Argentina Nearing Technical Default
Based on Argentine government’s belligerent behavior toward the rest of the world (see discussion), the odds of the $1.3bn showing up in the escrow account next month are not great. That, combined with the Appeals Court (as well as whatever other appeals Argentina can come up with – possibly appealing to the US Supreme Court) agreeing with Judge Griesa, will put the nation into default – again. By the way, those who still don’t think Argentina’s government is acting like thugs toward foreigners, just read this story from the Mail.
The market-implied peso exchange rate (the so-called “shadow” exchange rate - see discussion) now puts the peso at 42.3% discount to the official rate as the currency continues to decline. Should the technical default take place, the US will begin freezing Argentine government’s dollar accounts – which will push the shadow exchange rate to new lows.
EU Budget Summit Heading Toward Failure While Demanding 8000 Layoffs At Spanish banks
Despite hours of talks in Brussels on Thursday night, European Union leaders made little progress toward agreement on the bloc’s budget for the years 2014 to 2020. Britain and other countries have remained steadfast in their demands for cuts. A second summit looks to be the only likely outcome.
European Parliament President Martin Schulz began losing his temper as time wore on. It is “extremely irresponsible,” he told the 27 European Union heads of state and government gathered in Brussels, when EU member states deny the bloc necessary funding. The €1.091 trillion budget proposed by the European Commission, he said, is commensurate because it will also stimulate growth.
Black Friday Store Visits Climbed 3.5% But Retail Sales Fell 1.8%
ShopperTrak, which measures and analyzes foot traffic at more than 50,000 retail locations nationwide, says Black Friday store visits climbed 3.5% from last year to more than 307.67 million.
But Black Friday retail sales fell 1.8% to $11.2 billion, the firm said.
“While foot traffic did increase on Friday, those Thursday deals attracted some of the spending that’s usually meant for Friday,” said Bill Martin, ShopperTrak’s founder, in a statement.
ShopperTrak said foot traffic rose in most of the nation except for the West, where it was down more than 11%.
30% of Businesses Had Put At Least Some Projects On Hold
One of the weak spots in the economy appears to be business investment, and the story that gets told is that it has to do with the Fiscal Cliff, and hesitance to invest around that.
A recent Credit Suisse survey showed that 30% of businesses said they had put at least some projects on hold due to the issue.
And A Very Bad Fiscal Cliff Idea Is Floated
Jonathan Weisman at The New York Times reports on one plan that’s being considered: It would prevent the rich (defined, perhaps, as people making over $250,000) from taking advantage of the lower marginal tax rates on the lower parts of their income.
Under the existing tax code, the first $17,400 of adjusted gross income for a couple filing jointly is taxed at 10 percent. Above that level, up to $70,700, income is taxed at 15 percent. Income between $70,701 and $142,700 is taxed at 25 percent. Gross incomes up to $217,450 are taxed at 28 percent. The next bracket, 33 percent, ends at $388,350 for couples. The top bracket hits adjusted gross incomes only above $388,350.
All taxpayers get the advantage of the lower tax rates below the top threshold, whether they earn $40,000 or $40 million.
If Republicans insist that the top 35 percent rate cannot change while Congress tries to rewrite the tax code, negotiators could decide to technically keep all the Bush-era tax rates in place, but eliminate the lower tax rates for rich households.
On Twitter, Bloomberg View’s Josh Barro (an expert on taxation) and Nate Silver explained one huge problem with this idea. If the elimination of the lower tax rates kicked in at, say, $250K, then someone who makes $250K would have lower take home pay than someone who makes $249K (and gets to keep all the lower marginal rates). It would also mean a higher tax on the 250,000th dollar of earnings, than the 1 millionth. The beauty of the current tax system is that nobody ever gets less take home pay by making more money.
So if the tax code switches to just what’s described above, then it’s a horrible idea.