Wednesday, July 31, 2002

Uruguay Extends Bank Closure [AP World News] Uruguayan officials are in Washington negotiating with the IMF. Local reports have suggested that $1.5 billion could be released to Uruguay by international lenders in coming days. Uruguay is suffering from the crisis in neighboring Argentina. Sadly, their government seems to be following the standard governmental procedure of running to the IMF for more loans, thus contributing greatly to the problem. comment () trackback ()  3:55:04 PM     Big media's credo: Don't Know, Don't Care. So is "shattered investor confidence" the reason the stock market is falling? Call me a heretic, but I think the scandals have relatively little to do with the declining US stock market. I think it has more to do with the EU Savings Tax Directive, which Perry has discussed below. The US stock market was fueled in the '90s by massive foreign investment in American equities (British Petroleum buying Amoco, Daimler-Benz buying Chrysler, etc.) Europeans prefer to set up American holding companies to invest in the US, earning income on their investments that is taxed at (comparably low) American corporate tax rates. The US attracts massive amounts of foreign investment (another way to say this is that the US has a massive current account deficit) because the US has relatively low tax rates, and relatively light regulatory burdens. But the EU considers this "unfair tax competition" and is trying to establish a tax cartel that would tax receipts of income earned in the US by Europeans at higher European rates. To the extent that such a thing would make investment in the US less profitable, it has reduced the global demand for American corporate equities. It's just a theory, but at least it is a theory backed by some evidence, not just a bunch of tiresome cliches pastiched together into a jejune news story. [Samizdata.net] An interesting theory on why stock prices are dropping. It makes more sense than the mass media coverage, but I suspect that there's still more to it than European investors loosing their incentive to buy US stock. comment () trackback ()  2:54:32 PM     Hewlett Packard has no honor. [Scripting News] Of course it hasn't. Honor is an individual trait--only people can have honor, not organizations, countries, or animals. It's possible for the people who run a corporation to be honorable, but I wouldn't count on it. comment () trackback ()  10:39:49 AM

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