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This past week it was officially announced that Japan slipped into recession yet again—its 5th since the global crisis of 2008-09.

What does this mean—not only for Japan but for emerging market economies from Latin America to Asia; for the economic ‘hard landing’ apparently underway now in China; and even for Europe and the US?

The latest economic collapse in Japan—the third largest economy after the US and China— comes despite Japan’s massive ‘quantitative easing’ (QE) money injection program introduced by its central bank, the Bank of Japan, in the spring of 2013. That initial program provided more than $650 billion a year in Bank of Japan buying of corporate bonds and stocks—i.e. money that went directly into the pockets of bankers and investors in Japan and globally.

When the initial $650 billion was quickly followed by Japan’s 4th recession less than a year later, in the spring of 2014, it was raised to an estimated total of $1.7 trillion. That was followed once again within months by yet another 5th recession in 2015: Japan’s GDP fell by -0.7 percent this past March-June and another -0.8 percent July-September.

The continued failure of QE and free money to resurrect Japan’s real economy has nevertheless resulted in recent months in calls for the Bank of Japan to buy even more corporate bonds, stocks, and other private securities—illustrating the strange logic that, ‘if a multi-trillion dollar free money (QE) program fails, the solution is to provide even more of the same failed policies’.

But has QE and free money for banks, corporations and investors really failed? The real question is ‘failed for whom’?

Whose Recession?

While central bank subsidy programs everywhere—i.e. QE, zero rates, etc.—have clearly failed to generate much real economic recovery, they certainly have benefitted banks, corporations, and wealthy investors. In the case of just Japan, since spring 2013 its stock markets have risen by 70 percent. Corporate profits have doubled. And Japan corporations now sit on a cash hoard of more than $3 trillion, which they refuse to invest in Japan, in decent paying jobs, or to raise wages.

In contrast to rising stock prices, profits and corporate cash piles, median real wages continue to fall at a rate of 2 percent or more a year, as they have since 2009. Most of the jobs created in Japan in the past few years—as in the US and Europe— have been part time and temporary and therefore low paid. Japan’s ‘contingent’ (part time/temp) labor force is estimated today at about 38 percent of all employed. Many of Japan’s better paid manufacturing jobs have been offshored to China. Facing these dismal prospects, not surprisingly Japan workers have been leaving the labor force. The fixed incomes of retirees are also declining. Further exacerbating all the above is the sharp rise in inflation from imports for Japan households and consumers. A secondary effect of Japan’s QE and monetary policies has been to dramatically reduce the value of Japan’s currency. The Yen in recent years has fallen almost 30 percent against the US dollar; and up to 50 percent against other Asian and emerging market currencies, including China’s. That means Japan prices for imports have risen sharply, further reducing real wages and incomes for workers, retirees, and average consumer households.

Prime minister, Shinzu Abe’s, answer in 2013 was QE and free money for banks and investors and then austerity and taxes on consumers in 2014. And when the 4th recession hit in spring 2014, his answer was not only to expand QE but to introduce tax cuts for corporations within months after he just raised taxes on consumers. To offset wage and income decline Abe’s answer was to plead with Japanese corporations to raise wages voluntarily—a plea which they quickly and arrogantly dismissed publicly as ‘unrealistic’.

Now that another recession has just occurred, last week Abe desperately announced a token adjustment to Japan’s policy of fiscal austerity, by calling for an increase in subsidies to the tens of millions of retired Japanese on fixed incomes who have had no income gains for years and in some cases for decades. He also announced a plan to raise minimum wages. But whether this in fact occurs remains to be seen. If it does, it will represent a reversal of a 25 year history of fiscal austerity for most of the population.

Who’s Next?

What Abe’s monetary policies have accomplished is to set in motion, and then intensify, global currency wars that are devastating emerging market economies in particular.

Japan’s initial 2013 QE policy pushed emerging markets’ currencies lower, as the latter tried to compete with Japan for global exports share. But Japan QE came just as deflation in global commodities prices also began depressing emerging markets in 2013-14 also causing their currencies to decline; and just as the US central bank, the Federal Reserve, announced it’s a long term policy to allow US rates to drift up. This ‘triple impact’ of Japan QE, US interest rate shift, and global commodity deflation accelerated the collapse of emerging markets’ currencies.

Then Europe launched its own QE early in 2015, thus adding a fourth factor intensifying currency collapse. Japan’s QE no doubt had a role in the Eurozone’s decision to devalue the Euro by means of QE. Emerging market economies now faced ‘competition by dueling QEs’ from Europe as well as Japan. Meanwhile, as all parties intensify their fight over a total global trade pie that continues to contract in growth rate terms, the volume of world trade has slowed for the third year in a row in 2015 and by some estimates is now even flat.

For emerging markets, collapsing currencies mean capital flight, and a subsequent decline in their real investment and real growth. Foreign investment into their economies has been shrinking as well. To stem the outward flow and attract new capital, interest rates have been raised by some emerging markets, further slowing their economies. Unemployment has followed, further compressing wages and consumption. Meanwhile, falling currencies have meant rising inflation for imports, and thus even further declines in real wages, income and consumption, and therefore economic growth.

Overlaid on all this is China, which recent data shows is clearly heading for a hard landing. According to a growing number of independent estimates, its economy is not growing at the official 6.8 to 6.9 percent GDP rate but at a much lower 4 to 5 percent rate. New data out of China last week show China’s industrial production and profits have entered a period of major contraction. Its stock markets in November are now begun reflecting this, as China stock prices once again—as during last August—have begun another major contraction phase.

Japan will inevitably introduce yet another QE, likely sometime in 2016, after it waits for the US to raise rates in December 2015. Europe undoubtedly will follow Japan with more QE, maybe even before. And with its own economy slowing faster, China will be forced to devalue its currency further at some point as well.

Thus Japan’s latest recession promises to continue the global currency wars by precipitating yet another Japan QE, another similar response by Europe, and an eventual further devaluation response by China.

And what will the US do? Raise rates next month, of course—and experience yet another GDP contraction in early 2016, as it has four times already since 2011.

by Jack Rasmus
copyright 2015

Jack Rasmus is author of the just published analysis of the global economy, ‘Systemic Fragility in the Global Economy’, Clarity Press, November 2015, available at: http://www.kyklosproductions.com, at http://www.ClarityPress.com/Rasmus.html, or from Amazon.

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Jack Rasmus’s new Book, SYSTEMIC FRAGILITY IN THE GLOBAL ECONOMY, by Clarity Press, November 2015 is now available for purchase for readers interested in his most recent, in-depth, analysis of the current global economy.


Ordering Information:

Order from the author’s website at discount price of $27.00 plus s/h, via Paypal and credit card at: http://www.kyklosproductions.com

Or order from the publisher at http://www.claritypress.com/Rasmus.html
ISBN 978-0-9860769-4-7 — $29.95

Available from Amazon and other book publishers after December 1,


Just as contemporary economics failed to predict the 2008-09 crash, and over-estimated the subsequent brief recovery that followed, economists today are again failing to accurately forecast the slowing global economic growth, the growing fragility, and therefore rising instability in the global economy.

This book offers a new approach to explaining why mainstream economic analyses have repeatedly failed and why fiscal and monetary policies have been incapable of producing a sustained recovery.

Expanding upon the early contributions of Keynes, Minsky and others, it offers an alternative explanation why the global economy is slowing long term and becoming more unstable, why policies to date have largely failed, and why the next crisis may therefore prove even worse than that of 2008-09.

Systemic fragility is rooted in 9 key empirical trends: slowing real investment; a drift toward deflation; money, credit and liquidity explosion; rising levels of global debt; a shift to speculative financial investing; the restructuring of financial markets to reward capital incomes; the restricting of labor markets to lower wage incomes; the failure of Central Bank monetary policies; and the ineffectiveness of fiscal policies.

It results from financial, consumer, and government balance sheet fragilities exacerbating each other—creating a massive centripetal force disaggregating and tearing apart the whole, untamable by either fiscal or monetary means.

This book clarifies how the price system in general, and financial asset prices in particular, transform into fundamentally destabilizing forces under conditions of systemic fragility. It explains why the global system has in recent decades become dependent upon, and even addicted to, massive liquidity injections, and how fiscal policies have been counterproductive, exacerbating fragility and instability.
Policymakers’ failure to come to grips with how fundamental changes in the structure of the 21st century global capitalist economy—in particular in financial and labor market structures—make the global economy more systemically fragile can only propel it toward deeper instability and crises.

An appendix describes three equations that express in notational form the variables associated with the Theory of Systemic Fragility.

• Introduction: Fundamental Trends
• Chapter One: Forecasting Real and Financial Instability
• Chapter Two: The ‘Dead Cat Bounce’ Recovery
• Chapter Three: Emerging Markets’ Perfect Storm
• Chapter Four: Japan’s Perpetual Recession
• Chapter Five: Europe’s Chronic Stagnation
• Chapter Six: China: Bubbles, Bubbles, Debt and Troubles
• Chapter Seven: Slowing Real Investment
• Chapter Eight: Drift Toward Deflation
• Chapter Nine: Money, Credit and Exploding Liquidity
• Chapter Ten: Rising Global Debt
• Chapter Eleven: Shift Toward Financial Investment
• Chapter Twelve: Structural Change in Financial Markets
• Chapter Thirteen: Structural Change in Labor Markets
• Chapter Fourteen: Central Banks and Systemic Fragility
• Chapter Fifteen: Government Debt and Systemic Fragility
• Chapter Sixteen: Hybrid Keynesians and Retro Classicalists
• Chapter Seventeen: Mechanical Marxists
• Chapter Eighteen: The Contributions and Limits of Minsky
• Chapter Nineteen: A Theory of Systemic Fragility
• Appendix: Preliminary Equations


To read the Introductory Chapter, Chapter 11: ‘The Shift to Financial Asset Investing’, and the Extended Table of Contents, go to:


Click on the Icon for the book on this blog at the right, which will take you to the website and Paypal for ordering or for ordering from the publisher, Clarity Press.

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TO ACCESS, Download or LISTEN TO PART 2 of jack Rasmus’s Critique of TPP on the Alternative Visions radio show, Nov. 20, 2015 go to:


or to:


(Note: first half hour of this show comments on contemporary US and global economic issues: Japan’s 5th recession, coming US fed rate increase, Emerging Market economies massive private debt, United Health insurance company threat to pull out of Obamacare, new ‘tax inversions’ rule by US Treasury, and US rule to allow GMO salmon without labeling. TPP analysis begins second half of hour show).


Dr. Jack Rasmus looks in depth at Chapters 27-28 of the TPP and how they set up a new global corporate government. Why the TPP violates Article III of the US Constitution and how its signing on October 4 in Atlanta represents the ‘founding convention’ of a new form of global corporate government. Jack explains the new ‘legislative-executive’ body of the TPP ‘Commission’ and the new tribunal courts system and the danger they represent to existing representative government in the US and the 12 member countries. Jack critiques the claim of TPP supporters that it is a ‘living agreement’, asking if this means every time the TPP is changed as new countries join will the TPP have to be ‘ratified’ each time? If not, then corporations and bureaucrats running the Commission and Courts will change the TPP as they like. Other chapters are reviewed on trade in goods, investment, intellectual property, financial services, labor and environment. Jack challenges Obama’s claim that 18,000 tariff cuts will mean more exports and jobs for US workers, noting TPP provides no control over currency devaluations which will more than offset tariff reductions. TPP is about ensuring money and investment flows by US banks, IT, and services companies without limit. It protects big Pharma companies and removes opposition to US produced GMO products by big US Agribusiness. TPP means: more profit and sales for them and fewer jobs, lower wages, and destruction of representative Democracy for the rest.

Jack announces a new format for future shows: The first half of the show will identify critical global and US economic developments of the preceding week, followed by comments on the economic proposals and programs of US presidential candidates. The second half of the show will focus on interviews or presentations on a major feature of the US or global economy. Next week’s feature: ‘Why the Global Economy is Slowing and why the IMF, World Bank, and Central Banks Keep Under-Forecasting the Trend’.

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The following article by Dr. Jack Rasmus, appeared November 18, 2015, in teleSURtv media.

“The TPP agreement just recently released is a document of 5,554 pages. There are 30 separate chapters, not counting special ‘annexes’ and schedules. Then there’s a ‘secret guidance’ document, not yet released, which apparently even members of the US Senate still haven’t seen, according to US Senator, Jeff Sessions.

Of course, there are official executive summaries of the 5,554 pages, notably by the U.S. Trade Representative’s Office, and statements by President Obama. But readers won’t find out what the TPP is really about in these documents, which are designed to ‘market’ TPP to the public. In fact, these ‘for public consumption’ puff pieces are replete with misrepresentations, ‘spin’, and outright lies.

However, one statement by Obama is correct. He calls TPP “a new type of trade agreement”. It’s a new type all right.

The TPP is not simply an economic document, about trade in goods, services and, investor money capital flows. TPP is first and foremost a political document. TPP is the latest salvo fired by global corporations against national and popular sovereignty, against Democracy itself. The key to understanding how TPP is about global corporations setting up their own global government is contained in its Chapters 27 and 28.

In chapter 27, TPP provides for a new executive-legislative body whose decisions will usurp national and state-local legislative functions and representative democracy — already under serious attack everywhere by corporate money and other initiatives. And in chapter 28, TPP provides for a new kind of global corporate court system, run by corporate-friendly lawyers and hirelings who will make decisions which cannot be reviewed, appealed or challenged in existing court systems of any TPP member country. TPP ‘courts’ will take precedence over US and other national court systems, already under heavy attack by corporate forces vigorously promoting arbitration as a means by which to bypass the formal judicial system in the US.

TPP ‘Commission’ As Global Corporate Legislature-Executive Institution

Chapter 27 establishes a TPP Commission, composed of ministers or officials who oversee the operation of TPP and its future evolution. For the TPP is being called a ‘living agreement’, meaning it will change as new members join. What is not explained, however, is whether once it is ratified by Congress, will representatives get to ‘ratify’ each time it is changed? Or just once at the outset, thereafter allowing corporate lawyers, CEOs, and corporate-owned bureaucrats to change it anyway they please later?

According to TPP, the Commission members function as a kind of corporate global ‘Politburo’, a legislative committee of the Multinational Corporations of the TPP members, with yet to be defined accompanying executive powers. No separation of powers here.

More important, TPP is totally silent on questions like how will the Commission be determined? What are the terms of office of its members? Who chooses them and how? Can they be relieved and, if so, by whom and according to what process? To whom are they accountable? Can they meet in secret? What are the rules for decision making under which they’ll operate? The TPP is silent on all these questions. How convenient. Perhaps something addressing these questions exists in the mysterious ‘guidance document’ no one has seen yet. But don’t bet on it.

Most important, it appears the decisions by the Commission are not subject to review, let alone reversal, by Congress or any other existing government legislature. According to the US Congressional Record of November, 10, 2015 at least one US Senator has raised the warning that “we are empowering the TPP countries to create a new Congress of sorts” and a supra-national Commission that “will not be answerable to voters anywhere.”

TPP Korporate Kangaroo Kourts

But TPP proposes not only to negate existing government legislative and executive functions. It even more directly attacks existing judicial institutions and functions. Chapter 28 sets up an independent court system, or tribunals, which will make decisions that existing national Judicial systems cannot review or overturn. These tribunals are officially called ISDS panels, for ‘Investor-State Dispute System’, each of which is composed of three ‘trade’ and expert representatives. But once again, as in the case of the Commission, Investor-Corporate representatives selected by whom? How? For what terms? Representing whose interests? Etc.

Let’s call them what they are: ‘Korporate Kangaroo Kourts’, that will do most of their work in secret. TPP language allows them to conduct public hearings in public, but it also allows them the option to conduct hearings in total secrecy as well. Guess which they’ll prefer? TPP indicates KKKs may ‘consider’ requests from the public to provide written views—but consider does not mean ‘must’. It also says final reports will be available to the public—but that’s after their final decisions have been made. Furthermore, “the initial report will be confidential,” while the final report to the public is “subject to the protection of any confidential information in the report.” What’s finally released to the public will no doubt look like extensive ‘black outs’ in a typical US Freedom of Information Act request.

Here’s another problem: The ISDS-KKK courts allow corporations and investors to sue national governments—i.e. legislatures or executive regulatory agencies—that may try to pass laws or establish rules to protect workers, the environment, or whatever investors and corporations consider interfere with their ability to make profits under the TPP. The TPP suits will claim the US government violated the TPP treaty, even though the corporation’s dispute may in fact be between the Investor-Corporation and a state or local government.

This means technically that a corporation-investor that owns farmland in California, for example, can sue the state for imposing water rationing in the drought. That rationing would of course interfere with their profit making under TPP. Or how about a foreign owned restaurant chain in Los Angeles, which just passed a city ordnance calling for a $15 minimum wage? Under TPP, moreover, neither the state of California nor Los Angeles will be able to appear as a direct party to the TPP suit to defend itself, since disputes under TPP are restricted to the Corporation-Investor vs. the national government. So much for local democracy as well under TPP.

Corporate ‘Dual Power’ vs. Democracy

All governments exercise legislative, judicial, and executive functions. The TPP establishes on behalf of global corporations all the above. But TPP establishes those functions at the direct expense of existing government institutions, popular sovereignty, and the very idea of democratic representation. TPP’s Commission establishes a corporate pan-global legislature by corporate committee with unknown executive powers as well. Its KKKs clearly violate Article III of the US Constitution establishing an independent judiciary.

The signing of the TPP agreement in Atlanta, Georgia, on Oct. 4, 2015, represents in a sense the founding “Constitutional Convention” of global corporate government. For the economic Corporate Form has clearly ‘outrun’ the political Government Forms with which it has coexisted for the past two centuries.

All forms of revolution, they say, occur based on the emergence of ‘dual power’ and new sets of institutions attempting to replace the old. Chapters 27 and 28 of the TPP represent the seed of that emerging corporate dual power. So maybe its time for some new popular forms of ‘dual power’ to stop them as well.

Jack Rasmus is the author of ‘Systemic Fragility in the Global Economy’, 2015, now available at http://ClarityPress.com/Rasmus.html and at http://www.kyklosproductions.com

This content was originally published by teleSUR at the following address:
http://www.telesurtv.net/english/opinion/The-TPP-and-the-New-Global-Corporate-Government-20151118-0020.html”. If you intend to use it, please cite the source and provide a link to the original article. http://www.teleSURtv.net/english

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Listen to the first of Jack Rasmus’s two part analysis of the recently concluded TPP, Transpacific Partnership Free Trade Agreement, on the Alternative Visions Radio Show of November 14, 2015. (Tune in for part 2 on friday, November 20, 2015 at 3pm New York time, on the Progressive Radio Network, at: http://prn.fm/#axzz26hkFIP6s)

Access the podcast for the November 14, Alternative Visions show at:


or at:



Jack Rasmus undertakes the first of a two part deep examination of the terms and conditions of the actual TPP agreement recently concluded. The origins and true functions of free trade agreements is explained, beginning with the 1944 Bretton Woods international monetary system, the IMF, and World Bank established by the US, the role of trade in US global dominance to the 1970s, the restructuring of trade and money flows in the 1970s, and the advent of Neoliberalism in the 1980s under Reagan and Thatcher. How free trade became the international lynchpin of US neoliberal policies, beginning in the 1980s and expanding ever since under both Democrat and Republican administrations. Obama as the biggest advocate of Free Trade thus far is explained. Jack then begins a section by section analysis of the 30 chapters of the TPP, with an overview of provisions associated with ‘goods’ trade, investment, financial services, intellectual property and Pharmaceuticals, and the Disputes Settlement/Corporate Global Courts system section that will undermine domestic democracy and sovereignty and lead to a new drive for global corporate supra-political institutions. In Part 2 next week, further details of the 30 chapters, and reactions by labor, environmental advocates, food safety groups, and others will be reviewed—as well as reports by organizers of the Nov. 18 national US protests against the TPP.

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To listen to my analysis of the preliminary release of US GDP numbers for July-September 2015, listen to my Alternative Visions radio show of 10-20-15 on the Progressive Radio Network at:


or at:



Jack Rasmus looks beneath the surface of today’s announced preliminary figures for third quarter 2015 GDP, which slowed sharply at 1.5% from the previous quarter’s 3.9% official growth rate. Jack predicts the US economy is headed, once again, in early 2016 for another ‘relapse’ with US GDP collapsing to zero or near zero growth—for the fifth time of a single quarter collapse since 2011. The US economy is on a ‘stop-go’ trajectory of periodic single quarter ‘relapses’ followed by short, shallow recoveries. Jack notes a similar process globally has been occurring in Europe and Japan, where ‘recessions’ instead of ‘relapses’ occur. 3rd Quarter US data show problems in business spending on inventories, business structures and equipment investment. Problems in US manufacturing and exports continue and will worsen, he argues, and housing growth will remain tepid based on high end residences and apartments. Jack challenges claims by media and economists that US consumer spending will continue to prop up the US economy, citing recent negative wage growth, deflating prices, and rising household debt. Look for 4th quarter growth no better than third, then a ‘relapse’ in 2016 as the likely trajectory.

In the second half of the show, Rasmus discusses how US multinational corporations like Apple, Google, Starbucks and others manipulate global tax loopholes, how Wall St. manipulates the pharmaceutical companies, and how US consumers pay for pharma-bank profits and multinational corps taxes. Why politicians in office, and running, will do nothing about it—and pass even more tax cuts for US corporations after 2016 elections.

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(This article appeared in telesurtv.net 10-29-15 as ‘Pigs at the Corporate Tax Cut Trough’)

“A year ago, in November 2014, the US held elections for the US Congress. In an article for telesur that month this writer predicted the top two objectives of the new Congress in 2015 would be the Transpacific Partnership (TPP) free trade treaty and major tax cuts for US corporations. With the TPP agreement recently signed, the top priority of the US Congress is now more business tax cuts. Leading the charge are US multinational corporations (MNCs).

Since 2001, tax cuts have allowed US MNCs to keep trillions of dollars they should have otherwise paid in taxes. And that’s not counting additional hundreds of billions of dollars more in quasi-legal tax avoidance and outright illegal tax fraud.

One would think the issue of multinational corporate tax rip-offs would be at the top of the list in discussions and debates between presidential candidates of both US parties. But thus far hardly a word has been said by candidates, Clinton, Bush, Trump and the others. The one exception has been Bernie Sanders, who has raised the issue of corporate taxes in general, but has said little about multinational corporations specifically—i.e. the biggest pigs at the corporate tax cut trough.

It’s an election year and US MNCs are among the biggest election campaign money contributors to politicians running for office. So politicians of both parties will ‘blow smoke’, tell voters what they want to hear, and ‘take the corporate money and run’. After the elections, they’ll pass new laws giving US corporations in general, and MNCs in particular, even more tax cuts.

Here’s some interesting specifics about US corporations and the taxes they don’t pay:

• The US Government Accounting Office (hardly a radical source) estimated in 2013 that US corporations paid an effective (i.e. actual) federal tax rate of only 12.6% to the US government—not the official 35% that the media likes to report.

• That 12.6% effective rate in 2013 compares to what was once an effective rate of 33% in 1990 and 29% as recently as 2000, when nominal rates were 34% (1990) and 35% (2001).

• In 2013 US corporations paid another effective 2.2% to US states that levy income taxes in the US.

• US multinational corporations’ nominal rate paid to foreign governments is another 6% on average. But that number is a joke as well. US companies like Apple, Google, Starbucks, US oil companies, big pharmaceutical companies, and telecom companies manipulate dozens of loopholes in tax codes to end up paying on average no more than another 2% of that nominal 6% to foreign governments.

• As a result of paying 2%, US MNCs now hoard between $1.7 trillion and $2.1 trillion in cash in their offshore subsidiaries, refusing to bring the profits back to the US to invest there in order to avoid paying US taxes.
It’s not as if US corporations can’t afford to pay more. Corporate pre-tax profits in the US have tripled since 2001 and doubled since 2008, to $1.65 trillion in 2014. And that’s not counting the offshore cash hoarding; or another $1.35 trillion for non-corporate business profits. That’s $3 trillion in business profits in the US last year.

US multinational corporations have the best deal of all US corporations. They have ‘loopholes’ that allow them to pay even less total taxes on a global scale. For example, because they are located in many countries, they can manipulate their internal prices paid between their subsidiaries so that the profits end up recorded in the country with the lowest nominal rates. Favorite locations of US MNCs are Ireland, the Netherlands, and favorite tax haven islands like Bermuda and the Caymans in the Caribbean.

Their nominal rates are then reduced further by loopholes provided by those countries. Tax cut lawyers and corporate finance managers even joke about loopholes they call the ‘Dutch Sandwich’ in the Netherlands that allows them not to have to withhold taxes. Then there’s the ‘Double Irish’ in Ireland that allows them to cut their effective tax rates in half. Google Corporation in this way records all its foreign earnings through Ireland that it then routes through the Netherlands—that way creating a ‘Dutch Sandwich with a Double Irish’ to go. In one recent year, Apple Corp. saved $9 billion in taxes this way. It’s why they hardly pay more than a token 2% on their foreign earnings in taxes to foreign countries.

Surely US tax collectors know of all these manipulations by US MNCs. Yes, of course they do. And they not only allow but encourage the loopholes. Since 1995, under the Clinton administration and continuing under Bush and now Obama, the US government allows US MNCs to manipulate the tax loopholes without penalty. After 1995, all US MNCs have to do is ‘check the box’ on their corporate Internal Revenue Forms to indicate a foreign subsidiary of the corporation is what’s called a ‘disregarded entity’ for paying taxes. They then can activate the ‘Look Through’ loophole on their IRS forms to move profits between their offshore subsidiaries.

Then there’s the so-called ‘tax inversions’ gimmick that became public last year, which US pharmaceutical companies in particular have been manipulating. ‘Inversions’ is the corporate strategy of buying a small company offshore and then transferring the US corporation headquarters there on paper. That makes the MNC technically a foreign company and reduces its US taxes, especially if the purchase is made in Ireland, Bermuda, Luxembourg, Belgium, or elsewhere.

After a flurry of publicity and attention given to the spread of MNC ‘inversions’ in 2014, the Obama administration went silent on the issue of stopping inversions. Billions of dollars in inversion ‘deals’ have continued.
But what about the US foreign profits tax? Don’t US MNCs have to pay the US 35% corporate tax on offshore profits, called for by US law? No. Not if the law is not enforced, which it isn’t. That’s why they’ve accumulated their $1.7 trillion and $2.1 trillion cash hoard in their offshore subsidiaries.

Apple Corp. alone has stashed more than $150 billion offshore.
While US politicians and the Obama administration do nothing about the US MNCs constant ‘gaming’ of the global tax system, recently an initiative was launched in Europe to go after the Apples, Googles, Starbucks, Amazons, and other US MNCs to make them pay.

Last week Margrethe Vestager, an EU competition commissioner, declared US MNC loopholes amounted to “illegal forms of state aid”. Investigations have been launched into Apple, Amazon, Starbucks, and other US MNCs. More are coming. Not surprising, in response the US Treasury department of the Obama administration is protesting Vestager’s investigations. And the US Treasury says it may have to cut US taxes for Apple and others to compensate if Europe makes them pay more offshore. Meanwhile, Obama and Congress have re-introduced legislation to cut US MNC’s nominal and effective tax rates on offshore profits even further. So watch for US MNCs taxes to decline still further.

And what are the candidates for US president and Congress of both parties saying about all this? Nothing. But what can one expect from those who are receiving billions of corporate dollars today to fund their re-election campaigns.

Jack Rasmus is author of the forthcoming book, ‘Systemic Fragility in the Global Economy’, Clarity Press, December 2015. For more information, go to: http://www.kyklosproductions.com/homewar.html

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