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GE….Italy….GE

Bruce Krasting's picture




 

I was looking through a trade rag for biomass power generation (I have no life). This caught my attention:

 

 

The idea of turning waste to energy is a good thing. The facility in Italy is part of an overall effort to get the country to produce 17% of its energy needs from renewable sources.

The GE Jenbacher gas engines (mini blast furnaces) are built in Austria, Hungary and China. So this is one of those global stories.

I don’t have much info on the Villanova Mondovi project but I do have some history financing co-gen facilities in different places around the globe. They all have the following features:

-They are long life projects with long-term paybacks.


-They (almost) always have a municipal involvement.


-There is (almost) no equity in these projects. They are funded 99% with debt.


-The capital structure has debt maturities out to 15+ years.


-In (almost) all cases vendor financing of major components is a requirement for an equipment sale.

-The cost of debt is THE critical component for a project. Without the availability of cheap long-term money these co-gen facilities never get off of the drawing board.

While I can’t confirm that GE’s Austrian subsidiary (or GECS) actually took back Italian government paper in exchange for the sale of turbines it would be very typical for projects like this.

From GE’s 9/30/11 10Q:

 

 

Forbes took a look at US corporate exposure to Europe. GE is on top of their list. They conclude that those companies with high exposure AND a leveraged balance sheet are the most at risk. Well, 27% of GE’s top line comes from Europe. Their debt to capital is 75%.

With Italian interest rates where they are today (and the fact the country can’t sell new debt) projects like the one outside Turin will not be repeated. There may have to be haircuts on old debt. Where does that take GE?

 

*********************************************************

Thinking about the Italian bond market got me to look at a leveraged bet. There are many ways to achieve the following results (derivatives). The following is the simplest form of a carry trade. (Note: you have to be a “player” with a big balance sheet to get into this sandbox)

Buy
$1b of 6% Italian one-year Treasury bills.

Finance 90% of the purchase with dollars. Fully hedge the purchase with a one-year swap of dollars for Euros.

Result

One year return on equity: 50+%

 

What? A 50% return on Italian short-date paper?

I can hear people jumping on the fact that this huge return is a consequence of 90% leverage. Let me point out that the margin on Italian Tbills was 5% less than one month ago. But I understand that 90% may seem too high today. What leverage ratio would make you happy? How about 50%?

Result:
One-year return on equity: 10+%

That’s crazy!  I’ve never seen anything like this before. Is the probability of default within one year that high? I have difficulty believing that. But that’s what the market is telling us.

The only conclusion is that the European bond market is functionally nonexistent.

 

***************************************************

 

Getting back to GE, a friend sends me this link. This is a letter sent to Congress 11/9 that was signed by 1,500 US corporations. Everyone you can think of signed this. Most notably, GE.

 

November 9, 2011

Dear Member of Congress:

The undersigned organizations urge Congress to extend as soon as possible the tax provisions set to expire in 2011.

 

This letter is a plea for tax relief. The companies want to retain their favorite loopholes. For the heck of it I include the wish list below this piece. It’s endless. It’s a joke. It proves that American industry’s interests are not at all aligned with the American citizens. This list will insure that the likes of GE never pay their share of US taxes.

I don’t have a problem when US industry lobbies congress for what they want. That’s the system we signed up for. But I do have a problem when the company that has the most to gain from the tax code is also advising the Administration on economic policy.

Obama has made a bunch of dumb mistakes. His getting into bed with Jeff Immelt is high on the list.

.

 

.
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The "Vomit" list

TITLE I–INFRASTRUCTURE INCENTIVES
Sec. 101.

Extension of Build America Bonds.

Sec. 102. Exempt-facility bonds for sewage and water supply facilities.

Sec. 103. Extension of exemption from alternative minimum tax treatment for certain tax-exempt bonds.

Sec. 104. Extension and additional allocations of recovery zone bond authority.
Sec. 105. Allowance of new markets tax credit against alternative minimum tax.

Sec. 106. Extension of tax-exempt eligibility for loans guaranteed by Federal home loan banks.

Sec. 107. Extension of temporary small issuer rules for allocation of tax-exempt interest expense by financial institutions.

TITLE II–EXTENSION OF EXPIRING PROVISIONS
Subtitle A–Energy

Sec. 201. Alternative motor vehicle credit for new qualified hybrid motor vehicles other than passenger automobiles and light trucks.

Sec. 202. Incentives for biodiesel and renewable diesel.

Sec. 203. Credit for electricity produced at certain open-loop biomass facilities.
Sec.

204. Extension and modification of credit for steel industry fuel.

Sec. 205. Credit for producing fuel from coke or coke gas.

Sec. 206. New energy efficient home credit.

Sec. 207. Excise tax credits and outlay payments for alternative fuel and alternative fuel mixtures.

Sec. 208. Special rule for sales or dispositions to implement FERC or State electric restructuring policy for qualified electric utilities.

Sec. 209. Suspension of limitation on percentage depletion for oil and gas from marginal wells.

Sec. 210. Direct payment of energy efficient appliances tax credit.

Sec. 211. Modification of standards for windows, doors, and skylights with respect to the credit for nonbusiness energy property.

Subtitle B–Individual Tax Relief
PART I–Miscellaneous Provisions

Sec. 221. Deduction for certain expenses of elementary and secondary school teachers.

Sec. 222. Additional standard deduction for State and local real property taxes.

Sec. 223. Deduction of State and local sales taxes.

Sec. 224. Contributions of capital gain real property made for conservation purposes.

Sec. 225. Above-the-line deduction for qualified tuition and related expenses.

Sec. 226. Tax-free distributions from individual retirement plans for charitable purposes.

Sec. 227. Look-thru of certain regulated investment company stock in determining gross estate of nonresidents.
PART II–Low-income Housing Credits

Sec. 231. Election for direct payment of low-income housing credit for 2010.

Sec. 232. Low-income housing grant election.
Subtitle C–Business Tax Relief

Sec. 241. Research credit.
Sec. 242. Indian employment tax credit.
Sec. 243. New markets tax credit.

Sec. 244. Railroad track maintenance credit.

Sec. 245. Mine rescue team training credit.
Sec. 246. Employer wage credit for employees who are active duty members of the uniformed services.

Sec. 247. 5-year depreciation for farming business machinery and equipment.

Sec. 248. 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements.

Sec. 249. 7-year recovery period for motorsports entertainment complexes.

Sec. 250. Accelerated depreciation for business property on an Indian reservation.

Sec. 251. Enhanced charitable deduction for contributions of food inventory.
Sec. 252. Enhanced charitable deduction for contributions of book inventories to public schools.

Sec. 253. Enhanced charitable deduction for corporate contributions of computer inventory for educational purposes.

Sec. 254. Election to expense mine safety equipment.

Sec. 255. Special expensing rules for certain film and television productions.

Sec. 256.

Expensing of environmental remediation costs.

Sec. 257. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.

Sec. 258. Modification of tax treatment of certain payments to controlling exempt organizations.

Sec. 259. Exclusion of gain or loss on sale or exchange of certain brownfield sites from unrelated business income.

Sec. 260. Timber REIT modernization.
Sec. 261. Treatment of certain dividends of regulated investment companies.

Sec. 262. RIC qualified investment entity treatment under FIRPTA.
Sec. 263. Exceptions for active financing income.

Sec. 264. Look-thru treatment of payments between related controlled foreign corporations under foreign personal holding company rules.

Sec. 265. Basis adjustment to stock of S corps making charitable contributions of property.

Sec. 266. Empowerment zone tax incentives.

Sec. 267. Tax incentives for investment in the District of Columbia.

Sec. 268. Renewal community tax incentives.

Sec. 269. Temporary increase in limit on cover over of rum excise taxes to Puerto Rico and the Virgin Islands.

Sec. 270. Payment to American Samoa in lieu of extension of economic development credit.

Sec. 271. Election to temporarily utilize unused AMT credits determined by domestic investment.

Sec. 272. Reduction in corporate rate for qualified timber gain.

Sec. 273. Study of extended tax expenditures.
Subtitle D–Temporary Disaster Relief Provisions
PART I–National Disaster Relief

Sec. 281. Waiver of certain mortgage revenue bond requirements.

Sec. 282. Losses attributable to federally declared disasters.
Sec. 283. Special depreciation allowance for qualified disaster property.

Sec. 284. Net operating losses attributable to federally declared disasters.

Sec. 285. Expensing of qualified disaster expenses.

PART II–Regional Provisions
subpart a–new york liberty zone

Sec. 291. Special depreciation allowance for nonresidential and residential real property.

Sec. 292. Tax-exempt bond financing.
subpart b–go zone

Sec. 295. Increase in rehabilitation credit.

Sec. 296. Work opportunity tax credit with respect to certain individuals affected by Hurricane Katrina for employers inside disaster areas.

Sec. 297. Extension of low-income housing credit rules for buildings in GO zones.

TITLE III–TECHNICAL CORRECTIONS TO PENSION FUNDING LEGISLATION

Sec. 301. Definition of eligible plan year.

Sec. 302. Eligible charity plans.
Sec. 303. Suspension of certain funding level limitations.

Sec. 304. Optional use of 30-year amortization periods.

Sec. 305. Transition rule for certifications of plan status.

TITLE IV–REVENUE OFFSETS
Subtitle A–Personal Service Income Earned in Pass-thru Entities

Sec.401. Partnership interests transferred in connection with performance of services.
Sec. 402. Income of partners for performing investment management services treated as ordinary income received for performance of services.
Subtitle B–Corporate Provisions

Sec. 411. Treatment of securities of a controlled corporation exchanged for assets in certain reorganizations.

Sec. 412. Taxation of boot received in reorganizations.
Subtitle C–Other Provisions

Sec. 421. Modifications with respect to Oil Spill Liability Trust Fund.

Sec. 422. Denial of deduction for punitive damages.

TITLE V–HEALTH AND OTHER ASSISTANCE

Sec. 501. Extension of section 508 reclassifications.

Sec. 502. Repeal of delay of RUG-IV.

Sec. 503. Limitation on reasonable costs payments for certain clinical diagnostic laboratory tests furnished to hospital patients in certain rural areas.

Sec. 504. Funding for claims reprocessing.

Sec. 505. Medicaid and CHIP technical corrections.

Sec. 506. Addition of inpatient drug discount program to 340B drug discount program.

Sec. 507. Continued inclusion of orphan drugs in definition of covered outpatient drugs with respect to children’s hospitals under the 340B drug discount program.

Sec. 508. Conforming amendment related to waiver of coinsurance for preventive services.

Sec. 509. Clarification of effective date of part B special enrollment period for disabled TRICARE beneficiaries.

Sec. 510. Adjustment to Medicare payment localities.

Sec. 511. Clarification for affiliated hospitals for distribution of additional residency positions.

TITLE VI–OTHER PROVISIONS
Subtitle A–General Provisions
Sec. 601. Allocation of geothermal receipts.
Sec. 602. Employment for youth.

Sec. 603. Housing Trust Fund.

Sec. 604. The Individual Indian Money Account Litigation Settlement Act of 2010.

Sec. 605. Appropriation of funds for final settlement of claims from In re Black Farmers Discrimination Litigation.

Sec. 606. Expansion of eligibility for concurrent receipt of military retired pay and veterans’ disability compensation to include all chapter 61 disability retirees regardless of disability rating percentage or years of service.

Sec. 607. Refunds disregarded in the administration of Federal programs and federally assisted programs.

Sec. 608. Qualifying timber contract options.

Sec. 609. Extension and flexibility for certain allocated surface transportation programs.

Sec. 610. Community College and Career Training Grant Program.

Sec. 611. Extensions of duty suspensions on cotton shirting fabrics and related provisions.

Sec. 612. Modification of Wool Apparel Manufacturers Trust Fund.

Sec. 613. Department of Commerce Study.

Sec. 614. ARRA planning and reporting.

Sec. 615. Surety bonds.
Sec. 616. Funding for Deployment of Renewable Energy, Energy Efficiency, and Electric Power Transmission Projects.
Subtitle B–Extension of Trade Adjustment Assistance

Sec. 621. Short title.

Sec. 622. Extension of Trade Adjustment Assistance.
Subtitle C–Extension of Health Coverage Improvement

Sec. 631. Improvement of the affordability of the credit.

Sec. 632. Payment for the monthly premiums paid prior to commencement of the advance payments of credit.

Sec. 633. TAA recipients not enrolled in training programs eligible for credit.

Sec. 634. TAA pre-certification period rule for purposes of determining whether there is a 63-day lapse in creditable coverage.

Sec. 635. Continued qualification of family members after certain events.

Sec. 636. Extension of COBRA benefits for certain TAA-eligible individuals and PBGC recipients.

Sec. 637. Addition of coverage through voluntary employees’ beneficiary associations.

Sec. 638. Notice requirements.
Subtitle D–TANF Provisions

Sec. 641. Extension of Temporary Assistance for Needy Families and related programs.

Sec. 642. Reinstatement of Federal matching of State spending of child support incentive payments.

Sec. 643. Extension and modification of the TANF Emergency Fund.

Sec. 644. Modifications to TANF data reporting.
Sec. 645. State court improvement program.
Subtitle E–Unemployment Compensation Program Integrity

Sec. 651. Permissible uses of unemployment fund moneys for program integrity purposes.

Sec. 652. Mandatory penalty assessment on fraud claims.

Sec. 653. Prohibition on noncharging due to employer fault.

Sec. 654. Collection of past-due, legally enforceable State debts.

Sec. 655. Treatment of short-time compensation programs.

Sec. 656. State use of compensating balances and interest earned on clearing account to pay associated banking costs.

Sec. 657. Reporting of first day of earnings to directory of new hires.

Sec. 658. Deduction of obligations for custodial parents.

Sec. 659. Advisory Council on unemployment compensation.

Sec. 660. Amendment to the Federal-State extended benefits program.

Sec. 661. Operating instructions and regulations.
Subtitle F–Custom User Fees

Sec. 665. Customs user fees.
TITLE VII–TRANSPARENCY REQUIREMENTS FOR FOREIGN-HELD DEBT

Sec. 701. Short title.

Sec. 702. Definitions.

Sec. 703. Sense of Congress.

Sec. 704. Quarterly report on risks posed by foreign holdings of debt instruments of the United States.

Sec. 705. Annual report on risks posed by the Federal debt of the United States.

Sec. 706. Corrective action to address unacceptable and unsustainable risks to United States national security and economic stability.

TITLE VIII–TRANSPARENCY REQUIREMENTS FOR FOREIGN-HELD DEBT

Sec. 801. Short title.

Sec. 802. Definitions.

Sec. 803. Sense of Congress.

Sec. 804. Annual report on risks posed by foreign holdings of debt instruments of the United States.

Sec. 805. Annual report on risks posed by the Federal debt of the United States.
Sec. 806. Corrective action to address unacceptable risks to United States national security and economic stability.

TITLE IX–OFFICE OF THE HOMEOWNER ADVOCATE

Sec. 901. Office of the Homeowner Advocate.

Sec. 902. Functions of the Office.

Sec. 903. Relationship with existing entities.

Sec. 904. Rule of construction.

Sec. 905. Reports to Congress.
Sec. 906. Funding.

Sec. 907. Prohibition on participation in Making Home Affordable for borrowers who strategically default.

Sec. 908. Public availability of information.

 

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Sat, 09/08/2012 - 03:09 | 2774075 bags
bags's picture

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Fri, 11/11/2011 - 21:00 | 1871358 PulauHantu29
PulauHantu29's picture

Excellent pickup.

You are THE MAN! Bruce.

Fri, 11/11/2011 - 16:54 | 1870800 anonnn
anonnn's picture

Oh, does reality have to be that American corporations must serve American persons' interests?

There is need to inspect the meaning of American, corporations, interests and persons. It is a simple act that quickly dispels fog-think.

Btw, anyone know of a dictionary that defines corporation as persons and having the rights of persons?

There exists a technique known as creating insanity by redefinition of words. Beware.

Re: insanity by redefinition of words/symbols: Ivan Pavlov demonstrated easy creation, at will,  of paralyzing confusion and insanity in animal experiments. E.g., he alternately rewarded or shocked  animals by training them to choose between 2 clearly different symbols, like a square and circle.

Afterwards, he slowly altered the symbols [such as progressively rounding the corners of the square] until the victimes went beserk in their confusion over which symbol rewarded and which shocked.

Pavlov lessons are well understood by the very best control freaks...from advertising to ruling the unruly. 

Fri, 11/11/2011 - 20:16 | 1871302 DeeDeeTwo
DeeDeeTwo's picture

It can get lonely on Platial Plantations. Bruce needs to spend some quality time with his Tulip Girls. Perhaps his Swan Counters can round them up. Lay some pipe, baby.

Fri, 11/11/2011 - 15:42 | 1870676 heresy101
heresy101's picture

Bruce,

The list of corporate welfare is disgusting, but thanks for the list.

A few corrections on biomass generation are in order:

1) GE bought out Jenbacher engines a few years back because they run on as low as 40% methane from biogas that has only minimal clean-up. There is a waiting list for Jenbacher engines to run on landfill gas.

2) The engines aren't blast furnaces but are very large "truck" engines - from 2 to 8 Megawatt (about 12,000 hp). They are internal combustion engines.

http://www.ge-energy.com/products_and_services/products/gas_engines_powe...

3) As opposed to solar their capacity factor (% running in a year) is between 80-90% where solar is 18-25%

4) Landfill and biomass projects are more dependent on the gas supply than the technology. We have a PPA for a landfill project that has been reliably generating since 1987.

5) Looking at GE's website, monopoly finance grows ever larger. Besides Jenbacher, GE has disgustingly gobbled up another competitor-Waukesha.

If you have money to invest and know something about the technology, there are a lot of digester and landfill projects that will make steady money (not the Enron kind), but a good cash flow and provide renewable energy. Unfortunately, banks will not look at a lot of developers who need financing. There are a few hustlers and dreamers, but most know the technology and can make it work. The key is to be able to sell electricity at below $85/MWH and still make money.

Fri, 11/11/2011 - 20:15 | 1871293 disabledvet
disabledvet's picture

and it would seem "the competition" is far more threatened by a crisis in Europe than vice-versa. Sure...there are demand issues. But aren't the issues related to "local production" for more threatening in the long run to an industry like GE?

Fri, 11/11/2011 - 15:00 | 1870568 piceridu
piceridu's picture

BK, yet again you bring us stuff that not many can or will talk about. Thank you for your continued contributions.

Fri, 11/11/2011 - 15:19 | 1870624 RiverRoad
RiverRoad's picture

Amen to that "piceridu".

  And thanks for a great article BK.  IMO this whole Euro thing was a farce from the get go.  A wonderful way for the global oligarchies like GE to keep their profits offshore in an appreciating currency while the US dollar went down the toilet as it had to for us to compete with the Third World.  NOW they want their moola back in the US (untaxed!) as the ground shakes in Europe.  Worked great for Europe too:  allowing them a phoney pumped up fiat to buy their yachts with.

Fri, 11/11/2011 - 14:55 | 1870547 Dirtt
Dirtt's picture

Consumption tax solves half of the problems. An ICBM launched into The Beltway solves the other half.

Iran? Putin? Taliban?  Mole hills.

Fri, 11/11/2011 - 14:51 | 1870532 Cpl Hicks
Cpl Hicks's picture

The idea of turning waste to energy is a good thing. The good citizens of Harrisburg PA would probable have an opinion on that...'It sounded like a good thing but...'.

RE the Vomit list; I wonder why both Title VII and VIII read TRANSPARENCY REQUIREMENTS FOR FOREIGN-HELD DEBT ? The only wording difference is 2 words in a comparison of sections 706 and 806.

Fri, 11/11/2011 - 14:51 | 1870531 Careless Whisper
Careless Whisper's picture

I do have some history financing co-gen facilities in different places around the globe

Oh really

http://www.amazon.com/Confessions-Economic-Hit-John-Perkins/dp/1576753018

 

Fri, 11/11/2011 - 13:53 | 1870342 Bob Sacamano
Bob Sacamano's picture

Eliminate corporate taxes (100% of which are eventually paid by individuals - customers or shareholders) and you will eliminate a large part of corporate lobbying efforts.

Bonus - individuals paying increased taxes more directly (vs indirectly via corporations) will hopefully grow increasingly in favor of cutting government spending. 

Fri, 11/11/2011 - 15:29 | 1870646 RiverRoad
RiverRoad's picture

Fer sure.  How about that Christmas Tree tax scam floated yesterday that turned out to have been initiated by the National Christmas Tree Growers Assn.?  The money would have been used to PROMOTE the purchase of live trees since artificial have made huge inroads.  FACT IS:  Christmas tree farms are one of the best tax write off gigs around and a lot of those folks aren't laughing all the way to the bank anymore.  BTW, Obummer pulled the idea yesterday after ZHers here dumped all over it.

Fri, 11/11/2011 - 14:59 | 1870564 EvryInternational
EvryInternational's picture

Better yet, eliminate taxes altogether. Government uses its monopoly on power to afford favors on preferred groups - it should not exist.

Barring that, eliminate any tax that isn't voluntary. That is, the only logical tax is a sales tax where the two parties are engaging in the transaction for perceived mutual benefit. Everything else is confiscation of labor - a tax on existence, in effect.

The majority of business corruption is enabled by strong government controls. After all, if you're GE, a high barrier to entry for smaller businesses by way of the cost of compliance with regulatory burdens actually strengthens your position as less well capitalized competitors are kept out.

People continue to refuse to acknowledge the real economic incentives created by most of our modern social structure and government. They're going to pay the price of ignorance very soon...

Fri, 11/11/2011 - 17:52 | 1871028 Uchtdorf
Uchtdorf's picture

I get the whole "render unto Caesar the things that are Caesar's" concept. However, you make a very good point about the involuntary nature of the current tax systems used around the world. It used to be a source of pride that the US supported itself largely on the duties of imported goods. If you wanted a foreign-made item, pay the customs tax included in the price tag. Otherwise, buy American. Those days are so ancient now that nobody could imagine living again under such a system.

Fri, 11/11/2011 - 14:08 | 1870376 hannah
hannah's picture

so we eliminate corp taxes and they cut the msrp of their goods by the same amount .?..LOL. the gov would just create a new tax for the same amount and the corp would keep the 'tax' they use to charge. we would then pay more for the same goods.....

Fri, 11/11/2011 - 14:01 | 1870359 hungrydweller
hungrydweller's picture

Exactly.  How many times does it have to be said.  CORPORATIONS DO NOT PAY TAXES!  ONLY PEOPLE PAY TAXES.

 

Criminy - you think Bruce would get that.

Fri, 11/11/2011 - 19:42 | 1871252 hardcleareye
hardcleareye's picture

US case law is VERY CLEAR on this point.... a corporation is a legal person with constitutional rights .

See Citizens United vs FEC, or Western and Southern Life Ins. Co. v. State Bd. of Equalization of California and I could go on listing case law establishing this point. 

Fri, 11/11/2011 - 14:34 | 1870472 Freddie
Freddie's picture

More Democrat sh*tter corruption and the Dem media is silent.  Bush sucked but he was light years better than the muslim.

Fri, 11/11/2011 - 13:40 | 1870309 Moe Howard
Moe Howard's picture

Every one of these burn waste projects is a huge money loser and never pays back the promised monies.

Fort Knox has had one for years, total failure.

Fri, 11/11/2011 - 13:24 | 1870246 cymro33
cymro33's picture

- GE was ruined by Welch. He turned the company into a leveraged financial quagmire.

- Immelt does not know his ass from his head.

- Pathetic to see Welch spew rubbish on CNBC. He should be keeping company with Madoff.

 

Fri, 11/11/2011 - 14:01 | 1870353 DogSlime
DogSlime's picture

edited - forget it.  not worth me ranting about it.

Fri, 11/11/2011 - 12:52 | 1870109 Rainman
Rainman's picture

Those fancy Italian gas furnaces will work good when it comes time to incinerate Euros. Back to the lira...bitchez.  

Fri, 11/11/2011 - 16:04 | 1870729 Confuchius
Confuchius's picture

Rainman;

The gas furnaces are for:

Brussels buro-krats and banksters.

Fri, 11/11/2011 - 15:02 | 1870573 Cpl Hicks
Cpl Hicks's picture

Good one!

But seriously, they would make dandy souvenirs of your trip to Olde Europe. I'm thinking of places like the flea market in the Monastiraki district of Athens. Imagine, in a year or two you could get a handful of those multicolored bills for what, a dollar? ten Turkish lira?

Fri, 11/11/2011 - 12:51 | 1870103 the grateful un...
the grateful unemployed's picture

the solution is to create a competing North American currency (and back it with gold, and believe me if you issue a new gold backed currency the old dollars won't be worth anything by the time they are converted) if you really want to destroy the dollar, and bring living standards down to the baseline in America this is the way to do it. it also takes the heat off the Euro. Hell you could even bring a few of the PIIGS into the fold, just like NATO membership is offered to some Asian countries. then of course Bernanke could inflate the currency of an entire continent, which would give him lots of room to work. and what country wouldn't want to join the NA currency group, with ZIRP as far as the eye can see.

Fri, 11/11/2011 - 13:02 | 1870152 TheMerryPrankster
TheMerryPrankster's picture

Fiscal suicide is against the rules when you are playing last man standing. The whole idea is to be the last and only nation with a viable currency. Winner takes all, quite literally.

Gold and precious metals are kryptonite to a superfiat currency.

Fri, 11/11/2011 - 12:47 | 1870079 Mercury
Mercury's picture

Just think of all the capital and labor expended on hustling and maintaining every one of these tax breaks.

If all this crap were eliminated corporate tax rates could probably still be lowered below their effective rates today and end up producing more tax revenue overall for the government because the human and capital resources it would free up for more productive deployment would be enormous.

 

Fri, 11/11/2011 - 12:53 | 1870114 DCFusor
DCFusor's picture

Merc, in case you haven't noticed, there's no shortage of skilled people without work to do.  Makework projects like this are what keep some of them employed consumers.

Fri, 11/11/2011 - 13:24 | 1870197 Mercury
Mercury's picture

Well a lot of those skilled people are idle in large part because so many of the barriers to entry between them and a viable business are artificial and originate from the kind of cronyism pictured above in media res

Big, existing companies have a huge natural advantage in this kind of environment.  They're the only ones who can afford to to hire the extra people to fill in all the stupid holes the government digs for them.

The last thing you want if you're a Fortune 100 company is for some guy in a garage to invent a widget that jeopardizes your business model.  So, the bigger and more complex (and tweakable only with expensive tools)  tax codes and regulations are the better. At some point all that make-work BS paradoxically creates a competitive advantage for mega-firms.

Fri, 11/11/2011 - 13:05 | 1870162 TheMerryPrankster
TheMerryPrankster's picture

The Rat Race is now being held on a treadmill made of tax breaks and loopholes.

Fri, 11/11/2011 - 12:40 | 1870043 Fred Hayek
Fred Hayek's picture

The caption to that picture should have read something like:

"Welfare queen, on left, and 'ex' crack smoker on right greet subservient press"

Crap like the list above only survives through opacity. The corrupt congress critters who will probably rubber stamp all that could not justify it all for 30 seconds in front of their constituents.

I recently saw figures to the effect that 45 years ago, corporate taxes were something like 25% of federal receipts whereas now they're something like 6% of federal receipts. Perusing that list, one is not surprised.

Fri, 11/11/2011 - 12:43 | 1870033 Darth Silver
Darth Silver's picture

Holy, Fking shit batman. 

amazing journalism Bruce. 

the bond deals through the subsidiary sure seems like a loophole for bribes & kickbacks.  corruption at its finest.

 

Fri, 11/11/2011 - 12:36 | 1870029 NEOSERF
NEOSERF's picture

Never fear Bruce, Italy can sell all they want because they now know that they have taken over the driver seat from Greece who no one cares about anymore...Italy can and will force the ECB to come out with the "UNLIMITED" purchasing to stabilize the markets statement because they have to...Only option left is to either kick out the PIIGS (all of them) or to create a United States of Europe complete with Fed and foolish multi-country Parliament which is probably not allowed by every constitution

Fri, 11/11/2011 - 12:34 | 1870023 juggalo1
juggalo1's picture

Why the hell do we have so many different corporate subsidies?  When these come up for sunset, why isn't there more debate before rubber-stamping an extension?  No one will publicly admit they want a more complex tax code with higher nominal rates, but that clearly is what "the man" desires.

Fri, 11/11/2011 - 12:37 | 1870031 NEOSERF
NEOSERF's picture

Corporate subsidies are a backdoor quiet way to try to level the playing field...noisy nasty way is to throw tarriffs up everywhere but that would be contrary to our Open Markets public philosophy...

Fri, 11/11/2011 - 14:07 | 1870375 DCFusor
DCFusor's picture

You mean tilt the playing field, so the big guys can always stomp the small innovators - between that and our ridiculous IP laws, no small startup has a prayer of bringing anything innovative to market.  Look at the cross-suits in just mobile phones.  No matter *your* innovation, you can't sell it without running afoul of someone's riduclous patent, and can't be competitive anyway because only the bigs get those tax breaks.  And so we find ourselves last in manufacturing - ever wonder why?  The bigs got what they wished for, and it was bad for US.

Fri, 11/11/2011 - 12:33 | 1870020 Long-John-Silver
Long-John-Silver's picture

You will need this information in the near future.

Fri, 11/11/2011 - 19:28 | 1871236 espirit
espirit's picture

Nice!

Fri, 11/11/2011 - 12:32 | 1870018 GMadScientist
GMadScientist's picture

I would think that big projects like this would be like public transport elsewhere, surety bonded and based on lease-backs of equipment purchased and owned by the creditor (or a 3rd party).

Besides,...it's one plant in podunk Italy.

Fri, 11/11/2011 - 12:31 | 1870012 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Great article Bruce.

Fri, 11/11/2011 - 12:56 | 1870128 4shzl
4shzl's picture

+1

Fri, 11/11/2011 - 12:31 | 1870010 gckings19
gckings19's picture

GE is a joke.  They would be bankrupt if they had to compete honestly.  No more loopholes.  We need to pass a l=aw that the tax code applies to everyone.....no individualized tax breaks.......it would take a ton of power away from congress to reward their friends.

 

Fri, 11/11/2011 - 12:28 | 1869996 DCon
DCon's picture

Wil the mafia give their waste to GE for free?

 

Fri, 11/11/2011 - 14:28 | 1870446 El Yunque
El Yunque's picture

Your comment made me instantly think of dead bodies and Soylent Green.

Laughing at the absurdity of the world we live in - fueling furnaces with bodies and producing food in the same oven.

Has to be some profit in there some where, just like recyclers making a mint off my Dr. Pepper habbit.

Fri, 11/11/2011 - 12:26 | 1869986 Melin
Melin's picture

We did not sign up for a system where our government "manages" our economy.  Our government is corrupt because it "manages" our economy which spawns laws and lobbyists vying to seize unearned wealth from taxpayers. 

Separate the economy and state.

 

Fri, 11/11/2011 - 14:02 | 1870361 Tramp Stamper
Tramp Stamper's picture

We were all born into serfdom either live with it or.......??

Fri, 11/11/2011 - 15:34 | 1870658 Divine Wind
Divine Wind's picture

We were all born into serfdom either live with it or.......??

 

We were in fact all born into serfdom to one extent or another. Either live with it, get busy getting changing your situation, or die trying.

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