April 18, 2011

IP address worth $11 on open market

Wake up call for our friends in the Regional Internet Registries. Nortel, the Canadian telecommunications equipment manufacturer that filed for bankruptcy protection in 2009, has succeeded in making its legacy IPv4 address block an asset that can be sold to generate money for its creditors. The March 23 edition of the Dow Jones Daily Bankruptcy Report has reported that Nortel's block of 666,624 IPv4's was sold for $7.5 million - a price of $11.25 per IP address. The buyer of the addresses was Microsoft. More information is in its filing in a Delware bankruptcy court. Now the interesting question becomes, does the price of IPv4s go up or down from here? As the realities of dual stack sink in, I'm betting...up.

Posted by Anupam Chander on April 18, 2011 at 02:59 PM in Digitization | Permalink | Comments (1) | TrackBack

April 12, 2011

My Upcoming Talk: From Friends to Revolutionaries

I am giving a public talk sponsored by the Sacramento Social Media Club at the California Museum next Tuesday evening:

 SOCIAL MEDIA & SOCIAL UPRISING:
From Friends to Revolutionaries, How New Media Is Accelerating Change

Tuesday, April 19, 2011 • 5:30 - 8:30 p.m.

Posted by Anupam Chander on April 12, 2011 at 07:00 AM in Digitization, Globalization | Permalink | Comments (0) | TrackBack

IMF Offers Explanation of Japanese Lost Decade

Aaron Back of the WSJ reports on the IMF's interesting rebuttal of a popular view that an international agreement contributed to Japan's decline in the 1990s:

The International Monetary Fund fired the latest salvo in its long-running campaign for faster yuan appreciation, rejecting an often-heard argument in China that a sharp rise in the yen in the 1980s led to Japan’s economic stagnation.

In its World Economic Outlook released Monday, the IMF cited a report in the People’s Daily from last year, in which Li Daokui, an academic adviser to China’s central bank, is cited as saying that China will not repeat Japan’s mistake in the 1980s of letting its exchange rate surge in response to foreign pressure.

In an unusual move, the IMF devoted an entire three-page section of the report to dissecting and rebutting the argument that the Plaza Accord of 1985—in which Japan agreed to a substantial rise in the yen against the dollar—led to its economic crisis later that decade.

The real problem, the IMF argues, was that Japanese authorities were overly concerned about the effect of yen appreciation and overreacted to a slowdown in the first half of 1986, which led them the implement “a sizeable macroeconomic stimulus” that year.

“Policy interest rates were reduced by about 2 percentage points, a stance that was sustained until 1989. A large fiscal package was introduced in 1987, even though a vigorous recovery had already started in the second half of 1986. By 1987, Japan’s output was booming, but so were credit growth and asset prices, with stock and urban land prices tripling from 1985 to 1989. Then, in January 1990, the stock price bubble burst. Share prices lost a third of their value within a year, and two decades of dismal economic performance followed.

“Put another way, excessive stimulus was adopted in part because there was excessive concern about the impact of appreciation.”

That’s not all. In addition, Japanese banks were undercapitalized prior to the crisis, authorities delayed forcing banks to recognize losses after the bubble burst, and a premature fiscal tightening in 1997 may have choked off recovery, the IMF said, citing several scholarly papers.

The IMF’s version of events serves not only its campaign for greater appreciation of the yuan; it also reinforces the organization’s view that dangerous asset bubbles may currently be forming in China, just as they did in Japan in the late 1980s.

 

Posted by Anupam Chander on April 12, 2011 at 03:10 AM in International Finance | Permalink | Comments (0) | TrackBack

April 03, 2011

Natives vs. Immigrants (in the plant kingdom)

Anthropologist Hugh Raffles, of the New School, has a fascinating and controversial op-ed. (We, by the way, put in native California plants in our landscaping redesign a year ago--those our our California poppies popping up all over our yard today in the picture.)

just as America is a nation built by waves of immigrants, our natural landscape is a shifting mosaic of plant and animal life. Like humans, plants and animals travel, often in ways beyond our knowledge and control. They arrive unannounced, encounter unfamiliar conditions and proceed to remake each other and their surroundings.

Designating some as native and others as alien denies this ecological and genetic dynamism. It draws an arbitrary historical line based as much on aesthetics, morality and politics as on science, a line that creates a mythic time of purity before places were polluted by interlopers.

 

Posted by Anupam Chander on April 3, 2011 at 03:43 PM in Globalization, Life | Permalink | Comments (0) | TrackBack

April 02, 2011

My Op-Ed in the L.A. Times: Who Is Liable for Fukushima?

My op-ed in Friday's L.A. Times discusses the issue of corporate liability for the nuclear disaster in Fukushima prefecture:

In a legal sense it is too early to know, but General Electric, the designer of the stricken plant, might not entirely escape liability for the nuclear disaster.

 

Posted by Anupam Chander on April 2, 2011 at 09:02 PM in Globalization | Permalink | Comments (0) | TrackBack

The Corporate International Tax Shell Game

Ed Kleinbard, of USC (and formerly of Cleary, Gottlieb, and of the Congressional Joint Committee on Taxation) explains the amazingly complicated structures used to reduce tax rates both in the U.S. and abroad--basically to avoid paying taxes in either the populous countries in which corporations generate profits, or in the United States:

Tax collectors in the U.S. and in high-tax foreign countries are the direct victims of the tax avoidance, but we all suffer from the resulting budget deficits and distorted investment decisions that firms make as a result of their ability to generate what I call "stateless income" -- income derived from selling goods and services in a high-tax country but that, through internal tax legerdemain, surfaces in a low-taxed affiliate.

What's going on is a highly choreographed six-step dance.

Step 1: U.S. firms rely on aggressive "transfer pricing" to sell, at bargain prices, high-profit U.S. assets or business opportunities to their low-taxed foreign subsidiaries in countries like Ireland. It cannot be simply the luck of the Irish that explains the extraordinary profitability of the Irish subsidiaries of U.S. firms relative to their European sister companies.

Step 2: U.S. multinationals move income from higher-tax foreign countries, where their customers actually are located, to lower-taxed ones not only through transfer pricing but also through "earnings stripping." For example, a corporation funds its German subsidiary with loans secured in Ireland, so the interest is deductible in Germany.

Step 3: Not satisfied with low corporate tax rates in Ireland (12.5%) or in other countries, U.S. firms set up exotic internal funding structures -- with such names as "Double Irish Dutch Sandwich" -- to shift income from these countries to zero-tax havens like Bermuda.

Step 4: Firms arbitrage what remains of their U.S. tax base by parking their global external-debt financing here, which creates interest deductions to shield their U.S. income. They then overstuff their low-taxed foreign subsidiaries with equity capital.

Step 5: Having put their stateless-income generating machines in motion, U.S. firms let their ultra-low-taxed foreign income accumulate abroad. Microsoft, for example, has accumulated $29.5 billion in offshore indefinitely reinvested earnings. Its financial statements suggest that its effective foreign tax rate from selling its products and services to customers located primarily in populous and relatively high-tax countries is in the neighborhood of 4%.

Step 6: With more than $1 trillion in low-taxed earnings offshore, the firms complain to Congress that U.S. tax law impedes their ability to reinvest their foreign earnings back home because they have not yet paid U.S. taxes on them. They demand a special tax holiday from Congress so they can complete the circle and repatriate all those earnings at nominal cost.

All this tax engineering has yielded tax burdens that bear no relationship to tax rates in the United States or in the populous foreign countries where the firms actually have personnel, real investment and customers.

 

Posted by Anupam Chander on April 2, 2011 at 09:00 PM in Globalization | Permalink | Comments (0) | TrackBack