I trust this finds you exceptionally well and settling into the year. January is already behind us and the December/ Christmas shut-down is already a distant memory.
Now that the hype about ‘the new year” and accompanying resolutions is over, reality is setting in on the economic front albeit there is a sense of “Europe-fatigue” which is already prevalent. I say “already” because with the year only a few weeks old, to be experiencing fatigue at this stage does not make for happy endings.
Rather than take it from me, please find attached an excerpt from an article which summarises the situation beautifully, whilst emphasizing that at this point that there are no easy choices left.
Europe has too much sovereign debt, which is on the books of its banks, which have too much debt; and there is a huge trade imbalance between core and peripheral Europe. All three problems must be solved in order to prevent the Eurozone from imploding.
DEBT, WHETHER IT IS WITH AN INDIVIDUAL, A FAMILY, A CITY, OR A COUNTRY, ALWAYS HAS A LIMIT. DEBT CANNOT GROW BEYOND THE ABILITY TO SERVICE THE DEBT [My emphasis added. That statement is the bleeding obvious but has been and continues to be ignored by
many clever people all around the world who should know better]. That is the clear lesson of Rogoff and Reinhardt’s epic work, This Time Is Different. When that limit is reached, the debt must be restructured in some way, either with better terms or through some sort of default.
But the choice is print [more Euro’s to pay the debt] or let the euro perish. I see no other realistic solution, aside from massive austerity, willingly accepted by Europeans everywhere, along with the nationalization of their banks, etc., as described above. I think there is even less willingness to endure all that.
It is a hard choice, I know. If you held a gun to my head and asked, “What do you think they will do’” I would have to say, “I think the ECB prints.” But not without a lot of rancor and solemn pledges and maybe a rewriting of the treaty in order to get Germany to go along.
The choice is between a much lower [valued] euro or one that is far different from today’s, with a number of countries having left it. There are no good or easy choices.
As a closing aside, a lower euro means lower US and emerging-market exports (Europe is China’s biggest customer!) to Europe and more competition from Europeans in what the rest of the world sells to each other. It will be the beginning of serious trade issues and when coupled with the collapse of the Japanese yen, circa 2013, will usher in currency wars and protectionism. This will be a decade we will be glad to leave in 2020.
The lesson to take away from this is that this is going to be a volatile and difficult DECADE. Something not easily comprehended by people anymore in this age of instant gratification.
With regards to the ongoing disaster/ national embarrassment that is the CIPC the following illustrates the problem in a way that would be hysterically funny, were it not for the incalculable costs to South Africa’s business reputation and large amounts of time and money being squandered on what should be (and in first world countries is) a very basic and efficient operation. [All bracketed italics are my comments]:
Moneyweb 25 January 2012:
The Department of Trade and Industry (DTI) says there is no need for intervention in the Companies and Intellectual Properties Commission (CIPC) [of course not, there is no impact or accountability or financial prejudice being experienced by these people, irrespective of how badly they are doing their jobs] despite a deluge of ongoing complaints about the commission’s inefficiencies.
Speaking from Davos in Switzerland, DTI spokesperson, Sidwell Medupe told Moneyweb: “For us there is no crisis”. He said the CIPC had an eighteen month turnaround strategy and was only eight months into the process. [WHAT DOES HE MEAN THERE IS NOT CRISIS – HE HAS NO IDEA HOW BAD IT IS. WHAT IS THE DTI SPOKESPERSON DOING IN SWITZERLAND””’!!!!!!. THE SPOKESPERSON’! WASTING TAXPAYER MONEY AND FIDDLING WHILST ROME BURNS]. [IT TRULY BEGGARS BELIEF].
On to more pleasant matters (comparatively speaking) – as has been referred to on multiple occasions, SARS audits have increased significantly in scope and quantum and we are finding, in some cases, a complete disconnect between the amount of tax in question and the underlying reason for/ amount of time to be spent on the audit. There is now insurance available from QDos Consulting to cover costs relating to SARS audits. There is no recourse to SARS for the extra costs incurred if nothing else is uncovered.
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