Tag Archives: IMF

Brown snubbed over tax

From

Jonathan Oliver and Bojan Pancevski

GORDON BROWN’S carefully laid plans for a G20 deal on worldwide tax cuts have been scuppered by an eve-of-summit ambush by European leaders. Angela Merkel, the German chancellor, last night led the assault on the prime minister’s “global new deal” for a $2 trillion-plus fiscal stimulus to end the recession. “I will not let anyone tell me that we must spend more money,” she said. The Spanish finance minister, Pedro Solbes, also dismissed new cash being pledged at Thursday’s London summit.

“In these conditions I and the rest of my colleagues from the eurozone believe there is no room for new fiscal stimulus plans,” he said.

Nicolas Sarkozy, the French president, has insisted that “radical reform” of capitalism is more important than tax cutting.

The attacks on Brown’s ambitions for the G20 to inject more money into the world economy come at the end of a week where the prime minister has travelled to three continents to build support for his proposals.

The likely deadlock at this week’s meeting will kill any remaining hope that Alistair Darling’s April 22 budget will offer significant tax cuts.

The assault by European Union leaders also represents a defeat for President Barack Obama, who is desperate for other big economies to copy his $800 billion stimulus plan.

“There will be a very long communiqué, but there won’t be much in it,” said a Washington economist.

Adding to the disarray, a draft of the agreement Brown hopes to secure was leaked to a German news magazine, prompting suggestions of “dirty tricks” by Berlin.

The draft stated that Britain wanted a “$2 trillion” global fiscal stimulus. However, the figure appeared only in brackets, indicating agreement on the package had yet to be reached.

The stimulus would boost world growth by 2% and employment by 19m, the draft said. The rest of the document was mainly general pledges.

“We believe that an open world economy, based on the principles of the market, effective regulation and strong global institutions, can ensure sustainable globalisation with rising well-being for all,” it said.

A No 10 source expressed “disappointment” at the leak and insisted the $2 trillion figure was not new money but an expression of the total tax and spending packages already pledged by G20 members.

Privately, government officials admit that no further fiscal stimulus will be announced this week, although there will be a $250 billion package for the International Monetary Fund to help rescue struggling poor nations.

Lord Mandelson, the business secretary, said he sympathised with the concerns of demonstrators planning to disrupt the London summit. “There is understandable frustration and some anger. The global economic systems has stalled and what we have got to do is get it started.”

George Osborne, the shadow chancellor, yesterday warned Brown against further tax cuts in the budget. “When it comes to your plans for a second fiscal stimulus, I say this Gordon Brown: enough is enough,” he said in a speech. “We will not let you play roulette with the public finances yet again.”

UK officials have not given up on the idea there could be agreement on a fresh boost for the world economy later in the year. “It is likely that there will be another heads of government meeting probably in Asia in the autumn,” said an official.

“This will be the forum where the next round of stimulus will be discussed.”

Brown still hopes to establish the IMF as an informal referee for international tax cuts. The plan is that the Washington-based body could advise on the timing of any future cuts.

Merkel’s criticism drew an angry response from Labour MPs. Denis MacShane, the former Europe minister, said: “Who does Mrs Merkel think is going to buy Mercedes and BMWs if she . . . says putting demand into the economy is a bad thing?” Another Labour MP said: “One has to ask who had something to gain from the leak of the communiqué. This feels like a dirty trick.”

There are growing fears that protests at the summit venue, the ExCeL centre in London’s Docklands could be marred by violence. Scotland Yard will be deploying specialist officers trained to use 50,000-volt Taser stun guns.

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Bachmann Bill: Don’t Replace The Dollar

A member of Congress is warning the Obama administration to keep its hands off the U.S. dollar’s status as the world’s international currency,

 U.S. Rep. Michelle Bachmann, R-Minn., has introduced a resolution that would bar the U.S. from recognizing any other currency than the dollar as its reserve currency.

Her action comes in response to suggestions from China,Russia and the United Nations that another currency be explored. Even U.S. Treasury Secretary Tim Geithner has admitted he would be open to the idea, although he quickly backtracked when the stock market plunged on his announcement.

 “During a Financial Services Committee hearing, I asked Secretary Geithner if he would denounce efforts to move towards a global currency and he answered unequivocally that he would,” Bachmann said. “And President Obama gave the nation the same assurances. But just a day later, Secretary Geithner has left the option on the table. I want to know which it is. The American people deserve to know.”

Although Title 31, Sec. 5103 USC prohibits foreign currency from being recognized in the U.S., the president has the power to engage foreign governments in treaties, and the president is principally responsible for the interpretations and implementation of those treaties according to the Constitution, according to the congresswoman.

As a result, legislation prohibiting the president and Treasury Department from issuing or agreeing that the U.S. will adopt an international currency would need to come in the form of a Constitutional Amendment differentiating a treaty used to implement an international currency in the U.S. from other types of treaty agreements, she said.

“If we give up the dollar as our standard, and co-mingle the value of the dollar with the value of coinage in Zimbabwe, that dilutes our money supply. We lose control over our economy. And economic liberty is inextricably entwined with political liberty. Once you lose your economic freedom, you lose your political freedom,” Bachmann told the Glenn Beck program on the Fox News Channel today.

Her proposal, H.J.R. 41, isn’t complicated:

It is titled: “Proposing an amendment to the Constitution of the United States to prohibit the president from entering into a treaty or other international agreement that would provide for the United States to adopt as legal tender in the United States a currency issued by an entity other than the United States ”

Already with several dozen sponsors, it states:

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled (two-thirds of each House concurring therein), That the following article is proposed as an amendment to the Constitution of the United States, which shall be valid to all intents and purposes as part of the Constitution when ratified by the legislatures of three-fourths of the several States within seven years after the date of its submission for ratification:”

It would add to the Constitution:

The president may not enter into a treaty or other international agreement that would provide for the United States to adopt as legal tender in the United States a currency issued by an entity other than the United States.

According to the Wall Street Journal, the latest voice to endorse an “alternative” to the dollar was the head of a U.N. expert panel discussing solutions to the financial crisis.

Officials from both Russia and China have spoken out on the idea of a new global currency standard, and a U.N. panel published a report that said a new global reserve system would add to the world’s “economic stability and equity.”

 According to a report in the Financial Times, the subject could be on the table at the coming G20 summit of leading and emerging nations in London.

Specifically, the U.N. said a new system could “counteract the risk of a rapid fall in the value of the major reserve currency, gutting hard-earned reserve funds.”

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