Rather than reversing the process, the financial crisis has accelerated it. While public spending is being cut, the luxury goods market has registered double-digit growth every year since the crisis hit.
Inequality of income and wealth are not good for anyone. The consolidation of wealth and capital in so few hands is economically inefficient because it depresses demand, a point made famous by Henry Ford. It is also socially divisive.
If you are born poor in a very unequal society, you are much more likely to end your life in poverty.
A leading Washington economist was heard recently saying passionately (and off the record) about the lie that a poor Indian can also become a Mumbai millionaire if they just work hard.
And extreme wealth and inequality pose a moral dilemma. The father of India, Mahatma Gandhi, said the Earth provides enough to satisfy every man’s need, but not every man’s greed.
In addition, inequality is unnecessary; there are concrete steps that can be taken to turn the tide. First, governments need to pressure companies to cap excessive reward, by limiting bonuses and top salaries.
While corporate pay and rewards remain unregulated and out of control, the few will continue to earn exorbitant amounts and accumulate a disproportionate amount of the world’s wealth.
The tax system should be progressive and limit rather than exacerbate inequality. Warren Buffet underlined the unfairness of a tax system that allows him--on an income of $46 million (£28 million)--to pay only 17.7 percent in tax. His secretary, still on an above-average income of $60,000, is taxed at 30 percent.
Even when they are asked to pay tax, the extremely wealthy can use tax havens and financial secrecy to put their money where it cannot be taxed. It’s estimated that a quarter of all global wealth--as much as $32 trillion--is held offshore, and is untaxed.
Oxfam’s mission is to work with others to end poverty. But in a world with limited resources, this is no longer possible without an end to extreme wealth.
People are angry about inequality and unfairness that sees an ever-larger slice of the cake for the rich, while the poor are asked to survive an age of austerity in any way they can.
British Prime Minister David Cameron prepares for the G8 summit in June, when he has committed to tackle tax dodging, and co-chairs a panel of leaders to develop the next set of development goals, meeting next month in Liberia.
This is while Oxfam is calling for a new global goal to end extreme wealth by 2025 and an urgent reversal of the rapid rise in inequality.
Governments can no longer afford to stand idly by while inequality increases--it is time to act to put the 99 percent first.
Spain Recession Scars Exposed
Spain’s scars from the slump that overshadowed Prime Minister Mariano Rajoy’s first year in office will emerge this week as data shows the toll on economic output that may have kept as many as 6 million people out of work.
Spanish trade figures will be followed by house-price data showing how the property market endured a fourth year of declines.
The Bank of Spain may also release its estimate for fourth-quarter gross domestic product, and the data will culminate in jobs figures on Jan. 24, forecast by economists to show a record 26 percent of Spaniards unemployed, Bloomberg wrote.
Officials predict the eurozone’s fourth-biggest economy faces a further slump this year at a time when the government will struggle to meet its budget goals. Such a backdrop hasn’t deterred investors, with the prospect of a European Central Bank backstop in the event of a bailout enabling the Treasury to fast-track higher 2013 funding needs, selling €16 billion ($21 billion) at its first three auctions at lower costs.
Spain may be attractive to buy now, economic fundamentals point in a different direction, said Ricardo Santos, an economist at BNP Paribas SA in London, who sees the rate ending the year at 27.1 percent.
Spain is in the worst part of its cycle as the harshest part of the fiscal adjustment starts to produce its impact. The social cost will increase as the public sector sheds jobs on top of the private one.
Unemployment probably rose to 26 percent of Spain’s active workforce in the last quarter, reaching 6 million unemployed, according to a median of 10 estimates in a Bloomberg survey. One-in-three of all jobless in the eurozone are in Spain.
Missed payments as a proportion of total loans at Spanish banks rose to a record 11.38 percent in November, the Bank of Spain said last week, while purchases of the country’s banks’ bonds and shares have spurred rallies of 19 percent this year in Banco Popular Espanol SA and 16 percent for CaixaBank SA. Lending shrank 0.3 percent in November from October and 5.7 percent from the same month a year ago.
The default rate on loans to companies rose to 17 percent in the third quarter, 30 percent for real estate-linked activities and 3.49 percent for homeowners. The Bank of Spain is seeking to improve data on evictions due to mortgage defaults after suicides linked to home repossessions provoked public outrage, prompting government measures to limit them.
The economy will contract 1.5 percent this year after shrinking 1.4 percent in 2012, according to the median of 26 estimates in a Bloomberg survey. That is more than the government’s most recent forecasts of 1.3 percent for last year and 0.5 percent in 2013 as it seeks to avoid aid from the ECB and the European Union’s rescue-fund.
“We aren’t out of the woods,” said Fadi Zaher, head of fixed-income sales and trading for Barclays Wealth and Investment Management in London.
The markets have priced in the risk of fiscal consolidation dragging down growth for some time but not that Spain could actually need a bailout.
The Bank of Spain is due to publish this week a first estimate for gross domestic product in the three months through December. Industrial sales fell 4 percent in November from a year ago while orders fell 1.5 percent, Spain’s national statistics institute INE said last week. Activity in the services sector was down 7.8 percent.
Gold Inches Up
Gold inched up on Monday to reverse losses from the previous session, bolstered by expectations for aggressive monetary easing from the Bank of Japan.
The central bank may consider making an open-ended commitment to buy assets until a 2-percent inflation target is in sight at a policy meeting ending on Tuesday, driving the yen to a 2-1/2-year low and pushing Tokyo’s benchmark gold to match a record of 4,911 yen a gram, Reuters wrote.
Monetary stimulus from central banks helped gold extend its bull run into a twelfth year in 2012, with investors fleeing to hard assets on worries that rampant cash printing would prompt currency debasement.
There is attention on the Bank of Japan, which is really being pressured to embark on some very precious metals-friendly policy, said a Hong Kong-based trader.
Decent physical buying interest in Asia is also supporting prices, he added.
The upcoming Lunar New Year festivities in Asian countries including China, which is vying with India to become the world’s top gold consumer, has pushed up physical gold demand since the start of the year. That is likely to continue for the next couple of weeks or so, with the Lunar New Year falling on February 10.
Spot gold had risen 0.4 percent to $1,689.54 an ounce by 0334 GMT, after gaining 1.3 percent last week.
US gold inched up 0.2 percent to $1,689.60.
Technical analysis suggested spot gold is still targeting $1,706 an ounce during the day, as indicated by its wave pattern and a Fibonacci projection analysis, said Reuters market analyst, Wang Tao.
China Inflation Set to Rise
Growth levels will remain about the same in 2013 but inflation is likely to rebound moderately, according to economists at the government’s leading think tank.
“GDP growth will stay at 2012 levels, about 7.8 percent, and the Consumer Price Index, a main gauge of inflation, may go up from 2.6 percent in 2012 to 4 percent,” said Yu Bin, the director of macroeconomic research at the State Council Development Research Center, Xinhuanet reported.
Fixed-asset investment, which is seen as the most powerful driver of the world’s second-largest economy, may continue to face downward pressure, amid restrictions on raising property prices.
The National Bureau of Statistics reported that GDP growth was 7.8 percent in 2012, a 13-year low. It registered 9.3 percent in 2011.
“We should not be too optimistic about the economic situation in 2013, although growth rebounded in the final quarter last year to 7.9 percent from the 14-quarter low of 7.4 percent during July to September,” Yu said.
The two biggest areas of fixed-asset investment, manufacturing and infrastructure, both registered declines.
Investment in manufacturing, which accounts for 35 percent of fixed-asset investment, slowed to 22 percent in 2012 from 31.8 percent in 2011, the NBS reported.
Infrastructure investment, 25 percent of fixed-asset investment, shrank to 15.6 percent by the end of December 2012 from 16.2 percent in the first 11 months. Meanwhile, growth in property investment edged lower to 16.2 percent during the past year, against 16.7 percent from January to November.
Consumption will finally replace investment and exports to become the main driving force of China’s growth, although it will take quite a long time, he said.
Rising costs will hit investment, Feng Fei, also a researcher from the center, said.
Investment is no longer an efficient way to boost GDP in China as the cost is rising and the potential risks in the financial system are accumulating fast.
Trade With Turkey to Reach $30b by 2015
Trade exchanges with Iran should reach $30 billion by 2015, said the Turkish consul general in Tabriz.
In a meeting with Zanjan’s Governor General Mohammad Raoufinejad, Guven Begec said in 2012, exchanges with Iran exceeded $21 billion.
He underlined the importance of expanding economic relations between the two countries.
“Iran-Turkey trade exchanges stood at $1 billion in 2000,” he said, noting that in 2011, it reached $16 billion.
“Numerous economic opportunities exist in both countries for increasing transactions.”
Referring to Iran as a great neighboring country, Begec said Turkey should tap Iran’s potentials to bolster trade ties.
He also said his country is ready to introduce new investors and increase investments in Iran.
To expand the two provinces’ economic relations, plans should be outlined to increase both exports and imports to and from each other.
He praised the variety of Zanjan province’s agricultural products.
Iran and Turkey have sharply increased their trade ties over the past few years. In 2000, bilateral trade stood at only $1 billion, but in 2010, it exceeded $10 billion.
In recent years, the two countries have also increased cooperation in various fields of economy, security, trade, education, energy and culture.
The two sides exchanged several politico-economic delegations in recent months.
Earlier, Turkish President Abdullah Gul in a meeting with Iranian Parliament Speaker Ali Larijani underlined the need to remove obstacles to further expand economic ties with Iran and boost bilateral trade cooperation.
“The level of economic and trade cooperation between the two countries is not appropriate in view of the age-old ties between the two nations and we should remove obstacles to the development of mutual cooperation between Iran and Turkey,” Gul said at the time.
Iranian Companies Active In Latin America
Iranian private companies are operating in the mining sector of Latin American countries, said deputy minister of industry, mines and trade.
Mohammad Taqi Korei said the Iranian government supports firms interested in undertaking South American projects, Press TV reported.
Iran’s presence in South American mines is aimed at exporting technical and engineering services to those countries. To this end, the government provides Iranian companies with necessary information about the mines of the region,” he said.
Iran has been operating mines in Venezuela, Ecuador, Brazil and Bolivia. It has also agreed to prospect for lithium, a strategic metal, in Bolivia, and mine for gold in Venezuela.
Pakistan, Iran Seek Broader Trade Ties
A high-ranking Pakistani business official has stressed the need for the expansion of economic and trade ties between Islamabad and Tehran.
During a meeting with Iran’s Consul General in Peshawar Hassan Darvishvand on Saturday, President of Khyber Pakhtunkhwa Chamber of Commerce and Industry Muhammad Yousaf Sarwar emphasized the need for exchanging various products in order to promote bilateral trade, Fars News Agency reported.
The Pakistani official also called for the establishment of a joint banking system between Tehran and Islamabad, and urged both sides to turn to their national hard currencies instead of the American dollar in reciprocal trade exchanges.
The Philippine government approved five projects that will help achieve inclusive growth in the 2012-18 period. These projects will cover a total cost of 147 billion pesos (about $3.62 billion).