an autodidact meets a dilettante…

‘Rise above yourself and grasp the world’ Archimedes – attribution

Posts Tagged ‘finance

the boy in the white palace 5: empêchement? sûrement pas, and farewell

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Canto: As we ghouls await the kind of ritual massacre in the USA we’ve been primed for by watching Korean historical dramas, we of course recognise that the current laughing-stock status of that once-proud nation – admitted by a number of American analysts – is really serious stuff. However…

Jacinta: Indeed there are many howevers…

Canto: You do it it yourselves, you do, and that’s what really hurts. Take impeachment – a funny word, actually adapted from the French by the English. An empêchement, from the verb empêcher, to prevent, has in modern French a very everyday meaning, i.e. something that stops you from doing something, but it was first used by the English as a (somewhat ill-defined) politico-legal process way back in the 14th century. It remains just as ill-defined to this day, inhabiting a distinctly grey area between politics and the law. 

Jacinta: In those countries that have had the misfortune to adopt this horribly tainted and, IMHO, worthless procedure, it’s inevitably bound up with that nation’s Constitution – and considering that most national constitutions are creaky with age, impeachment suffers from the same creakiness. 

Canto: A kind of highly formalised shemozzle. It’s wholly obsolete in the UK, being surplus to requirements, and has never been a thing in Australia. For crimes, of course, we have this thing called law, and if a Prime Minister goes rogue, without quite doing anything he can be arrested for, she gets dropped as the team’s captain, and, depending on how rogue she goes, is either consigned to another place in the team or is dropped from the team altogether. Then the team selects another PM. And it’s not a particularly traumatic event, because the PM isn’t a quasi-king with his own white palace and swathe of courtiers and princeling-in-waiting. 

Jacinta: I don’t know whether there’s any point trying to convince Americans of the rottenness of GASP – the Great American System of the Presidency. I suspect they’re rather brainwashed about the beauty and perfection of it all. Rarely do I hear any American ‘expert’ speak critically about GASP, in spite of their intelligence in other areas. It’s a frog-in-the-heating-pan sort of thing.

Canto: Yes, to do away with impeachment means to do away with the super-powers of the Leader, which have actually, I think, led to the boy-king’s cult following. Do away with the superpowers, distribute the powers, thus diluted into ordinary human powers, throughout the principal players of the team, and sharpen up the laws on emoluments, campaign finances and influence peddling, and you might just start getting back to something like a real democracy.

Jacinta: This boy-king is, very obviously to all outside observers, a crime machine. The financial morass of his self-interest takes us to Russia, Turkey, Kazakhstan, Saudi Arabia, Azerbaijan, Israel, China, Indonesia and twenty-odd other countries large and small, and common garden corruption is to be found in all these dealings, because that’s all he understands, insofar as he understands anything. The cult following of his ‘base’ is all the more tragic when it’s clear that he despises them all and loves them only as dupes. He would immediately have anyone resembling these workers thrown out of his mar-a-lago shangri-la because he’s only ever comfortable with crooked rich people. But his success is, of course, the USA’s failure, and that is a vast thing. I don’t want to see the USA fail, but I would only want it to succeed from this point through a massive, soul-searching transformation. Not only of its presidential system – and I’m not sure if that system deserves to survive at all – but of its economic system and its criminal justice system. Currently, the USA is a global disgrace and deserves to be. And it will get worse – which will perhaps be a blessing in disguise. It may have to get worse for the transformation to be as fulsome as it needs to be. That, I think, is why we’re watching with such gruesome attentiveness. But I’m not confident that too many lessons will have been learned when we examine political America in five years’ time. The country won’t ‘come together’. It won’t start to rank higher on the Better Life Index. The third world poverty, disadvantage and despair in vast regions of the country won’t be alleviated, and it will continue to call itself the greatest nation on Earth, the leader of the free world, home of the brave and other nationalistic twaddle. And it will continue to be at war with itself while it bullies other nations, as powerful nations inevitably do.

Canto: Yes, we’re getting tired of watching, and maybe we should turn to other things, more positive stuff like science and solutions, heros and sheros, nice, positive go-getters who strive to make the world better and shame us, in the best possible way, with their energetic example. Adios little boy-king, may you finally get what you deserve, and may a chastened nation get out from under…

Written by stewart henderson

November 11, 2019 at 12:20 pm

getting roolly rich in the USA 1: Jeffrey Epstein

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Epstein’s two islands in the Caribbean – Little St James is immediately below the Great one

The Jeffrey Epstein case, in terms of women, girls and exploitation, is something I’m far too squeamish to explore, and of course it’s very very sad and disgusting, but my interest was also piqued by the news that he was/is a hedge fund manager (but maybe not), with mansions and an island and oodles of moolah to invest in all sorts of science projects. This raised many questions. Was he obnoxiously rich to begin with, like little Donny Trump? And what is a hedge fund, and can you legitimately make millions from one?

I’ve never been rich and I’ve never invested in anything, unless you call giving money to Oxfam or UNHCR an investment, so I’m really starting from scratch here. The first definition I’ve found is that a hedge fund is ‘an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital’. So, if this is true, why invest ‘offshore’, and how are you able to do this with money you don’t really have or haven’t earned? I suspect I won’t find easy answers to these questions. The website Investopedia (which sounds immediately suss!) starts with another definition: ‘Hedge funds are alternative investments (?!) using pooled funds that employ different strategies to earn active return, or alpha, for their investors’. Alpha! What a lovely musical note that hits for investors (especially combined with ‘male’). But the mention of pooled funds (e.g. mutual funds and pension funds, as well as hedge funds) might explain how you can make money even if you have little personally to invest. Investopedia also tells us that hedge funds ‘are generally only accessible to accredited investors’, because they’re less regulated than other funds. And we all know that the wealthy are very very keen to have less regulation and oversight than what the Yanks call ‘regular folks’

However, it does seem that, to be an ‘accredited investor’, it helps to be already rich. The term applies to financial institutions such as ‘investment banks’ and corporations as well as individuals. Needless to say, this is a world of which I know absolutely nothing. All I’ve really heard about it is negative – high rollers, corruption, anti-government arrogance and the like – which says much about where I get my information from. Even so, the most objective analysis raises questions – for example, the Australian Corporations Act of 2001 ‘defines “sophisticated investor” [basically synonymous with ‘accredited investor’] so as to exclude them from certain disclosure requirements.’ That rings alarm bells for me – you’d think that these heavy investors would be the last people to be excluded from disclosure. The Act also says that such investors require an accountant’s certificate to the effect that they have a minimum of $2.5 million in net assets or a gross income of $250,000 over each of the previous two years. Presumably they’re not asked about how they acquired such income/assets. And the financial bar is considerably lower in the USA.

Hedge funds have grown in popularity, and as a proportion of the asset management field, over the years. After the GFC of 2007-8 there was an attempt (probably feeble) to rein in the sector. The essential hedge fund strategy (think ‘hedging your bets’) is to receive a positive return regardless of bear or bull markets, by spreading the risk in some clever non-risky way. If you get to be a hedge fund manager (which some reports have claimed Epstein to be, though Wikipedia doesn’t mention this in a fairly comprehensive bio) you get to keep a certain percentage of invested funds for yourself – generally a management fee (maybe 2% of assets) and a performance fee (a substantial percentage of any annual increase in net asset value). You can see how disclosure is essential in payment of such fees, and why the temptation to cook the books would be high.

Epstein seems to have ‘risen’ from humble beginnings. His mother was a ‘homemaker’ and one-time school aide, and his father was a groundsman and gardener, yet Epstein is described, at various periods in his career from the early eighties, as an options trader, a financial consultant, a limited partner (at the dodgy investment bank Bear Stearns), a finance manager and other such vagueries – all despite a patchy scholastic record (but as an autodidact and dilettante I certainly don’t hold that against him). However, one very interesting item stands out….

Back in the eighties, Epstein became an associate of one Steven Hoffenberg, who hired him as a consultant for his company, Tower Financial Corporation (TFC). Epstein was paid $25,000 a month, which to me is an absurdly huge amount for anyone to be paid, though in this world it’s probably peanuts. Even before joining TFC (a collection agency that bought up other people’s debts – and if you think that’s dodgy, read on), Epstein had been bruiting it about among the crooked rich that he was a ‘high-level bounty hunter’, sometimes working for governments or the super-rich to recover embezzled funds, sometimes working for clients to secure embezzled funds. He and Hoffenberg became very close, flying around the world to do their dodgy deals, done not so dirt cheap, but in 1993 TFC collapsed and was exposed as one of the biggest Ponzi schemes in US history, with some $475 million of investor funds vanishing. Epstein, though, had already left the company and managed to escape without charge. Hoffenberg was sentenced to 20 years’ jail, and has always claimed that Epstein was intimately involved in the scheme. In fact, Wikipedia’s brief entry on Hoffenberg ends with this fascinating line:

In July 2019, he claimed that the American financier Jeffrey Epstein was his co-conspirator in the Ponzi scheme.

That’s right now, folks. Presumably he has the evidence for that – so why wasn’t Epstein prosecuted way back then?

Anyway, it appears, surprise surprise, that Epstein’s criminality isn’t restricted to his treatment of the opposite sex, which makes you wonder how many super-rich types who don’t draw attention to themselves vis-a-vis sexual exploitation can be shown to be criminals. And how is it possible to buy what is presumably an American island to use as a tax haven?

Tax havens are always described as ‘offshore’. That’s to say, not a part of the country in which you want to avoid paying taxes. The US site Investopedia underlines its dodginess by providing plenty of info on tax havens (hey man, we’re just tellin’ stuff, not selling’ stuff, I mean, peace off man), as well as providing a list which includes the British (but not the US) Virgin Islands. Epstein owns two of the US Virgin Islands, Great Saint James and Little Saint James, where he has one of his mansions. Great Saint James cost him $18 million in 2016, pretty cheap for an island I would’ve thought, and I can’t find the price he paid for Little Saint James back in 1998. This tiny island was his principal centre of sexploitation, aka Orgy Island by the cognoscenti.

The USA has an international reputation as a bad actor in respect of tax disclosure. With monumental hypocrisy, it implemented the Foreign Account Tax Compliance Act in 2010, requiring or ‘forcing’ (dog knows how) financial firms everywhere in the world to report accounts held by US citizens to their IRS, while at the same time refusing to comply with the OECD’s Common Reporting Standard – the only major nation to do so. To be clear about this the USA demands that other countries share information about US citizens’ offshore dealings, but refuses to share the same information with those countries about foreign investment in the USA. As a result, the USA is arguably now the world’s biggest tax haven. How this works exactly for US citizens like Epstein I’m not sure at this point, but the USA has become, especially over the last decade, one of the easiest places in the world for successful tax evasion, especially through the use of LLCs or shell companies. We’re finding this out through examination of Trump’s criminal activities, but of course I’m far from understanding the detailed nature of LLCs, offshore trusts and the like. I need to lern more.

I’ll end this piece – almost – with a quote from an organisation and site that’s the polar opposite of Investopedia, the Tax Justice Network:

The United States, which has for decades hosted vast stocks of financial and other wealth under conditions of considerable secrecy, has moved up from sixth to third place in our index. It is more of a cause for concern than any other individual country – because of both the size of its offshore sector, and also its rather recalcitrant attitude to international co-operation and reform. Though the U.S. has been a pioneer in defending itself from foreign secrecy jurisdictions, aggressively taking on the Swiss banking establishment and setting up its technically quite strong Foreign Account Tax Compliance Act (FATCA) – it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction at both the Federal and state levels.

Of course, none of this clearly explains how Epstein ill-got the wealth to be tax-liable in the first place. Certainly the Ponzi scheme he seems to have gotten away with was one, possibly the main, source, but he seems even before this to have ingratiated himself into the world of dodgy financial entities and personae, presumably through schmoozing and force of personality. Certainly his relationship with Ghislaine Maxwell, daughter of that supremo of repugnant dodginess, Robert Maxwell, is an indication of the world Epstein had become familiar with, a world in which everyone is advising everyone else on how to make money out of nothing and how to retain as much of that money as possible, regardless of anything so inconvenient as the law.

References

https://en.wikipedia.org/wiki/Jeffrey_Epstein

https://en.wikipedia.org/wiki/Hedge_fund

https://www.investopedia.com/terms/h/hedgefund.asp

https://www.investopedia.com/terms/p/ponzischeme.asp

https://en.wikipedia.org/wiki/United_States_as_a_tax_haven

https://www.investopedia.com/terms/t/taxhaven.asp

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https://en.wikipedia.org/wiki/Robert_Maxwell

Written by stewart henderson

July 21, 2019 at 2:14 pm