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Dis and Dat

Bruce Krasting's picture




 
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Self-Serving Accounting

There’s been an ongoing row about changes in lease accounting. Big players in the leasing industry (think GE) have been fighting the changes tooth-and-nail. This article had some interesting data on the consequences of the new accounting rules:

 

 

Consulting firm Chang & Adams found that proposed standards for lease accounting will result in an increase in total reported debt liabilities of $1.5 trillion; increased costs of $10.2 billion annually; job losses of over 190,000; and a lowered GDP of $27.5 billion annually.

$1.5 trillion is a hell of a lot of money to suddenly appear on the balance sheet of these lessors, for that reason alone I expect that the new rules will be watered down. No one wants to see another $1.5T of debt exposed those days. From the C&A report:

 

Essentially, the standards will require tenants to place leases on their balance sheets—an enormous line item that consists of anything from office, business and farm machinery to, yes, real estate.

 

But really, it’s there. I can’t imagine how the accounting rules can bury this debt. I’m amazed there a is even any debate, after all we've been through. The conclusion that it could cost 190k jobs and $28b annually might be correct. I would like to see a different report. What is the cost (in both jobs and money) of allowing phony accounting to persist? A few years ago we were measuring this in the Trillions. We still are.

 


Self-Serving Forecasts

This week the Fed came out with its consensus forecast of inflation for the next three years. No surprises, the Fed governors believe that inflation is a non-event:

 

 

I’m not sure if the Fed is trying to fool us with this very tame view of inflation. But the Fed is not fooling the market. The Ten-Year TIPS/Bond spread is now forecasting inflation at 2.3%. That’s the highest reading in the past six-months. Maybe the Fed folks are just kidding themselves.

 

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On Money Laundering

 

Another big step has been taken in the global effort to control the use of money. The Financial Action Task Force (FATF) has adopted new regulation to control money laundering. FATF is a policy setting body that is comprised of thirty-six countries, including the EU, Switzerland, Russia, China and the USA.

 

 

It’s difficult to find fault with this new effort. It’s directed at terrorist financing and other illegal activities. Most interesting to me, the new rules bring tax evasion within the scope of global money laundering:

• Expanding the scope of money laundering predicate offenses by including tax crimes.

By accepting the new standards, the US has significantly upped the consequences for tax evasion. Tax evasion brings with it a range of penalties and fines that include jail time for some. The rules on money laundering are much harsher.

FATF will give the “authorities” a big excuse to go looking for tax-cheats. They will also have expanded capacities (surveillance/monitoring of accounts) to seek out and find those cheats:

• More effective international cooperation including exchange of information between relevant authorities, conduct of joint investigations, and tracing, freezing and confiscation of assets.
Better operational tools and a wider range of techniques and powers, both for the financial intelligence units, and for law enforcement to investigate and prosecute money laundering.

 

It can be argued that we’re all better off when Big Brother can easily dig through financial records. It would be foolish to think that it doesn’t also come with an enormous cost.

 

Note:

FATF has provided an estimate of the global illegal activity. They think it could be as high as 5% of total GDP.

 

Ahhh. 5% means $3 Trillion in the $60T global economy. For the USA, 5% of GDP comes to $750 Billion. That's a hell of lot of criminal activity.

If FATF were able to achieve their objective of eliminating this activity, it would bring about a global depression greater than that seen in the 30s. Go figure.

 


Update on the Nation’s 31st Largest Bank

 

The Federal Financing Bank has been hard at work over the past sixty days since my last report. Some highlights:

 

These results are consistent will all the other monthly reports from the FFB since Obama took office. The Administration is conducting a back-door stimulus and an interventionist industrial policy. It’s financing this with off-federal-balance-sheet-financing, in lieu of funds appropriated by Congress.


 

This article from the Fiscal Times is just another in a long list of how the folks getting this money are connected one way or another to the Administration.

 

 

This bank will make headlines at some point during the Presidential campaign.

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Wed, 02/22/2012 - 04:24 | 2183950 sikefeier0728
sikefeier0728's picture

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Mon, 02/20/2012 - 09:13 | 2177121 ebworthen
ebworthen's picture

I'm o.k. with these accounting schems as long as they move my income from 100% to 150% retroactively.

"Mark to Unicorns" accounting was fully approved in 2008, so why would they suddenly join the real world?

There is no greater lie than people who deal in numbers making them into letters, then syllables, then words - and proceeding to mumble.

Pre-crisis/Post-crisis:

Milk = $2.00/$3.50 per Gallon

Gas= $2.16 (Jan. 2007)/$3.43 (Jan. 2012)

Inflation?  What inflation?

Debt?  What debt?

Unemployment?  What unemployment?

Too many professional liars (a.k.a. Bureaucrats or Mandarins), they are like a plague.

Gas price chart 1990-Present:  http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPMR_PTE_N...

Milk per gallon 1997-2012:  http://future.aae.wisc.edu/data/annual_values/by_area/2060?tab=prices

(p.s. from the spell checker - buried with one 'r' not two)

Mon, 02/20/2012 - 08:47 | 2177098 Coldfire
Coldfire's picture

AML laws are the face of financial fascism.

Mon, 02/20/2012 - 08:00 | 2177062 Norma Lacy
Norma Lacy's picture

Bruce:    Thank you for the interesting thises and thats.   And fellow ZHers, thanks as well for (mostly) interesting, often amuzing commentary.     I have one quibble however on behalf of William Bonzai and others of us who follow his profession:   An attribution for the painting/graphic of the girl in the gas mask.     Please.  Thank you.

Mon, 02/20/2012 - 08:30 | 2177079 Bruce Krasting
Bruce Krasting's picture

Sorry. This is a Banksy. He did a number like this. He used an old oil painting and then added the mask. Then he hung it in a museum to see how people would react.

What I don't know is what is the the history of the original work. Anyone have the answer to that?

bk

Mon, 02/20/2012 - 08:39 | 2177090 Coldfire
Coldfire's picture

Banksy? All class. Don't miss his Queen Victoria: http://www.nowallsgallery.com/artists/banksy/queen-victoria/2/4.htm

Mon, 02/20/2012 - 00:59 | 2176840 DonutBoy
DonutBoy's picture

BK - I don't get it.  If I rent my house from the property owner, why would I put the house on my balance sheet?  It's not the tennant's asset.  What am I missing?

Mon, 02/20/2012 - 08:33 | 2177082 Bruce Krasting
Bruce Krasting's picture

Most of the planes flying around are leased. Who owns them? On whose balance sheet are these planes? Answer: No One.

 

Mon, 02/20/2012 - 12:40 | 2177719 the grateful un...
the grateful unemployed's picture

so wait are you saying GM doesn't count all their lease units on the their balance sheet? who does?

Mon, 02/20/2012 - 01:02 | 2176845 DonutBoy
DonutBoy's picture

Wait a minute - I think I get it.  I put the lease on my balance sheet.  I've agreed to pay $xxx for the next 12 months - therefore it's a liability.  Right?

Mon, 02/20/2012 - 00:47 | 2176824 Bear
Bear's picture

Agua Caliente? I thought that track closed a long time ago, maybe its employees moved north ... I guess someone thought that would be a great name for a solar company ... and maybe not so good after Solyndra got into agua caliente

Mon, 02/20/2012 - 12:24 | 2177669 the grateful un...
the grateful unemployed's picture

its also a town, or a destination out in the american desert

Mon, 02/20/2012 - 00:42 | 2176817 Bear
Bear's picture

"What is the cost (in both jobs and money) of allowing phony accounting to persist?"

Really Bruce ... It keeps the whole accounting profession employed and at least half of Washington

Mon, 02/20/2012 - 00:39 | 2176809 boiltherich
boiltherich's picture

I just got my car insurance bill for the next six months so I am utterly without compassion at this point for those suffering under some arcane FASB proposal.  Up 10% since the last premium 6 months ago.  No inflation my hairy butt crack!  And I bought my car new June 2009 when it was stickered at 55,000 bucks, insurance was 388 every six months till it went to 400 last September 1.  Now for March 1 it is $440. 

Nice, hit an economy when it is down!

Mon, 02/20/2012 - 00:52 | 2176834 Bear
Bear's picture

Annual $880 for 55k car? Sounds like a great deal to me. You obviously don't live in California.

Sun, 02/19/2012 - 23:52 | 2176741 the grateful un...
the grateful unemployed's picture

you sell inflation when you know it doesn't exist because it achieves two purposes, it fools the public into thinking that there is an economic recovery, and then it drives down the price on new TIP bond issuances so they reflect a negative yield.

Sun, 02/19/2012 - 23:29 | 2176697 disabledvet
disabledvet's picture

"Look out above" as this rally starts gathering steam. My guess would be "the Fed will be too late to tighten"...we shall see.
http://www.youtube.com/watch?v=hYKYka-PNt0&feature=player_detailpage

Sun, 02/19/2012 - 22:49 | 2176612 mkhs
mkhs's picture

The Financial Action Task Force (FATF)

 

So they would be investigating MF Global?

Sun, 02/19/2012 - 22:38 | 2176592 DB Cooper
DB Cooper's picture

Here I've been supportive of Ford for not taking a bailout and continue to see big money they are getting through the back door.  I'm coming to the conclusion that they are only slightly less rotten than the bastards at GM and Chrysler.

Mon, 02/20/2012 - 08:51 | 2177104 Widowmaker
Widowmaker's picture

This got my attention, too.

I championed F up until this moment...

Sun, 02/19/2012 - 20:34 | 2176231 Yen Cross
Yen Cross's picture

One thing is new! As you so succinctly pointed out Mr. Krasting, the debt ceiling will be breached two months ahead of schedule. September of 2012, as opposed to November of 2012! Thank you for your contributions to Z/H, we all appreciate your busy schedule.

  Sincerely, Yen Cross

Mon, 02/20/2012 - 04:22 | 2176987 John_Coltrane
John_Coltrane's picture

Why do you think the house went along so readily with the SS tax cuts, more UE expenditures and other costs that must be funded via additional debt since they weren't paid for by offsetting cuts?  A nice trap as they know the teleprompter in  chief is very math challenged and hasn't yet figured he'll need another raise in Sept!  And it won't happen this time.

Sun, 02/19/2012 - 20:18 | 2176190 onlooker
onlooker's picture

 

Regarding the level of writing of BK. This group is less informed and involved than in the past. The level of comments by Bruce may not be for the everyman. However, for us that would not have access to his views and information, even if we do not totally grasp the whole article, this is the ongoing education that we REALLY need to have a go at--- even if we don’t do as well as we would like.

Bruce needs to be himself and do what he does in the way he does it. The Reader can adjust. We have lost a couple of writer/posters here at ZH because of the broader readership not being at the level of the contributor.

 

Hell no I don’t totally understand, but that is my duty to get up to speed and every month it gets better.

 

Give the guy cheers and a bravo or two. Give him the respect that he deserves.

Sun, 02/19/2012 - 19:58 | 2176144 Pike Bishop
Pike Bishop's picture

Krasting... did you know that your writing, and many of the subjects you choose, are about 2 inches away from being understandable by generic MainStreeters. And your posts are often topics in which people would find value towards an understanding they seek. All people are not sheeple, they suffer from the helpless feeling of the TBTU. Too big to understand. They are becoming acutely aware that much of what they have imbibed has not been helpful, nor healthy, for them.

I am a spotlighted writer in a new order private stock investing model for 15K members. The membership's breadth reaches from Tradesman to dual PhD. The common thread within the fabric of the Community is a seeking for a Cure for the common broker and pervasive Noise. The fact which grows more palpable and clear everyday is that MainStreet is being flushed out of a forest of measured investing risk to a Market constructed primarily as a stage for ambush and hopelessness. 

Upon occasion of particular relevance, all that is necessary for me to do (with full acknowledgment to you and site) is to establish a more accessible context in which they are capable of understanding the significance to topic. My iteratives of your blogs are overwhelmingly well received.

You may wish to continue preparing what nets to sugar water, in the context of the audience as knowledgeable and long battle-worn. 

But, you can also shift your intention of narrative to a different audience and change things in a way you could have never ever dared to imagine.

They are waiting to understand.

Mon, 02/20/2012 - 02:51 | 2176935 falun bong
falun bong's picture

hi Pike, you're welcome to hang around the bar a while but after that while you'll notice that the other people in here are not looking for sugar water. And they certainly don't get it from BK

tough crowd

Sun, 02/19/2012 - 19:58 | 2176122 EvlTheCat
EvlTheCat's picture

Good job Bruce!

'On Money Laundering' Damn those Swiss Banks. They will be part of the NWO or be branded terrorists. All bark and no bite as of yet.

'The discussions follow a Swiss court’s decision to block the turnover by UBS AG of data on 4,450 U.S. tax cheats to the United States. The bank and Swiss authorities agreed to disclose the account information in August, but the Swiss court rejected the deal in January, citing a distinction between tax evasion, a civil offense under Swiss law, and tax fraud, a criminal offense that could entail international cooperation. That FATF openly discussed the initiative with the backing of the Group of 20 so soon after the ruling demonstrates that the days of Swiss bank secrecy are numbered, said Jack Blum, chairman of the Tax Justice Network, a tax reform advocacy group.'

'The bad news is that the FATF has not tackled one of the biggest problems with the current international financial system: the difficulty of accessing information about the real persons who have ultimate control over a company. It is “anonymous companies” that are a key part of the structure that enables criminals to set up the bank accounts they use to hide their funds. This represents a failure of political will by FATF member states, leaving a significant loophole that undermines progress elsewhere. As a result the FATF has taken a step forward, but still has a long way to go.'

'With regard to wire transfers, FATF has defined “beneficiary” for the purposes of this recommendation as “the natural or legal person or legal arrangement,” which means that a shell company could easily be the beneficiary of a wire transfer and no additional diligence would be done. [Rec 16]'

'The new standards do not require the disclosure of the true “beneficial owners” of corporate entities. [Rec 24]'

'Bearer shares are still permitted. [Rec 24]'

But worth keeping an eye on since the possible implication is your bank will give you up on no bigger pretense then large account transfers or closing an account to move banks or to a credit union.

'Tying tax evasion to money laundering could also lead to a jump in defensive suspicious activity report filing in the United States as banks would be “terrified of missing something,” according to James Nason, head of international communications for the Swiss Banking Association (SBA).'

'Tax evasion in the United States is punishable by up to five years imprisonment and a $100,000 fine. A money laundering conviction can mean a prison sentence of up to 20 years and a $500,000 fine, or double the sum of the illicit transactions under question.'

'Although they carry no legal weight by themselves, FATF recommendations are considered the basis for national and international legislation to prevent the money laundering. As such we can expect this recommendation to be reflected in new law worldwide over the next few years.'

'In February 2009, Sens. Chuck Grassley (R-IA) and Patrick Leahy (D-VT) included a provision equating tax evasion to money laundering in the Fraud Enforcement Recovery Act, but members balked at applying more severe criminal penalties to tax evasion. Sen. Grassley has said he would introduce the provision again in future legislation.'

Sun, 02/19/2012 - 19:40 | 2176116 OutLookingIn
OutLookingIn's picture

... A LITTLE BiT OF DIS AND DAT!

Excelent. Brief, short, to the point and very informative post. Thank you.

Not a question of; "Do governments lie?" It's to what degree!

Shadowstats ~ for the real picture.

"There's a reason it's called the 'American Dream... you have to be asleep to believe it."

- George Carlin RIP

Sun, 02/19/2012 - 19:39 | 2176107 Problem Is
Problem Is's picture

+5 Bruce...

Tax Evasion = Criminal Money Laundering

A la Sergey Aleynikov being charged with criminal espionage on a civil matter... a dispute over some open source code. Good thing Sergey found an appeals court to hear his case and overturn that ludicrous conviction...

Tyler covered his appeal victory, right?

It's Not Fascism When We Do It
The problem with Corporate Owned Governance is denying Corporations any potential revenue... is a crime.

Sun, 02/19/2012 - 20:12 | 2176177 Careless Whisper
Careless Whisper's picture

Tyler covered his appeal victory, right?

No, he didn't.  Rather curious.

 

Sun, 02/19/2012 - 19:34 | 2176094 ConfederateH
ConfederateH's picture

It’s difficult to find fault with this new effort. It’s directed at terrorist financing and other illegal activities. Most interesting to me, the new rules bring tax evasion within the scope of global money laundering:

Bruce, as a Swiss it is your duty to have at least a vaque understanting of the importance of financial privacy and freedom.  Unfortunately your east coast elitistist brain washing appears to have rendered you unable to see anything more here that a typical sheeple.

Those elitists who you so often cover for are the drug dealers and money launderers.  But they will never get caught nor go to jail as long as they play the game.  The ones who are going to suffer from this are all those poor sheeple who will not be able to get any of their wealth out of the dollar or offshore once it starts to burn.  BRUCE, YOU WILL HAVE PLAYED A PART IN ENABLING THE ELITES TO ACCOMPLISH THIS.

Sun, 02/19/2012 - 19:25 | 2176072 onlooker
onlooker's picture

 

Great Again Bruce. The Lady with the Mask reminds me I need to take a shower before I see her again.

Sun, 02/19/2012 - 19:10 | 2176025 ekm
ekm's picture

Man o' man

How the fuck do you discover this stuff?

Keep writing please. I am learning a lot.

Sun, 02/19/2012 - 18:22 | 2175937 Justawhoaman
Sun, 02/19/2012 - 18:15 | 2175926 SimpleandConfused
SimpleandConfused's picture

"This bank will make headlines at some point during the Presidential campaign."

Doubt this and even if so, will make no difference.

The average voter wants more of the same.  Make no mistake about it; the results of this election are a foregone conclusion.

Obama in a landslide.  Think about how many are dependent on the government for their very existence.  Think about how the big money needs these guys to carry on as usual.  You think they're going to bring in anyone who will change this lying, BS status quo?  No fucking way.

No way this guy goes down.  Fraud and corruption?  No one in any number cares at all.  They read the headlines, watch the MSM and believe things are getting better all the time.

Obama wins with >52%.  This thing is over.

As for his next term?  Well, Bruce and ZH will have plenty to write about - we ain't seen nothin'yet.

Sun, 02/19/2012 - 19:45 | 2176117 Reese Bobby
Reese Bobby's picture

You got thumbs downs for having a completely valid opinion?

 

My only observation would be Obama is uncertain enough to once again pretend to be a Christian, even if he can't help a smirk when he chokes out that lie.  I always expect his horns to appear.

 

Sun, 02/19/2012 - 18:56 | 2175992 The Alarmist
The Alarmist's picture

"As for his next term?  Well, Bruce and ZH will have plenty to write about - we ain't seen nothin'yet.,

And you might see even more of nothing, 'cos sites like ZH will be shut down by the next version of SOPA, etc.

It's not a matter of if, just when.

Sun, 02/19/2012 - 19:22 | 2176061 Chimerican
Chimerican's picture

No question about it. The TSA is the model. The sheeple will become difficult to control when the money runs out. My parents come from China and told me how regimes clamp down when they are threatened. The TSA has been a test case in the process. The powers that be know we're in the final innings and have been preparing us for totalitarian control.

Mon, 02/20/2012 - 06:20 | 2175904 Dead Canary
Dead Canary's picture

Ok. Iceland tells the Euro banks to Fuck Off. The MSM sez Iceland will pay for their insolence and enter a thousand year dark age and will never be given credit again. Fast forward 2 years and lo and behold, Icelands credit rating is increased. Now all I hear about from the MSM goes something like this:

"Iceland, who received a 4 billion bail out from the IMF, is now recovering and is a shinning example to all of Europe that the system works!"

What happened to the 1000 years of pain and torment?

Mon, 02/20/2012 - 06:50 | 2177032 Ghordius
Ghordius's picture

+1 It's much more garbled and fucked up than the MSM story that it's being sold

1. Iceland told the global banks (why "euro"?) to fuck off, they would not bail out their own Icelandic Banks.

2. MSM said they would suffer.

3. meanwhile Iceland still has it's own sovereign debt - no change. ratings down, refi difficult

4. now the IMF helps - of course the rating goes up...

Sun, 02/19/2012 - 17:19 | 2175814 Chimerican
Chimerican's picture

There is no reason to pick a political party unless you are running for office. Make contributions to both parties and you win either way. Ideology is for chumps.

Sun, 02/19/2012 - 18:14 | 2175925 Nozza
Nozza's picture

Any chance of changing you avatar? Some people need to read this at work. Thx

Noz

Sun, 02/19/2012 - 18:42 | 2175967 Chimerican
Chimerican's picture

One clam is pretty much the same as another.

Sun, 02/19/2012 - 17:29 | 2175837 Race Car Driver
Race Car Driver's picture

Chumps know chumps! Contributing personal funds to any political party is always net loss unless it's a bribe (else, it would be an ideological contribution).

You should lose the avatar of your mom's twat, as facinated as you might be with it.

Sun, 02/19/2012 - 17:45 | 2175866 Chimerican
Chimerican's picture

Net loss? Are you nuts? Political contributions are legal and the cheapest investments you can make.

Sun, 02/19/2012 - 23:47 | 2176729 benb
benb's picture

Unfortunately, you are correct.

Sun, 02/19/2012 - 18:47 | 2175978 Uncle Remus
Uncle Remus's picture

Well, if you're Warren or the Vampire Squid.

Sun, 02/19/2012 - 17:16 | 2175803 apberusdisvet
apberusdisvet's picture

None of this rape and pillage will come out during and debates or campaigns because all the candidates (DR PAUL excepted) are run by the same puppet masters whose agenda is to continue the rape and pillage of this once great country.

Sun, 02/19/2012 - 19:29 | 2176084 Problem Is
Problem Is's picture

"When you're slapped, you'll take it and like it."

Sam Spade

Do NOT follow this link or you will be banned from the site!