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The totalitarian dystopia of the World Economic Forum is becoming reality

April 17, 2020 7 comments

from Norbert Häring

In January  2018, a pilot project for the surveillance of air travelers, commissioned by the World Economic Forum, was agreed upon in Davos. At the time, I presented the Known Traveller Digital Identity (KTDI) project as a “totalitarian dystopa”. A follow-up report shows that the multinational corporations are successfully involving governments and the EU in their plans. Covid-19 is speeding up implementation tremdendously and Bill Gates inadvertently lets us know how.

Like the 2018 report called „”The Known Traveller: Unlocking the potential of digital identity for secure and seamless travel“ this more technical KTDI White Paper that goes by the title “Known Traveller Digital Identity Specifications Guidance” was published without any fanfare on the Internet  in March. These reports, prepared by the consulting firm Accenture, are meant to be read only by people in the digital surveillance and security business. For understandable reasons, these people prefer to talk about digital identity rather than digital control or surveillance.

This is how the KTDI-scheme is supposed to work: We upload information about us into a database – or authorize others to do so. First of all, this should be a proof of identity from the authorities, but also our travel history, bank data, hotel accommodations, rental car bookings, documents from universities, government offices and much more. If we want to cross a border, we give the authorities access to this database in advance, so that they can see beforehand that we are harmless. Using facial recognition and our (ideally) biometrically linked smartphone, they can recognize us at the border crossing. If we have been diligent enough in providing data, we will be allowed to walk past the queues of other travellers, receiving preferential treatment and minimal checks. However, as it says in the first KTDI-report, if there should be any doubt as to a traveller’s intentions, the border official can, on the basis of the information provided in advance, ask the respective person more in-depth questions, for example „to better understand his recent activities”. Read more…

Problems of index fund capitalism

February 9, 2020 Leave a comment

fro Norbert Häring

If the trend of the last two decades continues, index funds could control 40 percent of the voting rights in the largest corporations by 2040.The share is already up to 25 percent in the US. There a two perspectives on this. Some scholars say it threatens shareholder value, others fear it will lead to too much of it. I side with the latter. …

Law-and-economics professors Lucian Bebchuk and Scott Hirst from the Universities of Harvard and Boston make the extrapolation of the index funds share in votes in their paper “The Specter of the Giant Three”.

The concentration of shares in an ever smaller number of fund companies is a trend that has started roughly 70 years ago. In 1960 only about six percent of US shares were held by capital management companies. This share has increased tenfold to 65 percent by 2017, according to Bebchuk and Hirst.

Index funds don’t select shares, actively, but instead replicate passively the composition of a stock market index with their assets, such as the DAX or the Standard & Poor’s 500 (S & P 500). The advantage for investors is that they do not have to pay fund managers and analysts to work on stock selection. Experience has shown that the majority of actively managed funds do not outperform index funds even before fees.

The Giant Three

Read more…

Anti-Cash-Alliance suffers setback in their home-town New York

January 27, 2020 2 comments

from Norbert Häring

The Better Than Cash Alliance (Visa, Mastercard, Citibank, Bill Gates, USAID) coordinates the global war against cash from New York. Now, the city council of the headquarters of the Alliance has decided to oblige all brick and mortar stores and restaurants to accept cash. The justification of the regulation is a low blow for the alliance’s financial inclusion propaganda.

According to a USA-Today report, retail stores, restaurants, and bars will have to accept cash in the future. The new regulation gets in the way of a program of credit card company Visa, which is paying restaurants for going completely cashless.

Visa is one of the founding members of the Better Than Cash Alliance, which aims to eliminate cash worldwide. The alliance is based in New York. With generous donations, it obtained office space from the United Nations Capital Development Fund (UNCDF) and now misleadingly calls itself a “UN-based organization”.  Read more…

How international corporations could be taxed, and why the US is working to prevent it

January 10, 2020 5 comments

from Norbert Häring

The OECD and the EU want to change international tax principles to curb tax evasion. The United States is opposed to the plans as they would affect its internet companies and other US multinationals.

The US has stepped up its fight against taxes on digital corporations. Shortly after President Donald Trump’s threat of special tariffs on French goods, US Treasury Secretary Steven Mnuchin asked all countries in early December to abandon similar plans for taxes that would hit US internet corporations in particular. In a letter to the industrialized country organization OECD, Mnuchin stated that an agreement should instead be reached at the OECD level. At the same time, however, he warned of changes to the taxation right, which this same OECD has been planning to introduce. These could damage established pillars of the international tax system, he wrote.

The US is thus questioning the OECD’s plan to curb rampant tax avoidance by international corporations and also low-tax competition by national governments. To this end, the OECD wants to change long established principles of international taxation rights, if possible by 2020. Read more…

What the German government must do now to turn around an unsustainable economy

August 18, 2019 13 comments

from Norbert Häring

Germany’s economic output contracted in the second quarter and most indications point to a worsening in the third quarter, which is just halfway through. The culprit is only superficially Donald Trump with his trade wars. The German economy has been on an unsustainable path in several respects. Now the government is called upon to act courageously and intelligently to ensure that a deep restructuring crisis is avoided.

The German success model was not sustainable because it ignored the limits of the rest of the world’s ability to borrow money to pay for German exports and because it omits the fact that we are already very close to the limits of the ecological resilience of our planet.

As far as economic limits are concerned: In the long run it is not feasible that, in addition to China’s massive economic expansion through exports, rich Germany also tries to increase its prosperity through exports and frugality, resulting every year in a huge trade surplus. The counterpart to the export successes of these two nations is that the rest of the world is building up ever higher foreign debt. The longer this continues, the more countries will reach their debt limits and will no longer want or be able to participate in this game. If Trump hadn’t stood his ground, sooner or later others would have. Or simply more and more nations – including EU countries – would have descended into crises and would no longer have been able to buy German exports. Read more…

European Court of Justice to decide if public institutions have a right to refuse cash

March 30, 2019 2 comments

from Norbert Häring

On 27 March, the highest administrative court in Germany, the Bundesverwaltungsgericht, has referred my case to the European Court of Justice (ECJ) in Luxembourg. I have insisted to pay my legally required contributions to public radio and TV with the legal tender, euro cash. This is not possible according to their regulations. The Bundesverwaltungsgericht has ruled that there is indeed a requirement for all public institutions to accept cash based on §14 of the Bundesbank Act, which makes euro-banknotes legal tender. However, they will ask the ECJ to clarify, if this law is in agreement with higher ranking European law.

§14 Paragraph 1 Sentence 2 of the Bundesbank Act says:

“Banknotes denominated in euro shall be the sole unrestricted legal tender.”

Article 128 Paragraph 1 Sentence 3 of the Treaty on the Functioning of the European Union (TFEU) reads:

“The banknotes issued by the European Central Bank and the national central banks shall be the only such notes to have the status of legal tender within the Union.”

Read more…

How monetary union is sacrificed on the altar of competitiveness

January 25, 2019 4 comments

from Norbert Häring

European Economic & Monetary Union (EMU) is in permanent crisis. The economic strengths of the participating nations are drifting apart instead of converging. This creates great frustration among the governments of countries being left behind and fierce disputes between them and Brussels and governments of core countries.

The currency union was based on the premise that the economic structures and levels of prosperity among the members of the union would converge. The poorer countries would catch up. That didn’t happen. On the contrary. Philipp Heimberger from the Vienna Institute for International Economic Studies (WIIW) warned in his analysis of October 2018:

“The most significant long-term risk of disintegration for the euro area is the existing polarisation in the production structures of ‘core’ countries and southern ‘periphery’ countries.”

While the German economy grew by 27 percent and the Austrian by as much as 33 percent between the beginning of monetary union in 1999 and 2017, Italy’s grew by a modest six percent and Portugal’s by 12 percent.  In Greece, gross domestic product in 2017, adjusted for inflation, was at the same level as 19 years earlier. While the share of German industry in value-added remained almost stable at a high level, it fell sharply in the periphery countries.  Read more…

A leading economist who took Uber’s money and delivered favorable results sees his reputation tarnished

November 15, 2018 3 comments

from Norbert Häring

A year ago, I described how the controversial and well-financed ride-hauling platform Uber pays economists with data and money to do Uber-related research. This research invariably leads to favourable results, which can be used to fend off criticism and regulation. One such study has now been ripped apart in the Industrial & Labor Relations Review (ILR), a top journal in labor-economics.

Two fearless economists, Janine Berg, senior-economist at the International Labor Organisation (ILO), and doctoral candidate Hannah Johnston submitted an extremely critical comment on a paper by Uber’s chief economist Jonathan Hall and Princeton economist Alan Krueger, which portrayed Uber as a good company to work for and its “driver-partners” as very satisfied and earning good money. The comment recently appeared in ILR, the same journal in which the Hall-Krueger paper had appeared. Notably, there is no reply by Krueger.

While I cannot be specific about the history of this comment, for fear of legal complications, I judge it as almost a miracle that it made it into the journal, despite strong adverse winds. The elephant in the room could not be mentioned in that article, though: the strong conflict of interest that arises if an Uber-employee and a prominent economist on an Uber consultancy-contract use confidential Uber-data to research an issue in which Uber has an elementary business interest. This omission is not surprising: at the time of my critical report, the editor in chief of ILR had also declined to talk about this issue, insisting on keeping the discussion to the substantive arguments.  Read more…

Demonetisation in India was a great success – for the Better Than Cash Alliance

November 10, 2018 3 comments

from Norbert Häring

Two years ago, on 8 November 2016 at 8 pm, prime minister Narendra Modi declared most cash in India demonetised, starting a period of several months of severe cash shortage, which imposed a lot of hardship and suffering on the people. The National Herald India invited me to write a guest-comment on the occasion.

I have been invited to write a comment on the ‘failure’ of the Demonetisation exercise of Prime Minister Modi. True, it was an obvious failure if you judge it by its declared objective of fighting corruption, terrorism funding and tax dodging. Almost all the demonetised banknotes were deposited in banks and thus re-inserted into the legal economy. It was a failure also if judged by the secondary goal of promoting financial inclusion. Rather than helping the poor by giving them access to modern means of savings and payment options, demonetisation disproportionately hurt the poor, as they were robbed of the free means of payment that they used to have at their disposal: cash and which was working well for them. Those well integrated into a social web of support found ways to cope. Those at the margin of society, like migrant workers, suffered tremendously from being temporarily excluded from participation in the monetary economy.

It would be unthinkable for a US-government to take most of the cash out of circulation at four hours’ notice. If it is done in India to Indian people, however, it is alright!  Read more…

Brave New Money: The trend toward a digital world currency – part 2

August 28, 2018 3 comments

from Norbert Häring                                                                                              part 1

The winner takes all is a basic rule of the digital economy. Whoever is ahead has a large advantage, just from being ahead, and has a good chance to end up as a quasi-monopolist. This has two main reasons, called network effects and economies of scale. Network effects make digital services more attractive, if more people use them. This is true for social media or trading platforms as well as for computer programs like Word or Windows. Economies of scale arise, because once a digital service or a programme has been developed, it often costs next to nothing to provide it to more customers. Thus, the leader, who has the most customers, can offer the most attractive digital services at the lowest cost. This is the reason why Google, Amazon, Apple, Microsoft and Facebook have risen to the top of the league of the most valuable American companies within only a few years. Together with their Chinese look-alikes Alibaba, Baidu and Tencent hold the global top-spots. They all have a near-monopoly in their industry and can command very high profit margins.

The winner takes all applies also to money in a digitalized and globalized environment. Digital money can be produced at near-zero cost, and its utility increases with the number of users. What is in the way for one currency to gain a near-monopoly is only the desire of national governments to have their own currency and their power to enforce its usage at home. This power of national governments, however, might wane in an era of globalized digital commerce.   Read more…

Brave new money: PayPal, WeChat, Amazon Go – A totalitarian world currency in the making – Part I

August 23, 2018 9 comments

from Norbert Häring

My book in German with the translated title: “Brave New Money: PayPal, WeChat, Amazon Go – A Totalitarian World Currency in the Making” has just been published by Campus. I have tanslated the “Introduction and Overview” and part of Chapter 1. I will publish this translation in two parts over the next few days. This is part 1.

The future of payments has arrived in early 2018, when the first Amazon Go store opened its gates for the general public in Seattle. If you shop there, you will not have to queue at the cash register. There is none, thanks to – as Amazon calls it – the most modern shopping technology. You just download an app and sign on before entering the store. Then you freely take everything you want from the shelves and put it into your shopping bag – or put it back on the shelf, if you change your mind. When you are satisfied with what you’ve got, just leave the store, unencumbered by cashiers or shop detectives. Amazon’s surveillance apparatus has followed you around the store and registered your every move. Shortly after you have left the store, you will get a bill on your smartphone and the money will be taken from your account.

Shopping cannot be any easier than this. The activity of paying is eliminated in this consumerist utopia that is just becoming reality. Without your involvement, you will be rid of your money. You don’t even have to take out a card, give a signature or swipe your smartphone. The seller and the person who manages your money are merging. This is there we are headed, not just in Amazon Go stores. In the future of payments, all convenience will be on our side, all the power will be with the other side.  Read more…

CEPR vs. NBER: Two approaches for dealing with false research in favor of tuition fees

February 23, 2018 5 comments

from Norbert Häring

For international readers, I would like to summarize a piece on false economic research supporting tuition fees, which appeared in German in Handelsblatt on 19 February. As interesting as the fake research itself is the differing reactions of the two main channels, which had been used to publicize it: One was the prestigious Working Paper series of the National Bureau of Economic Research in the US The other was the well-read platform Vox (voxeu.org) of the London-based Centre for Economic Policy Research.

Britain started to impose tuition fees starting in 1998. From 1000 GBP, at first just for the wealthier students, the fees went up steeply to 9250 GBP for all students today. On average, graduates leave university with about 50.000 GBP in debt. With Jeremy Corbyn rather successfully campaigning against tuition fees and one of the architects of the current system, former Blair advisor Andrew Adonis demanding its abolition, the system has come under fire in Britain. The same is true for the US. Critics assume that there is a deterring effect of high tuition fees on young people from disadvantaged households.

A surprising finding   Read more…

George Soros’ INET, the Trojan horse of the financial oligarchy

February 7, 2018 10 comments

from Norbert Häring

Four years ago, I framed it as a question: “George Soros‘ INET: An institute to improve the world or a Trojan horse of the financial oligarchy?” Today I would not use a question mark any more.Frances Coppola came to a similiar conclusion after attending the big INET gathering in Edingburgh in October.

On her blog Coppola reports about the conference of the Institute for New Economic Thinking, bankrolled initially by George Soros. He was joined by other hedge fund managers to provide this institute with extremely lavish funds. Do read Coppola’s entertaining conference review in the original, if you have time.

She reports of “panel after panel of old white men discussing economic theories developed by old white men, many of them dead. Economic beliefs that I thought had been comprehensively debunked have reappeared, dressed up as “new thinking”.” No new voices, no exiting ideas. She gets agitated about the gender issue, and understandably so. “When a young female attendee pointed out that there were 84 white male speakers at the conference, 14 women and 9 people of colour, and called for INET to be more inclusive, the audience applauded. But the panel went quiet. Her comment was not even acknowledged.” Read more…

The curious silence of the British media regarding Mark Carney and the secretive G30

January 25, 2018 1 comment

from Norbert Häring

The governor of the Bank of England, Mark Carney has at least two things in common with Mario Draghi, the president of the European Central Bank (ECB): He worked for Goldman Sachs before becoming a central banker, and he is a member of the Group of Thirty. The EU-Ombudsman has just called it maladministration on the part of the ECB to let Mario Draghi be a member of that secretive bankers’ club. This should invite the question: What about Mark Carney and the Bank of England? The British press, apparently, couldn’t care less.

The Financial Times dutifully reports that “An EU watchdog wants the European Central Bank to ban Mario Draghi, its president, and other senior officials from an exclusive club of global financiers, saying the links could erode belief in the institution’s independence and quotes Ombudsman Emily O’Reilly writing:

The implied closeness of the relationship through membership — particularly between a supervising bank and those it supervises — is not compatible with the independence obligation of an institution such as the ECB, for which independence is a hallmark of its operations.

The Guardian reports similiarly and notes that  Read more…

The curious silence of the British media regarding Mark Carney and the secretive G30

January 22, 2018 4 comments

from Norbert Häring

The governor of the Bank of England, Mark Carney has at least two things in common with Mario Draghi, the president of the European Central Bank (ECB): He worked for Goldman Sachs before becoming a central banker, and he is a member of the Group of Thirty. The EU-Ombudsman has just called it maladministration on the part of the ECB to let Mario Draghi be a member of that secretive bankers’ club. This should invite the question: What about Mark Carney and the Bank of England? The British press, apparently, couldn’t care less.

The Financial Times dutifully reports that “An EU watchdog wants the European Central Bank to ban Mario Draghi, its president, and other senior officials from an exclusive club of global financiers, saying the links could erode belief in the institution’s independence and quotes Ombudsman Emily O’Reilly writing:

The implied closeness of the relationship through membership — particularly between a supervising bank and those it supervises — is not compatible with the independence obligation of an institution such as the ECB, for which independence is a hallmark of its operations.

The Guardian reports similiarly and notes that  Read more…

How Uber money dominates and distorts economic research on ride-hailing platforms

December 9, 2017 4 comments

from Norbert Häring

“The text has been changed on the weblog from which it had been

> crossposted. Please go to

> http://norberthaering.de/en/32-english/news/920-uber-research for a

> current version with change notices.

> Thank you.”

 

How does Germany’s Monopolies Commission combat market concentration? By making sure that no good data is available.

November 23, 2017 4 comments

from Norbert Häring

How many companies have merged into corporate groups in Germany? We don’t know. The official figures are completely unconvincing. We have a Monopolies Commission which, together with the German Federal Statistical Office, has the legal mandate to monitor market concentration. Germany’s parliament wanted to ensure that the necessary information about the possible emergence of problematic market power is available, only to discover this no longer fits in with the neoliberal ideology inspired by the Chicago School, which has apparently become the ruling ideology at Germany’s Monopolies Commission.

The figures presented by the Monopolies Commission and the Federal Statistical Office appear unreliable. According to the Commission’s main 2008 report, more than 500,000 companies were part of corporate groups in 2003. Following a parliamentary question by the Left Party (die Linke) in the Bundestag the Federal Government recently compiled data from the Federal Statistical Office for the period from 2005 to 2017 concerning the number of corporate groups. According to this study, the number of merged companies in 2005 was surprisingly only one-third as high as in 2003, and the number of corporate groups was 75% less than two years previously. Over the following years there was a clear increase, although with strong fluctuations.

Read more…

Bundesbank rejects 100%-money based on sophistry and false claims

May 16, 2017 7 comments

from Norbert Häring

In its April monthly report, Deutsche Bundesbank explains that banks create money ex-nihilo and rejects the proposal of 100%-money. The full English version is now online. The arguments employed to discredit 100%-money are a mix of sophistry and misleading or false statements.

With some delay, Bundesbank has joined the Bank of England in explicitly stating that the treatment of banks and money creation in most textbooks is wrong and that banks are not intermediaries, transferring money from savers to investors, but rather creators of money.

A key statement is this:

Sight deposits are created when a bank grants a credit or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry. This refutes a popular misconception that banks act simply as intermediaries at the time of lending – ie that banks can only grant credit using funds placed with them previously as deposits by other customers.

All the explanations are impeccable, albeit framed in a way that is very friendly toward the interests of commercial banks. The Bundesbank is stressing the “services” that banks provide. It does not even mention the benefits, which banks derive from their extraordinary privilege of having their short-term debt instruments treated as money.

Still, overall the article is a welcome attempt to bring knowledge and sanity back into the treatment of money.

The Annex titled “Remarks on a 100% reserve requirement for sight deposits”, however, is quite disappointing.   Read more…

Bundesbank corrects textbook mistakes on money creation, rejects 100%-money

May 11, 2017 34 comments

from Norbert Häring

In the April-edition of their monthly report, the Bundesbank has belatedly joined the Bank of England in explicitly stating that the treatment of banks and money creation in most textbooks is wrong: banks are not intermediaries; they create money ex-nihilo. This helps the Bundesbank to reject criticism that central banks are currently “printing” too much money. At the same time, the Bundesbank rejects the proposal of 100%-money, i.e. bank deposits fully backed by central bank money.

So far, the Bundesbank has only published an English summary of the article “How money is created”, originally written in German (and a French summary). Once the article is available in full translation, I will write a bit more about the (mostly faulty) arguments of the Bundesbank against 100%-money.

The most important sentences regarding money creation are already there in the summary, though:

The majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank grants a credit or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry. This refutes a popular misconception that banks act simply as intermediaries at the time of lending – ie that banks can only grant credit using funds placed with them previously as deposits by other customers.

IMF tells governments how to subvert public resistance against elimination of cash

April 7, 2017 2 comments

from Norbert Häring

The International Monetary Fund (IMF) in Washington has published a Working Paper on “de-cashing”. It gives advice to governments who want to abolish cash against the will of their citizenry. Move slowly, start with harmless seeming measures, is part of that advice.

In “The Macroeconomics of De-Cashing”, IMF-Analyst Alexei Kireyev recommends in his conclusions:

Although some countries most likely will de-cash in a few years, going completely cashless should be phased in steps. The de-cashing process could build on the initial and largely uncontested steps, such as the phasing out of large denomination bills, the placement of ceilings on cash transactions, and the reporting of cash moves across the borders. Further steps could include creating economic incentives to reduce the use of cash in transactions, simplifying the opening and use of transferrable deposits, and further computerizing the financial system. 

The private sector led de-cashing seems preferable to the public sector led decashing. The former seems almost entirely benign (e.g., more use of mobile phones to pay for coffee), but still needs policy adaptation. The latter seems more questionable, and people may have valid objections to it. De-cashing of either kind leaves both individuals and states more vulnerable to disruptions, ranging from power outages to hacks to cyberwarfare. In any case, the tempting attempts to impose de-cashing by a decree should be avoided, given the popular personal attachment to cash. A targeted outreach program is needed to alleviate suspicions related to de-cashing; in particular, that by de-cashing the authorities are trying to control all aspects of peoples’ lives, including their use of money, or push personal savings into banks. The de-cashing process would acquire more traction if it were based on individual consumer choice and cost-benefits considerations.

Note, that the author is not talking about unreasonable objections and imagined disadvantages: He does count it among the advantages of de-cashing in the very next paragraph that personal savings are pushed into banks and he also does count total control of all aspects of financial life under the pros, as in the last sentence of the last quote below.   Read more…