Under pressure from the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, Israel agreed on May 19, 2013, to cancel the exemption from filing tax returns by new immigrants and veteran returning residents. Israel agreed not to cancel the tax exemption in its entirety, but merely the reporting exemption.

In 2014, the Global Forum wrote approvingly that “the legislative proposal is pending discussion by Knesset.”

But the discussion never happened. Each year since 2014, a provision canceling the reporting exemption has been placed before the Ministerial Committee for Legislation as part of the Economic Arrangements bill. Each year, the Minister of Immigrant Absorption, first Landver (Yisrael Beitenu) then Elkin (Likud) then Landver again, negotiated to have the provision removed from the bill before the other ministers could even vote on it.

Israel’s failure to keep its promise is not helping its reputation, Harari told The Times of Israel.

For instance, she said, in the latest (2016) International Narcotics Control Strategy Report (INCSR) issued by the U.S. State Department, Israel is listed as a “a major money-laundering country,” the most egregious of three categories, which it defines as one “whose financial institutions engage in currency transactions involving significant amounts of proceeds from international narcotics trafficking.”

The report adds that “Israel’s ‘right of return’ citizenship laws mean that criminal figures find it easy to obtain an Israeli passport without meeting long residence requirements. It is not uncommon for criminal figures suspected of money laundering to hold passports in a home country, a third country for business, and Israel. ”

A Rolls Royce car parked at the Tel Aviv-Jaffa Port, on November 15, 2014. (Nati SHohat/FLASH90)

A Rolls Royce car parked at the Tel Aviv-Jaffa Port, on November 15, 2014. (Nati SHohat/FLASH90)

Harari fears further international opprobrium if Israel does not cancel the reporting exemption soon.

“At present the EU is working on a list of blacklisted countries that are considered tax havens. I honestly have no idea if Israel will end up being on that list or not.”

Taxes and the cost of living

Israel has the highest cost of living relative to incomes of any OECD country except Japan, according to economists at the Taub Center. The high cost of housing has a lot to do with it. Do taxes directly affect the cost of living as well?

Certainly, says Nov. Not just this tax break, but most tax breaks are favors granted to the rich, said Nov, who wrote his doctoral thesis on the relationship between tax benefits and the influence of wealthy individuals on politicians. When the rich pay less in taxes, he said, the middle class pays more.

Illustrative: Tax haven (iStock)

Illustrative: Tax haven (iStock)

“Israel’s treasury recently published its estimate that it loses 50 or 60 billion shekels a year to tax benefits. If they cancelled all these tax favors, which are unjustified and have no economic basis, it would be possible to reduce the VAT to 10% and everyone would benefit.”

“Just imagine, he continued, your net salary would increase by a few hundred or a few thousand shekels and when you went to the supermarket instead of paying NIS 500 ($133) for your basket of groceries you would pay NIS 400 ($106).”

The problem said Nov is that the beneficiaries of tax benefits like Amendment 168 clearly benefit from them and lobby for them, while the loser, the average Israeli or middle-class new immigrant, is not paying attention and is not even aware of the reasons why her financial life feels like an uphill battle.

“The weak have no lobby. Tax benefits are as political as you get, and wealthy people work hard to have influence with politicians.”

Including, if allegations and media reports about would-be Amendment 168 beneficiaries Arnon Milchan and James Packer are to be believed, the prime minister himself.

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Inflation picks up to multi-year highs in China as cbank eyes tighter policy

China’s producer price inflation picked up more than expected in January to near six-year highs as prices of steel and other raw materials extended a torrid rally, adding to views that global manufacturing activity is building momentum.

China consumer inflation also rose more than expected, nearing a three-year high as fuel and food prices jumped, data showed on Tuesday.

Much of the pick up in consumer prices was likely due to higher food and travel costs heading into the long Lunar New Year holiday, the National Bureau of Statistics (NBS) said.

But mounting price pressures in China and many other countries have sparked talk of tighter monetary policy this year, after years of super-loose settings aimed at reviving economic growth.

China’s central bank raised short-term interest rates in recent weeks as it looks to contain risks from an explosive growth in debt, while India’s central bank last week unexpectedly signaled an end to its longest easing cycle since the global financial crisis, citing inflation risks.

Some analysts, however, believe the ramp up in price pressures in China may be short-lived, noting that a jump in January food prices was likely seasonal and that producer price gains slowed by half on a month-on-month basis.

“We don’t expect such high rates of inflation to last,” Capital Economics China economist Julian Evans-Pritchard said in a note.

“Tighter monetary policy, slowing income growth and cooling property prices should keep broader price pressure contained over the medium-term,” he added, noting that weak prices early last year may have exaggerated the strength of a reflationary trend seen in recent months.

Consumer inflation quickened to 2.5 percent in January from a year earlier, the highest since May 2014.

But it is still well within the government’s comfort zone of 3 percent, and is showing few signs yet that the jump in producer prices is filtering through to the broader economy, analysts say.

Analysts polled by Reuters had predicted the consumer price index (CPI) would rise 2.4 percent, after a 2.1 percent gain in December.

Food prices, the biggest component of CPI, rose 2.7 percent in January, led by a 7.1 percent increase in the price of pork.

Fuel costs surged 16.5 percent on-year, the biggest increase among CPI components, likely due to a low comparison in the year-ago period when fuel prices fell.

Capital Economics expects consumer prices to rise only 2.0 percent this year.

Producer price inflation accelerated to 6.9 percent — the fastest since August 2011 — from December’s rise of 5.5 percent.

Gains in the producer price index (PPI) were driven by a 31.0 percent increase in mining costs as coal prices rise, the biggest jump in that category since early 2010.

The market had expected producer prices to rise 6.3 percent on an annual basis.

But on a monthly basis, they only rose 0.8 percent, down from December’s 1.6 percent gain.

China’s massive imports of coal, crude oil, iron ore and industrial materials have helped fuel a sharp rebound in global resources prices in recent months, boosting profits for producers and processors.

Iron ore futures in China rose for a sixth session in a row on Tuesday, hitting their highest in more than three years, while London copper futures have climbed to around 20-month highs.

Price gains in China have been further amplified by government efforts to reduce industrial overcapacity.

Investors are cashing in on the global reflationary trade. Shares of Jiangxi Copper Co Ltd (600362.SS)(0358.HK), China’s biggest integrated copper producer, have surged over 60 percent in the past year in Shanghai and 85 percent in Hong Kong.

But heady increases in China’s commodity futures market, especially for iron ore, metal reinforcing bars and coking coal used in steel production, have added to policymakers’ worries about speculative price bubbles.

Worries about speculation and debt risks led the central bank to move to a tightening bias in recent months, not inflation, analysts say.

“Inflation is not the main driver of monetary policy at the moment…I do think they are going to tighten more this year, but the main driver is credit risk and concerns of leverage and what’s going on in the property market,” said Capital Economics’ Evans-Pritchard.

Banks in some big Chinese cities have started to reduce discounts on mortgage rates for first-time home buyers, newspapers have reported, joining recent steps to curb financial risks stemming from years of loose credit conditions.

Senate confirms former banker Mnuchin as Treasury secretary

WASHINGTON (AP) — A bitterly divided Senate on Monday confirmed Steven Mnuchin as treasury secretary despite strong objections by Democrats that the former banker ran a “foreclosure machine” when he headed OneWest Bank.

Republicans said Mnuchin’s long tenure in finance makes him qualified to run the department, which will play a major role in developing economic policy under President Donald Trump.

“He has experience managing large and complicated private-sector enterprises and in negotiating difficult compromises and making tough decisions — and being accountable for those decisions,” said Sen. Orrin Hatch, R-Utah, chairman of the Finance Committee.

Votes on President Donald Trump’s Cabinet picks have exposed deep partisan divisions in the Republican-controlled Senate, with many of the nominees approved by mostly party-line votes.

The vote on Mnuchin followed the same pattern. He was confirmed by a mostly party-line vote of 53-47. Democratic Sen. Joe Manchin of West Virginia joined the Republicans.

The Senate also confirmed a less divisive nominee Monday evening, physician David Shulkin, to be secretary of the Department of Veterans Affairs. The vote was unanimous.

David Shulkin, the Under Secretary of Health at the Department of Veterans Affairs, leaves a meeting with President-elect Donald Trump at Trump Tower, Monday, Jan. 9, 2017, in New York. (AP Photo/Evan Vucci)

David Shulkin, the Under Secretary of Health at the Department of Veterans Affairs, leaves a meeting with President-elect Donald Trump at Trump Tower, Monday, Jan. 9, 2017, in New York. (AP Photo/Evan Vucci)

Like others in Trump’s Cabinet, Mnuchin is a wealthy businessman. He is a former top executive at Goldman Sachs and served as finance chairman for Trump’s presidential campaign.

As Treasury secretary, Mnuchin is expected to play a key role in Republican efforts to overhaul the nation’s tax code for the first time in three decades. Trump has promised to unveil a proposal in the coming weeks.

Mnuchin will also be in charge of imposing economic sanctions on foreign governments and individuals, including Russia.

Senate Majority Leader Mitch McConnell, R-Ky., said Mnuchin “is smart, he’s capable, and he’s got impressive private-sector experience.”

Democrats complained that Mnuchin made much of his fortune by foreclosing on families during the financial crisis.

In 2009, Mnuchin assembled a group of investors to buy the failed IndyMac bank, whose collapse the year before was the second biggest bank failure of the financial crisis. He renamed it OneWest and turned it around, selling it for a handsome profit in 2014.

“Mr. Mnuchin has made his career profiting from the misfortunes of working people,” said Sen. Debbie Stabenow, D-Mich. “OneWest was notorious for taking an especially aggressive role in foreclosing on struggling homeowners.”

Sen. Sheldon Whitehouse, D-R.I., said, “I simply cannot forgive somebody who took a look at that banking crisis and took a look at the pain that Wall Street had sent in a wave across all of America, and thought, ‘Ah, there’s a great new way to make money, foreclosing on people.’”

Rep. Maxine Waters of California, the top Democrat on the House Financial Services Committee, called Mnuchin “the foreclosure king.”

Mnuchin has said he had worked hard during the financial crisis to assist homeowners with refinancing so that they could remain in their homes.

He said his bank had extended more than 100,000 loan modifications to borrowers.

But several Democratic senators raised examples of residents in their states who they said were not treated fairly by OneWest, including elderly homeowners and members of the military.

Democrats also complained that Mnuchin failed to disclose nearly $100 million in assets on forms he filed with the Senate Finance Committee.

Mnuchin called his failure to disclose assets an oversight. After meeting with committee staff Mnuchin amended his disclosure forms and also disclosed his position as director of Dune Capital International in the Cayman Islands, a well-known offshore tax haven.

When pressed by Democrats to explain the omissions, Mnuchin said: “I did not use a Cayman Island entity in any way to avoid taxes for myself. There was no benefit to me.”

The Treasury Department is responsible for a wide range of activities, including advising the president on economic and financial issues. The department oversees the IRS, negotiates tax treaties with other countries, imposes economic sanctions against foreign governments and individuals, and targets the financial networks of terrorist groups and drug cartels.

The department also issues the bonds that finance the government’s deficit spending.

Republicans and Democrats praised Shulkin, who is charged with delivering on Trump’s campaign promises to fix long-standing problems at Veterans Affairs.

Shulkin, 57, a former Obama administration official, has been the VA’s top health official since 2015. He secured the backing of Senate Democrats after pledging at his confirmation hearing to always protect veterans’ interests, even if it meant disagreeing at times with Trump.

He has ruled out fully privatizing the agency and says wide-scale firings of VA employees are unnecessary, describing the VA workforce as “the best in health care.”

Cash No Longer King: Europe Moves to Begin Elimination of Paper Money

http://www.renegadetribune.com/cash-no-longer-king-europe-moves-begin-elimination-paper-money/

 

Shaun Bradley of The AntiMedia

In the shadow of Donald Trump’s spree of controversial actions, the European commission has quietly launched the next offensive in the war on cash. These unelected bureaucrats have boldly asserted their intention to crack down on paper transactions across the E.U. and solidify a trend that has been gaining momentum for years.

The financial uncertainty amplified by Brexit has incentivized governments throughout Europe to seize further control over their banking systems. France and Spain have already criminalized cash transactions above a certain limit, but now the commission has unilaterally established new regulations that will affect the entire union. The fear of physical money flowing out of the trade bloc has manifested a draconian response from the State.

The European Action Plan doesn’t mention a specific dollar amount for restrictions, but as expected, their reasoning for the move is to thwart money laundering and the financing of terrorism. Border checks between countries have already been bolstered to help implement these new standards on hard assets. Although these end goals are plausible, there are other clear motivations for governments to target paper money that aren’t as noble.

Negative interest rates and high inflation are a deadly combination that could further destabilize the already fragile union in the future. With less physical currency circulating, these trends ensure that the impact of any additional central bank policies will be maximized. If economic conditions deteriorate, the threat of citizens pulling cash out of their accounts and starting a bank run is eliminated in a cashless system. So long as the people’s wealth is under centralized control, funds can be shifted at will to conceal any underlying problems. But the longer this shell game is allowed to persist, the more painful it will be when reality overrides the manipulation.

Since former Chief Economist at the International Monetary Fund (IMF), Kenneth Rogoff, published a paper last year advocating for the U.S. $100 bill to be removed, governments around the world have pushed forward their agendas towards a cashless society. He wrote:

There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism. There are substitutes for cash—cryptocurrencies, uncut diamonds, gold coins, prepaid cards—but for many kinds of criminal transactions, cash is still king. It delivers absolute anonymity, portability, liquidity and near-universal acceptance.”

This announcement comes just months after the 500 euro note was discontinued, and it follows India’s lead in subverting the financial independence of their citizens. The incremental steps currently being taken may look trivial in isolation, but the ultimate end is to lay the foundation for an entire network for economic repression.

The German people have placed themselves in strong opposition to the action and previously pushed back hard against domestic legislation that would have limited cash. Nearly 80% of all transactions in Germany are made with paper currency, putting Europe’s economic engine in direct conflict with the vision coming out of Brussels.

The spillover effect has affected new forms of investment, like Bitcoin, which witnessed an astronomical rise over the last months and has been brought back into the discussion as a viable alternative to fiat currencies. Of course, the E.U. Commission is also attempting to impose similar limitations on crypto-currencies to make sure no transactions fall outside of their domain. The ECB and BOJ are working towards a trojan horse blockchain network that will serve only to entrap those naive enough to trust it.

Former Treasury Secretary Larry Summers wrote last year that the E.U. would likely be the trailblazer of the West towards this new digital model:

But a moratorium on printing new high denomination notes would make the world a better place. In terms of unilateral steps, the most important actor by far is the European Union. The €500 is almost six times as valuable as the $100. Some actors in Europe, notably the European Commission, have shown sympathy for the idea and European Central Bank chief Mario Draghi has shown interest as well.”

Since the public’s attention has been drawn to emotional manipulations and political stunts, the threat the war on cash represents has gone unrecognized. Instead of feeding energy into systems meant to divide and conquer, individuals must educate themselves to secure their own financial futures. By submitting to the hive mind and following the media down whichever rabbit hole they choose, the most important issues of today will go unnoticed. The value of advocating for decentralized and physical alternatives to the banking system may not be easily grasped by the activists of today, but few other things have the potential to erode freedom on such a massive scale.


This article (Cash No Longer King: Europe Moves to Begin Elimination of Paper Money) was originally created and published by The Anti-Media.

RECESSION 2017? THINGS ARE HAPPENING THAT USUALLY NEVER HAPPEN UNLESS A NEW RECESSION IS BEGINNING

economy broken

Is the U.S. economy about to get slammed by a major recession? According to Gallup, U.S. economic confidence has soared to the highest level ever recorded, but meanwhile a whole host of key economic indicators are absolutely screaming that a new recession is beginning. And if the U.S. economy does officially enter recession territory in 2017, it certainly won’t be a shock, because the truth is that we are well overdue for one. Donald Trump has inherited quite an economic mess from Barack Obama, and it was probably inevitable that we were headed for a significant economic downturn no matter who won the election.

One of the key indicators to watch is average weekly hours. When the economy shifts into recession mode, employers tend to start cutting back hours, and that is happening right now. In fact, as Graham Summers has pointed out, we just witnessed the largest percentage decline in average weekly hours since the recession of 2008…

Average Weekly Hours

In addition to the decline in hours, Summers has suggested that there are a number of other reasons to believe that a new recession is here…

The fact is that the GDP growth of 4%-5% is not just around the corner. The US most likely slid into recession in the last three months. GDP growth collapsed in 4Q16, with a large portion of the “growth” coming from accounting gimmicks.

Consider the following:

  • Tax receipts indicate the US is in recession.
  • Gross private domestic investment indicates were are in a recession.
  • Retailers are showing that the US consumer is tapped out (see AMZN’s recent miss).
  • UPS, another economic bellweather, dramatically lowered 2017 forecasts.

To me, even more alarming is the tightening of lending standards. In our debt-based economy, the flow of credit is absolutely critical to economic growth, and when credit starts to get tight that almost always leads to a recession.

So the fact that lending standards have now tightened for medium and large sized firms for six quarters in a row is very bad news. The following comes from Business Insider

“Although modest over the past couple of quarters, it is still worth noting that this is now the sixth quarter in succession that standards have tightened for large and medium sized firms,” Deutsche Bank economist Jim Reid wrote in a research note to clients.

“This usually only happens in recessions.”

Reid is 100 percent correct on this point. This is precisely the kind of thing that we would expect to see if a new recession was beginning, and if this trend continues it is hard to imagine that the U.S. economy will be able to continue to grow.

And it is interesting to note that job growth at S&P 500 companies has gone negative for the first time since the last recession, and so large firms are definitely starting to feel the pressure.

Simultaneously, lending standards are also tightening up for consumers

“The most notable tightening in standards though was in consumer loans,” the Fed said. “During the quarter, banks reported an 8.3% net tightening in credit standards for credit cards and 11.6% net tightening for auto loans.”

US consumer spending accounts for more than two-thirds of economic activity and is thus a key driver of growth in the world’s largest economy.

Those numbers for credit cards and auto loans are major red flags.

It is very simple. Tighter credit means less economic activity which means slower economic growth. The U.S. economy grew at a dismal 1.9 percent annual rate during the 4th quarter of 2016, and it would be absolutely no surprise if we end up with a negative number for the first quarter of 2017.

One of the big reasons why lending standards are tightening is because bankruptcies are rising.

As I reported the other day, consumer bankruptcies just rose on a year-over-year basis in back to back months for the first time in almost seven years. Commercial bankruptcies had already been rising on a year-over-year basis throughout 2016, and so the fact that consumer bankruptcies have now joined the party is a very bad sign.

And we have also just learned that real median household income declined in 2016

Its official! The spectacular Obama/Fed “recovery” produced no increase in real medin household income in 2016 (the last year of Obama’s reign of [economic] error). In fact, real median annual household income in December 2016 ($57,827) was 0.9 percent lower than in December 2015 ($58,356).

Yes, I understand that there is a tremendous amount of optimism out there right now because of Donald Trump.

But the truth is that it is literally going to take some sort of an economic miracle to avoid a recession.

And if a recession is going to happen anyway, the Trump administration should want it to occur as quickly as possible.

You see, if a recession starts a year from now, it will be much more difficult for Trump to blame it on Obama. But if a recession starts right now, he will definitely be able to argue that it happened because of the mess that he inherited from the last administration.

In addition, the sooner the next recession ends the sooner the next recovery can begin. If a recession is still going on during the 2020 campaign, that would be really bad for Trump, but if a recovery is well underway by then that would be really good for his chances.

If you doubt this, just go back and look at the 1984 campaign. After a very difficult recession, the U.S. economy bounced back strongly and Ronald Reagan was able to ride that momentum to an easy victory.

So this may sound very strange to many of you, but the truth is that if a new recession is coming Trump supporters should want it to happen as rapidly as possible.

Unfortunately, once a new recession begins it may not play out like recessions normally do. The U.S. government is 20 trillion dollars in debt, we are in the midst of one of the biggest stock market bubbles in history, and our planet is becoming more unstable with each passing day. So even though Trump is in the White House and Obama is gone, let there be no doubt that a catastrophic economic crisis could literally erupt at any moment. I continue to encourage my readers to do all that they can to get prepared, because those that are prepared in advance will have the best chance of successfully getting through what is coming.

Unfortunately, a lot of people out there seem to believe that all of our problems have somehow evaporated just because Donald Trump is now living in the White House.

That is simply not true, and we all need to be praying for guidance and wisdom for Trump and his team as they prepare to deal with the great challenges that are ahead for our nation.

Delivered by The Daily Sheeple

Utah May Soon Dump Federal Reserve: “Put Trust Back in God and Gold, Rather Than Central Bank”

http://www.shtfplan.com/commodities/utah-may-soon-dump-federal-reserve-put-trust-back-in-god-and-gold-rather-than-central-bank_02072017

 

gold

States fed up with the phony, manipulated central bank currencies are starting to move away from the failing system – and prepare to hedge themselves against the worst case scenarios of monetary collapse.

Though the Federal Reserve clearly dominates the U.S. and global economy, some U.S. states are making moves to reestablish real money, and shift away from the burdensome and oppressive central bank currency.

With the financial system so broadly manipulated by central bank printing – and the experiment over the past eight years of zero interest, unlimited  – many leaders are looking for a safe haven and a guard against the downturn of weak spots of debt-based money printing as the default means of exchange.

Put more simply, Utah may soon lead the way of putting “trust” back in God and gold, rather than in God and the Federal Reserve.

A new law proposed in the House there would allow for a repository of physical gold, and encourage and facilitate official business of the State being conducted with funds backed by or drawn from the value of this stored wealth – a subtle move that is nonetheless revolutionary in scope.

According to the 10th Amendment Center:

A bill introduced in the Utah legislature would build on the state’s Legal Tender Act, creating a foundation for further action to encourage the use of gold and silver as money, and take another step toward breaking the Federal Reserve’s monopoly on money.

Rep. Ken Ivory (R-West Jordan) introduced House Bill 224 (HB224) on Jan. 27. The legislation would add several provisions to state law designed to encourage the use of gold and silver as legal tender. Passage would set the stage for expansion of gold repositories in the state and authorize further study on several sound money policies.

Specifically, HB224 would authorize the investment of public funds in specie legal tender held in a commercial specie repository. Under existing code, “specie legal tender” means gold or silver coin and bullion. “Commercial specie repository” means an institution that holds or receives deposits of specie legal tender that is located within the state. Practically speaking, passage would give the state the option to hold funds in gold and silver instead of Federal Reserve notes.

Things probably wouldn’t change overnight, but it would certainly be noticed by the banking class.

via X22 Report:

Relevant portion on Utah and gold starting around 11:30 minutes

According to the definitions set in place by the founders of this nation, only gold and silver represent real currency.

Article 1 Section 10 of the U.S. Constitution makes clear that only gold and silver are to be used as payment, but it is hardly what takes place in the modern economy:

No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

While Texas made a big move in 2015 to set up a gold bullion depository in the state, Utah – historically a very independent and conservative state – is also now attempting to get back on solid footing. As SHTF reported:

As Money Metals Exchange explains, Texas’ move to repatriate gold is a big deal, centered around distrust of Wall Street financial markets and a keen eye on schemes surrounding the physical possession of gold.

When Governor Greg Abbott signed House Bill Number 483 in his own hand on Friday, Texas gave a big gold “finger” to Wall Street and will soon bring $1 billion in gold bars back to the Lone Star State.

[…]  In fact, those with the fiduciary responsibility for managing the Texas gold are feeling less certain than ever.

Many European nations – like Germany – have been repatriating their gold bullion holdings, billions of which have been until recently retained by the NY Fed and other central bank vehicles, while Russia and China, among other world powers, have been accumulating massive amounts of gold at a rate never before seen in history.

Much of it is being soaked up in stealth, and through back channels on the market to downplay the size of the purchases, but close observers are acutely aware of the fact that many states are attempting to build up enough personal collateral to guarantee their relative place if/when the dollar reserve standard is officially dissolved, and a new global exchange takes over.

Of course, individual states in the United States can also make similar moves, and thereby stave off the effects of bankruptcy and potential currency collapse in the foreseeable future.

Would states see a return to prosperity and independence if they used sound money and avoided the debt trap and control instrument of the Fed?

The answer should be obvious, but many would be surprised at how it plays out, if it were allowed to happen.

If states and foreign nations are putting this much stock in gold, given their knowledge of economic events yet to unfold, should you be placing your trust in gold, silver or other precious metals as well?

Keep your eyes on Utah… and if it takes hold there, other states that want more freedom.

Read more:

Texas Signals New Gold Rush: “Governments Have Lost Trust in New York Depositories”

The Ultimate Call: Will Federal Reserve Be Caught Without Gold in ‘Repatriation Rush’?

University of Texas Takes Physical Delivery of $1 BILLION In Gold

Uncertain In 2017? Analysts Expect “Silver and Gold Rally Under Trump”

The unanswered question in Trump’s announcement of a $7 billion Intel investment

President Trump met with Brian Krzanich, the chief executive of U.S.-based technology company Intel, on Wednesday to announce a $7 billion investment in an advanced computer chip factory in Chandler, Ariz.

Speaking from the president’s side in the Oval Office, Krzanich said the facility, called Fab 42, would employ 3,000 people at its peak and indirectly create 10,000 jobs in the Arizona area in support of the factory.

In remarks to the press, Trump called Intel a “great, great company” and a “great thing for Arizona.”

“Brian called a few weeks ago and said ‘We want to do a very big announcement having to do with our country, but also having to do mostly with Arizona and the jobs and the great technology that will be produced,'” Trump said.

In his remarks, Krzanich echoed the president’s broader economic message, of employing Americans and increasing exports rather than imports. “Intel is very proud of the fact that a majority of our manufacturing is here in the U.S., and the majority of or research and development is here in the U.S., while over 80 percent of what we sell is sold outside of the U.S.,” Krzanich said.

Krzanich said the company had decided to make the announcement in response to Trump’s business-friendly policies on taxes and regulation. But some analysts raised the question of whether the company would have made the investment sooner or later.

“This would have happened anyway. This was always part of their plan,” said Jim McGregor, an analyst at Tirias Research in Phoenix. “But obviously the current administration and Intel are going to try to get some political gain out of it.”

McGregor said the announcement was a positive sign for Intel, but not a significant change in strategy or policy. He described Intel and other chipmakers as having a rotation cycle, in which they periodically update, build and shutter facilities.

The Chandler facility has featured prominently in American politics before. A company executive originally announced the factory in February 2011, after giving a tour of Intel’s Hilsboro, Ore. plant to then-president Barack Obama.

In Jan. 2012, Obama visited the Chandler construction site on a tour of potential swing states in the election later that year, using it as a backdrop for a speech in which he talked about a vision for an economy built on American manufacturing.

“When this factory is finished, Intel will employ around 1,000 men and women,” Obama said. “As an American, I’m proud of companies like Intel, who create jobs here.”

In 2014, Intel announced it would postpone the facility’s opening amid decreased global demand for its products, the Oregonian reported at the time. For years, the factory has stood as an empty shell while Intel focused on other facilities.

It’s not clear when Intel ultimately planned to bring the Chandler facility online, but the company likely would have completed its investment in Chandler at some point, analysts said. Furthermore, as Intel invests in Arizona, it’s also likely to retire older facilities in other areas — including perhaps an aging factory in Rio Rancho, N.M., said McGregor.

The Chandler facility will be completed in three to four years, Intel announced on Wednesday.

In his remarks, Krzanich said Intel had been working on the factory for several years, but had “held off actually doing this investment until now.” In response to a question from the press, he said Intel had decided to make its announcement in support of the administration’s tax and regulatory policies that “really make it advantageous to do manufacturing in the U.S.”

Krzanich also took aim at past government policies, saying that his company had been able to achieve its success despite regulatory and tax policies that “disadvantaged us in the past relative to the competition we have across the world.”

“The president and the administration’s commitment to tax reform, smart regulation and deregulation and a general attitude of ‘make it in America’ has given them the confidence and the will to move forward,” said Reed Cordish, assistant to the president.

Pointing out that the product was high-tech, cutting-edge technology, Cordish added, “It’s a wonderful statement for where we’re heading, bringing manufacturing back to America, creating 21st century jobs in America and the feeling of optimism and confidence that CEOs all over the country are showing and a validation of the president’s policies and views.”

Intel joined more than 100 companies to file a legal brief opposing Trump’s Jan. 27 executive order, which barred entrants to the United States from seven majority-Muslim countries.

In a letter to employees about the investment on Wednesday, Krzanich briefly mentioned the controversy. “When we disagree, we don’t walk away. We believe that we must be part of the conversation to voice our views on key issues such as immigration, H1B visas and other policies that are essential to innovation.”  

Since Trump won the election, numerous companies have announced plans to create or retain jobs in the United States. Yet some analysts have charged that many of these plans were in the works before the election, or had come at significant cost to taxpayers.

In November, air conditioning company Carrier announced it would keep hundreds of factory jobs in the United States that were slated to move to Mexico. While Trump celebrated the announcement as a win, later reporting revealed that Indiana had agreed to give the company up to $7 million in tax credits.

In December, when Japanese corporate giant SoftBank announced it would invest $50 billion and create 50,000 new jobs, analysts said that those funds likely would have been destined for the United States anyway.

Intel’s stock rose after the announcement but pared gains before the market closed. The stock ended the day up just 0.08 percent, underperforming overall gains by the tech-heavy Nasdaq Composite.

As sun streamed in the windows of the Oval Office on Wednesday, Trump invited Krzanich to introduce Intel’s product. Krzanich held up a shiny, reflective wafer that would be built in the Chandler factory and repeated Intel’s slogan for the cameras.

When asked if Intel would bring jobs back to the United States that are currently overseas, Krzanich did not directly answer the question, saying “this position is actually about growth and new jobs in the U.S.” Much of the company’s manufacturing is U.S.-based, though it also has facilities in Ireland, Israel and China.

Facebook shareholders urge company to replace Mark Zuckerberg with ‘independent’ board chair

http://venturebeat.com/2017/02/06/facebook-shareholders-urge-company-to-replace-mark-zuckerberg-with-independent-board-chair/

 

Facebook is being pressured by a group of shareholders seeking the removal of company chief executive Mark Zuckerberg from the board of the directors. A proposal has been put forward claiming that an independent chairperson would be better able to “oversee the executives of the company, improve corporate governance, and set a more accountable, pro-shareholder agenda.”

The idea for Zuckerberg’s board ousting comes from Facebook shareholders who are members of the consumer watchdog group SumOfUs. The organization bills itself as an online community that campaigns to hold corporations accountable on a variety of global issues such as climate change, workers’ rights, discrimination, human rights, corruption, and corporate power grab.

Facebook declined to comment on the proposal, but it’s likely to issue a statement when it files a proxy filing in April, as is per standard practice with shareholder proposals.

Lisa Lindsley, the capital markets advisor for SumOfUs, told VentureBeat that 333,000 people signed the petition requesting Facebook improve its corporate citizenship, but 1,500 were actual shareholders in the company. “The shares held by four individual SumOfUs members enabled us to file this proposal,” she said.

The proposal cites the new capital structure approved by Facebook last year as an example of where there was an imbalance of power. During the company’s shareholder meeting in June, participants were asked to vote on a proposal to issue Class C shares in a bid to keep Zuckerberg in control. Although approved, Facebook is dealing with litigation brought on by at least one shareholder who claimed it was an unfair deal.

Issuing the Class C shares was intended to help Zuckerberg continue his long-term vision and “encourage” him to remain involved with the company over the long term. The plan came after the Facebook CEO announced in 2015 that he and his wife, Dr. Priscilla Chan, would be giving away 99 percent of his family’s shares to various groups in a bid to promote child equality.

The proposal states that shareholder value will be enhanced with an independent board chair “who can provide a balance of power between the CEO and the board and support strong board leadership.” It goes on to assert that this individual would be “particularly constructive” at a time when Facebook “faces increasing criticism regarding its perceived role in the promotion of misleading news; censorship, hate speech and alleged inconsistencies in the application of Facebook’s community standards guidelines and content policies; targeting of ad views based on race; collaboration with law enforcement and other government agencies; and calls for public accountability regarding the human rights impacts of Facebook’s practices.”

Having someone be both the CEO and chairperson isn’t a unique situation for companies, as Tesla, Bank of America, the Walt Disney Company, IBM, Amazon, Netflix, and Salesforce all have one person sitting in both roles.

It’s doubtful that Facebook will acquiesce to the group’s demand, especially since Zuckerberg is one of the largest shareholders and could strike the proposal down easily, along with other allied investors. There are those who think having the founder in charge is a good thing for the company, especially as it pursues the goal of being first in virtual reality and video. Additionally, it’s not as if Facebook is in a precarious financial situation: Its stock continues to go up — its last earnings results surpassed what Wall Street analysts had expected, and the company appears in fine shape to compete against Snap after finally finding its groove in the ephemeral messaging space.

But what SumOfUs is probably worried about is the likelihood of Zuckerberg taking Facebook down a path he believes is right, but putting too much of the company behind it, which may result in damaging impact on shareholder value. Having an independent chairperson could stem that, according to the proposal.

Should Facebook implement this proposal, it would be an additional independent director joining Susan Desmond-Hellmann, Reed Hastings, Erskine Bowles, Marc Andreessen, and Peter Thiel on the board.

Lindsley acknowledges the uphill battle in getting the SumOfUs proposal approved when the company convenes its annual investor meeting: “This shareholder resolution, like most shareholder resolutions, is advisory in nature,” she said. “There could be a 99 percent vote in favor of it and the board would not be under legal obligation to implement it.  However, most competent board members realize that it is unwise to ignore the voice of the shareholders whose interests they are charged with representing.”

Yen holds gains, European political risks generate safe-haven demand

By Shinichi Saoshiro | TOKYO

The yen held large gains against a number of peers on Tuesday as investors sought refuge in the safe-haven Japanese currency amid a latest rise in European political concerns.

The dollar traded at 111.930 yen JPY= after slipping to 111.590, its lowest since Nov. 28. The euro fetched 119.910 yen EURJPY= following a dip earlier to a two-month low of 119.750.

The Australian and New Zealand dollars and the pound also gave ground to the buoyant yen.

The Japanese currency had rallied versus the dollar the previous day on an increase in risk aversion, dragged down as U.S. Treasury yields fell in tandem with Wall Street shares and crude oil prices.

It also attracted demand thanks to the latest rise in investor caution toward European political developments generated after France’s far-right National Front leader Marine Le Pen on Monday launched her presidential bid, vowing to fight globalization and take France out of the euro zone.

French government bond yields rose sharply and European stocks fell amid perceived risks to the already strained European political establishment.

“The drop in euro zone equities and the rise in European and U.S. bond yields are pushing up the yen,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“In comparison to last week, the yen’s appreciation has been significantly more widespread. But as the steadiness in some emerging market currencies show, it has not been a one-way ‘risk off’ event,” he said.

The euro extended overnight losses and was down 0.3 percent at $1.0725 EUR=, in reach of a one-week low of $1.0713 set the previous day. The latest decline pulled the euro further away from an eight-week high of $1.0829 scaled on Thursday against a broadly weaker dollar.

Apart from France, investors also have to factor in elections in other parts of the European Union this year.

Dutch and German elections will be held in March and September. Another presidential election looms in Italy, even as former Italian prime minister Matteo Renzi said he was willing to shelve his push for early voting.

The euro’s struggles did not give the dollar much traction against the yen.

The U.S. currency has fallen 4.5 percent against the yen so far this year, hurt in large part by U.S. President Donald Trump’s protectionist trade rhetoric and his readiness to see the United States end a two-decade old “strong dollar” policy.

The greenback had taken a knock after Trump and his top trade adviser Peter Navarro last week criticized Germany, Japan and China, saying the trading partners were engaged in devaluing their currencies to U.S. disadvantage.

Immediate focus fell on U.S. trade data due later in the session.

“With the protectionist trade stance the United States is seemingly poised to adopt now a key market theme, the December U.S. trade data due later today garners attention,” said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.

“A trade deficit that exceeds forecasts would weigh on the dollar by raising caution in the market toward top U.S. officials, who may speak out against perceived dollar strength.”

The Australian dollar pared earlier modest losses and inched up 0.1 percent to $0.7668 AUD=D4after the Reserve Bank of Australia left interest rates unchanged and gave a somewhat upbeat assessment of the economy.

Trump to dismantle Dodd-Frank Wall Street rules through executive orders

http://www.usatoday.com/story/news/politics/2017/02/03/through-executive-orders-trump-takes-aim-financial-regulations/97431284/

 

WASHINGTON — President Trump signed two directives Friday rolling back key financial regulations of the Obama era, including restrictions on Wall Street banks and on financial advisers who sell clients expensive financial products with higher commissions, a White House adviser said.

The two executive actions don’t take effect immediately, but rather ask federal agencies to review options to cancel existing or proposed regulations.

Trump and aides said Dodd-Frank rulings aren’t working and are making legitimate investing activity more difficult than it should be.

“Today, we are signing core principles for regulating the United States financial system,” Trump said.

Rep. Ann Wagner, R-Mo., who joined Trump for an Oval Office signing ceremony, said, “we are returning to the American people, low- and middle-income investors, and retirees, their control of their own retirement savings. This is about Main Street.”

Democrats said Trump’s efforts will re-create the conditions that led to the 2008 financial meltdown.

“During the campaign President Trump said he would be tough on Wall Street,” said Sen. Bob Casey, D-Pa. “Then he filled his administration with billionaires and bankers and now he’s trying to roll back the rules put in place to prevent another economic crash like the one that occurred in 2008.”

Most Dodd-Frank changes would need to be made via legislation, and Democrats vowed to fight Trump’s plans.

“The president’s attempts to repeal Wall Street reform will be met with a Democratic firewall in Congress,” said Senate Minority Leader Charles Schumer, D-N.Y.

Trump signed the executive orders in a ceremony Friday afternoon. Previous executive orders have been far more sweeping than originally advertised. The two executive actions are:

► An executive order targeting the Dodd-Frank Wall Street Reform and Consumer Protection Act — and especially the so-called Volcker rule prohibiting banks from making speculative investments. The order would direct the secretary of the Treasury to review regulations on financial institutions and report back specific recommendations to the president.

Among the actions being considered are “personnel actions,” the White House official said. While he did not identify those actions, the most vulnerable financial regulator is Richard Cordray, the director of the Consumer Financial Protection Bureau. A federal appeals court ruled last year that the bureau’s structure was unconstitutional he exercises “massive, unchecked power” independent of the president. As a remedy, the court said, the president ought to be able to fire.

It could also include a dismantling of “orderly liquidation” authority for too-big-to-fail banks. Last week, the Justice Department’s Office of Legal Counsel released a 2010 legal opinion raising constitutional questions about the authority of bankruptcy courts to seize those banks, suggesting that the Trump administration was prepared to rely on the previously undisclosed legal advice.

► A presidential memorandum to the secretary of Labor ordering a delay in implementing a rule requiring financial advisers to act in their clients’ best interests. The regulation, known as the fiduciary rule, is scheduled to go into effect April 10. Opponents argue that it would discourage financial advisers from working with low-net worth clients.

The secretary of Labor could delay implementation of the rule, but repealing it would require starting the rulemaking process over from the beginning. That’s because the rule was already finalized last year, with a one-year grace period for compliance. President Barack Obama already vetoed an attempt by congressional Republicans to kill the rule outright.