The equivalent of trillions of dollars are held in all manner of assets in China, from the high-return wealth management products to so-called entrusted investments.
Taking the heftiest piece of the leverage pile first, wealth management products have had a precipitous rise over the past few years, but now seem to be feeling the heat of deleveraging. This is the asset class that is coming under renewed scrutiny from regulators.
The White House says the true cost of the opioid drug epidemic in 2015 was $504 billion, or roughly half a trillion dollars.
In an analysis to be released Monday, the Council of Economic Advisers says the figure is more than six times larger than the most recent estimate. The council said a 2016 private study estimated that prescription opioid overdoes, abuse and dependence in the U.S. in 2013 cost $78.5 billion. Most of that was attributed to health care and criminal justice spending, along with lost productivity.
The council said its estimate is significantly larger because the epidemic has worsened, with overdose deaths doubling in the past decade, and that some previous studies didn't reflect the number of fatalities blamed on opioids, a powerful but addictive category of painkillers.
"My aim today is not to argue for state-contingent price-level targeting," Evans said on Tuesday. "That may be a good way to go, but at this point, I just don't know. My point is that we should be planning for these inevitable future situations today."
Chicago Federal Reserve Bank President Charles Evans on Tuesday became the second Fed policymaker in recent days to call for a new approach to rate-setting that would allow the central bank to respond to shocks when interest-rate cuts alone are not enough.
One option is so-called price-level targeting, Evans said in remarks prepared for a European Central Bank conference in Frankfurt.
Under such a strategy, a central bank combats bouts of too-low inflation by allowing inflation to run too high for a time. Evans championed this policy in 2010 to deal with sagging inflation, but ultimately the Fed rejected such an "extreme" idea as too difficult to undertake during an economic crisis, Evans said on Tuesday.
Now that economic times are calmer, Evans said, the Fed can study and analyze this and other approaches, and prepare the public for their possible use in the next severe downturn if the Fed cuts rates to zero and still needs more firepower to get the economy growing again. Bouts of zero interest rates are likely to become more common in the future as potential economic growth slows, Evans and other Fed policymakers believe.
Last week, San Francisco Fed President John Williams embraced the idea of price-level targeting as a way to set rates in the future, though he too said such a shift would require plenty of study and debate.
Both men referenced the recent work of former Fed Chair Ben Bernanke, who last month argued for a framework where the Fed is to adopt price-level targeting on a temporary basis when rates became too low for conventional policy.Click here to download a pdf of this article, Missile.pdf
Ways and Means Chairman Kevin Brady took a hard-line approach during a “Fox News Sunday” interview, saying the House won’t accept a tax bill that eliminates the deduction entirely. The House bill retains the deduction for property taxes up to $10,000.
The Senate Finance Committee will start debating late Monday afternoon the 247-page tax proposal released last week by Chairman Orrin Hatch. As of now, the “conceptual” mark has some significant differences with the tax bill the House Ways and Means Committee approved last week -- chief among them the Senate’s call for repealing the state and local tax deduction entirely.
“There are going to be things that we absolutely object to” in the bill that comes out of conference, said Scott Perry, a Pennsylvania Republican and member of the conservative Freedom Caucus. “But we’re going to have to look at it in its totality and say, ‘Yeah I don’t like it,’ but you have a binary choice” to vote for or against the tax bill, Perry said.
House Speaker Paul Ryan has promised that the differences will be settled in a conference between the two chambers, but some House lawmakers are concerned they’ll just be forced into a take-it-or-leave-it vote for a bill that looks much closer to the Senate version.
A final bill is more likely to resemble the Senate proposal, in part because the upper chamber has a slim majority and can only afford to lose two Republican senators and pass a bill without any Democratic support. The House has a wider majority and can afford up to 22 defections.
After the Senate Finance Committee markup, the panel will release legislative text and vote on the measure by the end of the week, according to Hatch. Majority Whip John Cornyn said the Senate plans to vote on their bill the week of Nov. 27. -- Anna Edgerton
What to Watch on Monday:
“It’s a key message that China continues to open up and make its financial markets more international and market-oriented," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. "How important a role foreign financial firms can play remains to be seen.”
The relaxation of ownership rules follow a period in which most overseas lenders lost interest in direct stakes in their Chinese counterparts. After sales by Citigroup Inc., Goldman Sachs Group Inc. and others, HSBC Holdings Plc is the only international bank with a major holding -- a 19 percent stake in Bank of Communications Co. HSBC has been building its business on the mainland as part of a “pivot to Asia” under outgoing Chief Executive Officer Stuart Gulliver.
Regulators are still drafting detailed rules, which will be released soon, China’s Vice Finance Minister Zhu Guangyao said at the briefing in Beijing. Here’s what we know so far:
China relaxes ownership rules to allow foreign firms direct stakes up to 51%.
Did China relax the rules to help recapitalize their banks?
What the GOP Senators tax plan looks like.
Farm sector moving more and more to automation.
Shaking down a Saudi Prince is harder than you think.
Since 1981, the year of President Ronald Reagan’s big tax cut, Congress has passed and presidents have signed 55 bills that the Urban-Brookings Tax Policy Center counts as “major” tax legislation. During the prior 36 years there had been just 18. In their essential text, Taxing Ourselves: A Citizen’s Guide to the Debate Over Taxes, economists Joel Slemrod and Jon Bakija dub the years since 1981 the “modern tax policy era.” Which leads this exhausted taxpayer to wonder: What will it take to make this era end?
Ominously, most previous U.S. tax eras ended with major wars that required big increases in government revenue. Let’s hope it doesn’t take that to break us out of the cut-reform-increase-repeat loop we’re currently trapped in. But a tour of U.S. tax history does at least offer the hopeful message that things can change.Click here to download a pdf of this article, Missile.pdf
"The third quarter (vacancy) numbers are a welcome sign (for owners) after the sharp increase at the end of last year. Overall, it was a strong third quarter, which was a nice surprise," said Michael Cohen, CoStar director of advisory services, during this week's State of the Multifamily Market Q3 2017 Review and Outlook. "We're still in the golden age for multifamily, but we're seeing signs of a gradual slowdown in the apartment market."
Renter demand for apartments continued to accelerate in the third quarter of 2017, as the market absorbed more than 70,000 units. The overall national vacancy rate for U.S. apartments continued to trend lower after turning sharply up at the end of last year.
Accounting for the slowing apartment market conditions is the gradual upward trend in the homeownership rate, which subtracts from the renter pool as millennials and other groups purchase single-family homes. The rate rose by 20 bps in the third quarter to 63.9%. A one-percentage point increase in the homeownership rate would subtract about 800,000 rental units from net absorption, Cohen said.
(Multi-nationals start to ramp up the fear campaign)
The new 20 percent tax is “the atomic bomb in the draft” legislation, said Ray Beeman, co-leader of Ernst & Young’s Washington Council advisory services group. “We’re trying to get our arms around the implications.”
House tax writers say the proposed excise tax is aimed at preventing U.S. companies from shifting their earnings offshore to subsidiaries in tax shelters -- and it moved into the spotlight this week amid a series of global investigative reports on corporate tax avoidance. But tax practitioners say the provision has far larger implications for consumer prices on a range of goods.
“It’s a very big gorilla in the living room,” said Gary Friedman, a tax partner at Debevoise & Plimpton. Tech companies, pharmaceutical makers, automakers and reinsurers are the companies most likely to be concerned, he said.
The tax would apply to billions of dollars in intellectual-property royalties that technology and pharmaceutical firms make to their overseas affiliates each year -- payments often linked to tax-avoidance strategies. But it would also hit U.S. companies’ imports of generic drugs, cars and other products from their affiliates. Global insurers would incur the levy on the cost of “reinsurance” they buy from foreign affiliates.
The provision, which is estimated to raise $154 billion over a decade, “could trigger a trade war,” Friedman said -- stirring other countries to tax their companies’ imports from U.S. units.Click here to download a pdf of this article, Missile.pdf
Retirement savers and financial companies cheered Thursday. The really big change they feared—a slashing of the amount workers can contribute before taxes to their 401(k) plans—didn’t materialize in the U.S. House of Representatives tax bill.
But it does include some proposed tweaks.
Here are five changes legislators want to make to the workplace accounts, and how they could affect employees in retirement savings plans.
1. Continuing contributions
Currently, someone taking a hardship withdrawal from a 401(k) plan can’t contribute again until six months have passed. The bill would eliminate that restriction.
2. Bigger hardship withdrawals
Right now, participants can only take hardship withdrawals of money they contributed, not matching contributions from their employer or amounts that have appreciated through investments. The proposed change would allow savers to take a withdrawal based on the whole balance.
3. Repaying loans
Currently, if you have an outstanding loan from your 401(k) and lose your job, you generally have to roll that money into an IRA or new employer’s plan within 60 days. If you don’t, the loan becomes taxable and subject to a 10 percent penalty. The bill says a worker who was terminated with a loan outstanding would have until their taxes are due (so April 15 of the following year) to repay it into an IRA or a plan at a new job.
4. Syncing ages
The age when plan participants can take in-service distributions would be synced for 401(k)s and government plans. In-service distributions are withdrawals some employees can make while still working. With 401(k)s, the age to take money out without penalty is 59 1/2, but some state and local governments with 403(b) or 457 plans set the age at 62. The bill would declare the age as 59 ½ for all of these types of defined contribution plans.
5. Nondiscrimination test tweaks
One change would make it easier for defined benefit plans, the predecessor to 401(k)s, that are closed to new participants to pass nondiscrimination tests. Those tests are meant to ensure that the retirement plan doesn’t favor higher-compensated employees over lower-paid workers.Click here to download a pdf of this article, Missile.pdf
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