TPT July 2013

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Of course, Mr Bartlett acknowledged, foreigners may have entirely plausible reasons for holding US currency, especially in countries suffering severe financial problems. Moreover, he wrote, economic strains in Europe have diminished the popularity of the euro despite the convenience of its 500- euro denomination (about $645 at current exchange rates) for large cash transactions. But he also observed that, as a crime-fighting measure some European Union countries have withdrawn that note, which has probably raised the popularity of what he calls “the good old $100 bill,” now the largest-denomination US note. Bills $500 and larger are no longer produced and are taken out of circulation when they surface. › Mr Bartlett, who held senior policy roles in the Reagan and George HW Bush administrations and whose speciality is the nexus of politics and economics, touched on another consequence of having much of the US money supply circulating abroad. The Commerce Department treats exported cash as an increase in foreign-owned assets in the United States. “But it is better thought of as an almost costless way of financing a good chunk of our current account deficit,” wrote the author of Tax Reform: Why We Need It and What It Will Take . “It’s like borrowing money from foreigners that most likely will never have to be paid back, at zero interest.” Of related interest . . . › Europe’s efforts to crack down on tax havens gained momentum on 13 April as finance ministers from nine countries agreed to share more bank information. Ministers from Belgium, the Netherlands and Romania joined their French counterpart in a push for more automatic exchanges of

bank records that already had the backing of Germany, Britain, Italy, Poland and Spain. “The surge in member states’ appetite for progress and action in the fight against evasion is extremely welcome,” Algirdas Semeta, the European Union commissioner for taxation, said at a news conference in Dublin after two days of meetings. The ministers discussed adoption of Europe-wide laws modelled on the Foreign Account Tax Compliance Act, a US initiative to find hidden accounts overseas. In brief . . . › The International Monetary Fund said on 17 April that it expected global growth of about 3.3 per cent this year and 4 per cent in 2014. While that represents a percentage point reduction of 0.2 from the fund’s January estimate for 2013, the report underscored that global financial conditions had improved markedly since last year. The Washington-based IMF attributed this in no small part to the vigorous monetary easing undertaken by the US Federal Reserve, the Bank of Japan, and the European Central Bank. IMF officials have urged stronger European economies with lower borrowing costs, like Germany, to do more to foster growth across Europe and to move more aggressively toward a cross-border banking union to shore up investor confidence. The IMF also said that the US has been too aggressive in carrying out budget cuts, given its still-sluggish rates of growth and high unemployment levels. The fund expects the across- the-board $85bn in budget cuts known as sequestration to act as a brake on US economic growth this year and beyond. Dorothy Fabian, Features Editor (USA)

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July 2013