Alesina’s theory rests on two conceptual pillars. The main one is that if deficits persist, businesses and consumers will expect higher taxes and will therefore invest and consume less. Spending cuts, on the other hand, signal lower taxes in the future, and thus stimulate investment and consumption.
The second, supplementary pillar is the assumption that rising public debt leads investors to expect a default. This expectation forces up interest rates on government bonds, leading to higher overall borrowing costs. Austerity, by stopping the growth of debt, can bring about a “sizeable reduction” in interest rates, and thus enable increased investment.
...Keynes says an announced reduction in public spending signals to business people that their incomes will be reduced because fewer people will be buying the goods and services they produce. But Alesina says that an announced reduction in public spending signals to business people that they can expect lower taxes tomorrow, and therefore will spend more today.
Readers must decide which theory they find more plausible.
...The US blames China for the current tensions. Since joining the World Trade Organization in 2001, China has reaped the benefits of the global trading and investment system, while failing to meet its obligations and free riding on its rules. According to the US, China has gained an unfair advantage through intellectual-property theft, forced technology transfers, subsidies for domestic firms, and other instruments of state capitalism. At the same time, its government is becoming increasingly authoritarian, transforming China into an Orwellian surveillance state
...A full-scale cold war thus could trigger a new stage of de-globalization, or at least a division of the global economy into two incompatible economic blocs. In either scenario, trade in goods, services, capital, labor, technology, and data would be severely restricted, and the digital realm would become a “splinternet,” wherein Western and Chinese nodes would not connect to one another. Now that the US has imposed sanctions on ZTE and Huawei, China will be scrambling to ensure that its tech giants can source essential inputs domestically, or at least from friendly trade partners ...Whatever happens, the Sino-American relationship will be the key geopolitical issue of this century. Some degree of rivalry is inevitable. But, ideally, both sides would manage it constructively, allowing for cooperation on some issues and healthy competition on others. In effect, China and the US would create a new international order, based on the recognition that the (inevitably) rising new power should be granted a role in shaping global rules and institutions.
...interest rates may be causing resource misallocations and undercutting long-term financial security for households, elevated asset prices have heightened the risk of future financial instability....
...what if...in the middle of a multi-stage process in which strong disinflationary supply-side forces eventually give way to the return of higher inflation?
...Owing to the persistence of low inflation, monetary policies have remained ultra-loose for an unusually long time, raising concerns that the US or Europe may succumb to “Japanification” as consumers postpone purchases and companies reduce investment outlays. So far, that risk has led to protractedly low or negative (in the case of the European Central Bank) policy rates and bloated central-bank balance sheets, despite the potentially deleterious effects of such policies on the integrity of the financial system.
...these structural forces the Amazon/Google/Uber effect. While the Amazon model pushes down prices by allowing consumers to bypass more expensive intermediaries, Google undercuts companies’ pricing power by reducing search costs, and Uberbrings existing assets into the marketplace, further eroding established firms’ pricing power.
...more low-cost production online and reducing the power of organized labor....inflationary influences....the slack in the labor market is diminishing every month, and increased industrial concentration is giving some companies, especially in the technology sector, far greater pricing power.
...growing political pressure on central banks to bypass the asset channel (that is, QE bond purchases) and inject liquidity directly into the economy.
... tariffs and other trade measures is risking a fragmentation of global economic and financial relationships, favoring higher prices, and compelling a greater degree of more costly self-insurance by companies and consumers.
...Lacy showed how, in a world of falling monetary velocity, the amount of GDP growth produced by each additional dollar of debt fell 24% in the last 20 years. That’s why we have so much more debt now and yet slower growth....
...
bb. Two issues: (1) if interest rates are low, then the velocity of money is low because it doesn't earn much; (2) what if GDP isn't being measured correctly - and/or we are investing with new products and such disruption, that GDP (assets, goods and services, cycle out-of-use with quick replacement? NOT ALL IS AS SIMPLE OR OBVIOUS as it may seem.
Thought experiment: If Italy were to remove itself from the euro and reissue the lira, does anybody really think that Italy would keep today’s low rates? Ditto for Greece and other countries. Left on their own, these currencies would devalue relative to stronger ones like Germany, and their interest rates would rise.
This is not necessarily a bad thing. The “safety valves” of currency devaluation and bond market vigilantes saved Italy numerous times before it joined the euro. What most people don’t realize is that Italy grew faster than Germany in real terms for the 20–30 years prior to joining the euro, despite its inflation and devaluations.
The contamination with organic chlorides, which is very unusual, comes at a time when the global oil market is already short of supply of crude of similar quality to Urals. The combined impact of U.S. sanctions on Iran and Venezuela, OPEC+ production cuts, and lower-than-expected output in Mexico has reduced worldwide shipments of denser crude with high sulfur content. Premiums in the physical market for medium-heavy crude have surged to multi-year highs as a result.
“This is a significant unplanned outage that is having spill-over effects,” said Harry Tchilinguirian, head commodity strategist at BNP Paribas SA. “What you end up with is a further reduction in the availability of medium quality crude oil.”
...If an investor holds the gains in an opportunity zone fund for five years, they can exclude 10 percent of those gains from taxation. If they hold them for another two years (for a total of seven), they can exclude another five percent from taxation — meaning that taxpayers can exclude up to 15 percent of the value of reinvested capital gains from their taxable income, Eastman said.
Finally, any gains achieved after the investment is made in an opportunity zone fund are tax-free, if the investment is held for at least ten years.
...“It's the only part of the tax code where you get to fully write off your capital gains taxes.”
“Investors in real estate opportunity zone funds projects should expect mid-teen returns and 6 to 10 percentcash-on-cash distributions after stabilization,” said Quinn Palomino, principal at Virtua Partners, via email. She added that returns would be lower for social impact funds and higher for single-asset funds.
he laid out their three to five year targets (goals).
Purchase 5,000 homes per month through Zillow Offers. Generating revenue of approximately $20 billion. In 2018, they purchased 686 homes through Zillow Offers, generating $52 million in revenue.
Originate 3,000 loans per month. Up from 4,000 originations in all of 2018.
----
As mentioned earlier, Zillow believes that consumers expect magic to happen at the push of a button. Let’s go ten years into the future and see what that might look like…
…One rainy day, Mr. Prescott is sitting at his computer, and he gets a notification from Zillow.
😲Surprise! The house he looked at seven times ontheir app, has just become part of Zillow’s inventory.
Since he bought his current house from Zillow (Zillow Offers), they know exactly how much he paid. In addition, they financed his current house (Zillow Mortgage), so they know exactly how much he can afford.
Note: He wasn’t thinking about moving, just likes looking at houses, as do millions of Americans.
Their email says something like this:
Mr. Prescott,
We noticed you have looked at this house on 523 Elm St. seven times over the past month. Great news! This house just became part of our inventory😁
We are prepared to offer you $275,000 for you current house.
We will sell you 523 Elm St. for $315,000.
Since you have $100,000 of equity in your current house (they know this because they financed it), we are prepared to offer you a 15-year mortgage for $215,000 at a 3.5% interest rate.
Your TOTAL out-of-pocket expenses for this transaction will be $4,300 (people like certainty; moving will $100 dollar you to death).
In addition, here are three dates we can move you out of your current house, and into your new house.
Attached are some repairs we think this house will need and what they will cost. If you choose to go forward with any of them, we will proceed with the repairs, and the costs will be rolled into your mortgage at no additional out-of-pocket cash for you.
This offer will expire in 72 hours.
Again, your total OUT-OF-POCKET cash, should you accept this offer, will be $4,300 dollars. And not a penny more.
If you would like proceed, just click “Accept this Offer” and one of our agents will be in touch with you shortly…
...I should note that among the Northeastern and Midwestern cities on this list, only Boston is actually experiencing significant (10.9% since 2010) overall population growth, so it’s not so much that young college graduates are flocking to those places in massive numbers as that this group is growing somewhat while the rest of the population holds steady or shrinks. Still, it’s a good group to have around: Concentrations of young, skilled workers help struggling cities pay their bills now (by generating tax revenue while not placing big demands on city services) and can be a harbinger of economic growth to come.
...For next year alone, the government has earmarked more than 20 billion euros ($22.4 billion) in VAT increases to try to keep close to deficit targets. That would have a negative effect on the consumer. Far preferable to find spending cuts to avoid this sudden tax increase. But, for all the campaign rhetoric about slashing waste, there’s no sign of the coalition actually doing i
Why is Trump behaving this way? Because higher tariffs offer him the chance to square this circle. By raising tariffs he puts pressure on China to stimulate its economy. That, in turn, will tend to lead to a recovery in U.S. share prices....In the last week, the chance of a Fed rate cut by the end of the year has shifted from 50 percent to more than 75 percent, according to data compiled by Bloomberg:
...Added to that, Trump’s actions to push up the Dow are also great politics when judged more conventionally. Getting tough with China involves doing exactly what he said he would do, which is always popular with the electorate. It is a posture that is also popular with many Democrats, and the party is already having difficulty knowing how to respond.
...Connecticut, Kentucky, and Illinois have the lowest funding ratios, at 20 percent, 21 percent, and 23 percent respectively.
...Already, Illinois spends as much on pensions as it does on welfare and public protection (that is, police and firefighters) combined, and nearly half of its education appropriations go toward teacher pensions
...Japanification and massive quantitative easing throughout the developed world. As I’ve written the past few weeks, that will bring financial repression and reduced growth.
Facebook and Google aren’t merely competing for dominance in online advertising. They’re also battling over artificial intelligence.
At the core of their fight is the underlying software for creating neural networks, the software that learns on its own to recognize patterns within data. Although neural networks have been around for decades, it wasn’t until recently that researchers discovered that the technology could be useful for helping computers with tasks like automatically translating languages and recognizing people and objects in photos.
Currently, there’s no easy way for companies to create neural networks, like there is for developing more conventional software. But, in recent years, several big companies have introduced so-called developer “frameworks” that are a first stab at helping coders build neural networks and at making the technology more practical to use widely in apps.
In 2015, Google debuted TensorFlow, the leading toolkit for building neural networks, according to researchers who track the software. TensorFlow’s popularity has so far eclipsed rival toolkits from the likes of Amazon and Microsoft.
Until now, that is.
Last week’s annual Facebook developer conference highlighted several updates to PyTorch, Facebook’s neural network construction kit that succeeded an older and less sophisticated version. PyTorch has emerged as one of the fastest growing free open source technologies, according to some surveys, and is used by a handful of big companies like Genentech, Toyota, and Airbnb.
Although Facebook, like Google, makes no money from its A.I. tools, the company benefits from outsiders using them. For one, the more A.I. researchers use PyTorch, the more Facebook has a pool of A.I. talent that is familiar with its technology and is therefore more attractive to recruit.
Additionally, like many open-source technologies, PyTorch should improve over time as more of its users share feedback with Facebook. And while Facebook, Google, and others would never publicly admit it, they want to be perceived as leading A.I. firms, and the more their A.I. tools are adopted by third parties, the more they can claim the A.I. crown.
Still, Facebook’s director of applied machine learning Srinivas Narayanan told Fortune that it’s still the early days of PyTorch and A.I. tools overall. Despite the buzz, there is still no effort to create technical standards around PyTorch or to create independent groups that would oversee the technology, like how the Linux Foundation oversees an umbrella of open source technologies.
But companies would be wise to pay close attention to the A.I. toolkit wars, because the outcome could be crucial to their A.I. ambitions.
The migration to Britain was just one part of a general, massive expansion of people out of Anatolia in 6,000BC that introduced farming to Europe.
Before that, Europe was populated by small, travelling groups which hunted animals and gathered wild plants and shellfish.
One group of early farmers followed the river Danube up into Central Europe, but another group travelled west across the Mediterranean.
DNA reveals that Neolithic Britons were largely descended from groups who took the Mediterranean route, either hugging the coast or hopping from island-to-island on boats. Some British groups had a minor amount of ancestry from groups that followed the Danube route.
Image copyrightROYAL PAVILION & MUSEUM, BRIGHTONImage captionA facial reconstruction of Whitehawk Woman, a 5,600-year-old Neolithic woman from Sussex. The reconstruction is on show at the Royal Pavilion & Museum in Brighton
When the researchers analysed the DNA of early British farmers, they found they most closely resembled Neolithic people from Iberia (modern Spain and Portugal). These Iberian farmers were descended from people who had journeyed across the Mediterranean.
From Iberia, or somewhere close, the Mediterranean farmers travelled north through France. They might have entered Britain from the west, through Wales or south-west England. Indeed, radiocarbon dates suggest that Neolithic people arrived marginally earlier in the west, but this remains a topic for future work.
In addition to farming, the Neolithic migrants to Britain appear to have introduced the tradition of building monuments using large stones known as megaliths. Stonehenge in Wiltshire was part of this tradition.
Although Britain was inhabited by groups of "western hunter-gatherers" when the farmers arrived in about 4,000BC, DNA shows that the two groups did not mix very much at all.
The British hunter-gatherers were almost completely replaced by the Neolithic farmers, apart from one group in western Scotland, where the Neolithic inhabitants had elevated local ancestry. This could have come down to the farmer groups simply having greater numbers.
"We don't find any detectable evidence at all for the local British western hunter-gatherer ancestry in the Neolithic farmers after they arrive," said co-author Dr Tom Booth, a specialist in ancient DNA from the Natural History Museum in London.
"That doesn't mean they don't mix at all, it just means that maybe their population sizes were too small to have left any kind of genetic legacy."
Co-author Professor Mark Thomas, from UCL, said he also favoured "a numbers game explanation".
Image copyrightCHANNEL 4/PLIMSOLL PRODUCTIONSImage captionA reconstruction of Cheddar Man. As with other Mesolithic hunter-gatherers, DNA results suggest he had dark skin and blue or green eyes
Professor Thomas said the Neolithic farmers had probably had to adapt their practices to different climatic conditions as they moved across Europe. But by the time they reached Britain they were already "tooled up" and well-prepared for growing crops in a north-west European climate.
The study also analysed DNA from these British hunter-gatherers. One of the skeletons analysed was that of Cheddar Man, whose skeletal remains have been dated to 7,100BC.
He was the subject of a reconstruction unveiled at the Natural History Museum last year. DNA suggests that, like most other European hunter-gatherers of the time, he had dark skin combined with blue eyes.
Genetic analysis shows that the Neolithic farmers, by contrast, were paler-skinned with brown eyes and black or dark-brown hair.
Towards the end of the Neolithic, in about 2,450BC, the descendants of the first farmers were themselves almost entirely replaced when a new population - called the Bell Beaker people - migrated from mainland Europe. So Britain saw two extreme genetic shifts in the space of a few thousand years.
Prof Thomas said that this later event happened after the Neolithic population had been in decline for some time, both in Britain and across Europe. He cautioned against simplistic explanations invoking conflict, and said the shifts ultimately came down to "economic" factors, about which lifestyles were best suited to exploit the landscape.
Dr Booth explained: "It's difficult to see whether the two [genetic shifts] could have anything in common - they're two very different kinds of change. There's speculation that they're to some extent population collapses. But the reasons suggested for those two collapses are different, so it could just be coincidence."
if we had data going back a few centuries, we would see that those 30 or so years between 1950 and 1980 were actually the statistical aberration. Mass prosperity hasn’t been the historic norm. It certainly wasn’t that in the 1800s and the Gilded Age. Nor was it so in Europe.
This is a 30-year chart of total S&P 500 earnings divided by total S&P 500 sales. It’s how many pennies of earnings S&P 500 companies get from a dollar of sales… earnings margin, essentially
It’s only a matter of time before European countries start taxing tech multinationals, first individually and then in a coordinated way. The question really is how digital taxes will work, and so far, the Czech Republic appears to have the best idea.
It became clear in March that France’s push for a Europe-wide tax on Big Tech’s local revenues would fail for now. Germany torpedoed it because of fears of U.S. retaliation against European multinationals, especially German carmakers, and the European Union now is waiting for the Organization for Economic Cooperation and Development to come up with a global plan. The OECD’s most recent document on the issue reflects an intense deliberative process that could go on for quite a while. In the meantime, individual European countries are trying out different approaches.
France’s idea is to claim 3 percent of revenue generated locally by large companies running digital intermediary platforms (like Uber or Airbnb) or online advertising businesses. Austria’s is similar, only with a 5 percent rate. Slovakia is trying to collect traditional corporate tax from foreign tech firms by redefining corporate presence for the digital era. The U.K. wants 2 percent of local revenue from companies whose business model requires the active participation of U.K. users in creating content, being targeted with advertising or linked by intermediary platforms.
The Czech finance ministry plans to have a digital tax proposal ready by the end of this month. What’s known about it so far is different from other nations’ plans in two important ways: the high proposed tax rate of 7 percent, and the targeting of advertising and personal data sales as the primary base. The country also plans to tax sharing economy platforms. It estimates receipts of about 5 billion korunas ($217 million) a year. France, with six times the Czech Republic’s population, only hopes to receive about 2.6 times as much.
At first glance, the idea behind the Czech digital tax is similar to the French one, but the French proposal names platforms that put users in touch with each other for a fee as the primary target, while the Czech one prioritizes targeted ads. That puts the emphasis in the right place.
The basic unfairness of global giants hardly paying any tax in most of their countries of operation isn’t the only reason for countries to levy a digital tax; then, India’s solution – a tax on anything Indians pay online to a non-resident company – would be sufficient. An important question to ask is what exactly about tech companies activities’ requires monetary compensation to society.
Intermediary platforms such as Airbnb and Uber exacerbate cities’ housing problems and weaken worker protections. But these negatives can also be handled through regulation rather than taxation: Professional Airbnb hosts can be forced to obtain hotel licenses, while Uber drivers can be granted paid leave and minimum wages. Compensation is largely due for the use – many would say abuse – of personal data for advertising purposes.
Europe has tried to set some data use rules with the General Data Protection Regulation, which came into effect last year, but it doesn’t put a monetary value on private data or allow users to recover any of the money that targeted advertising companies make on them. The companies themselves operate on the assumption that the “free” services they provide offsets the value of the data collected, but that’s not necessarily true: Research shows, for example, that quitting Facebook makes people happier.
There’s also plenty of evidence that ad targeting is a potent political manipulation tool: It has helped malicious actors during the 2016 U.S. presidential election and the Brexit referendum, arguably helping to subvert democratic institutions. Besides, targeted ad platforms have deprived news organizations of previously reliable revenue streams, creating yet another negative externality for democracy.
The potential disparity between the value of personal data and what users receive in return creates space for governments to seek reimbursement on society’s behalf. The Czech Republic is a low-tax country – it has a flat 15 percent personal income tax – but it is setting a relatively high rate for data use. The often-heard argument that the tax simply will be passed on to advertisers may not be valid with a 7 percent rate: If Facebook and Google merely add it to their bill, advertisers may well think of going elsewhere, including to news sites and traditional advertising media.
Governments shouldn’t be shy to ask for more: At some point, this should produce reliable estimates of the true worth of our personal data. For example, the Czech Republic has 9.3 million internet users. The finance ministry’s revenue projection puts the value of their personal data not covered by the “free” services provided at about $23 a year per user – still a modest amount. Trying to raise it could help find an equilibrium at which the digital advertising problems can still be profitable without strangling the competition that doesn’t try to target ads on the basis of personal data.
Taxing advertising that is based on personal data could make another important contribution to the common good. If the idea is to tax the revenue from clicks on and views of ads shown in a specific country, then platforms such as Facebook and Google must be required to disclose to a government analytical data on where the clicks and impressions occur. Governments would, naturally, want to audit the data. That would be a major step toward much-needed transparency: There’s too little independent control of digital advertising companies’ claims of precise targeting and advertising efficiency. Whatever information governments collect from platforms for tax audit purposes should be available to advertisers and the public, too.
One can only hope the legislative process doesn’t defang the Czech government’s digital tax initiative or dilute its focus on targeted ads. The Czech Republic is a small country, but it can set an example for bigger neighbors and even the U.S.
(Corrects fourth paragraph korunas figure to billions, instead of millions. )
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
