Mish's Global Economic Trend Analysis

"Pigeon" Tax Protest Goes Viral in France

Posted: 04 Oct 2012 01:44 PM PDT

I received an interesting email today from Andrea, who is from Italy but now lives in France.

The email is about "pigeons", a movement started by French entrepreneurs in protest of president Francois Hollande's tax policies. The "pigeon" movement has gone viral on Twitter.

Andrea writes ...

Hello Mish

After the recently announced budget plan of Hollande-Ayrault governement with its huge round of tax increases, an on-line mouvement of start-up businessman has been very rapidly spreading out and going viral in France. This mouvement in just a few days has gone mainstream and become very popular: the government is even reconsidering some measures to cool down this protest.

The mouvement is called the "Pigeon".

The reason of the protest is very well explained by Pierre Chappaz (a "serial" start-up entrepreneur), and very well reported by Vincent Benard (an excellent libertarian economist and blogger) in his blog (in French) Objectif Liberté Esprit d'entreprise: "Hollande m'a tuer".

The point is: this wave of taxes will kill any economic motivation to create a company. The main sentence (quoted by Pierre Chappaz)

"I do not know a single startup founder who accept the idea that creating a company, in which it will invest all his savings and years of effort often without a salary, must then give to the State 60.5 % of gain when he sells his company if he succeeds. It should be known that 9 out of 10 startups fail, and in this case nobody will refund the founder. Then, on the 39.5% that he will be left with, it will pay 1 to 2% per year, every year for the ISF ("Wealth Tax"). And when he dies, the state will take 45% of what remains."

This is sad because France has been the cradle of some very nice companies in high-tech and Internet domains, many of them rapidly become leaders in France or even in Europe.

Best regards,
Andrea

Here is an English Translation of Objective Freedom: Entrepreneurship "Hollande Kill Me"

Pigeon Web Protest on Twitter

Bloomberg reports 'Pigeon' Entrepreneurs Take Hollande Tax Protest to Web

French entrepreneurs have a new mascot -- the pigeon.

Using the bird's role in French slang as the "sucker," owners of startups have formed a group dubbed "Les Pigeons" to show that President Francois Hollande's new taxes make them the fall guys for France's economic woes. They are protesting the almost doubling of the tax rate on capital gains generated from selling a business in Hollande's budget for 2013.

The group has gathered more than 34,000 supporters in less than six days on Facebook Inc.'s social network and spurred more than 3,600 posts under the "#geonpi" tag on Twitter, with the founders of Iliad SA (ILD), Vente-Privee and Meetic SA (MEET) throwing in their voices of support.

"The government thinks France's entrepreneurs are pigeons," the movement's initiators wrote on a dedicated Facebook page. "Anti-economic policies are crushing the entrepreneurial spirit and exposing France to a big risk."

Some business figures criticized Hollande's tax move by voicing support for the "Les Pigeons" movement on Facebook. Xavier Niel -- who created Internet-service company Iliad and started selling mobile-phone packages this year under the brand name Free -- was one of them.

France's small and medium businesses group CGPME said it has started a petition-signing project against the 2013 budget.

Pierre Chappaz, the Frenchman who founded comparative shopping site Kelkoo and sold it to Yahoo! Inc. for 475 million euros in 2004, wrote on his blog.

"I won't be part of the protest since I've already flown away," wrote Chappaz, who lives in Switzerland. "I do wish good luck to the birds that are still fighting in Paris."

As stated previously in French Economy Implodes ...

The French economy is clearly imploding and Hollande has not even fully followed up on his economically insane promise regarding layoffs, but he has pressured companies to not do so, and he has also massively raised taxes (a splendidly stupid thing to do in recession).

You reap what you sow, and the implosion of France is now underway. Odds of France making its budget projections are in my estimation close to zero, but time will tell.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com/

Hyperinflation Hits Iran; Monthly 70% Inflation Rate; Reflections on Economic Warfare

Posted: 04 Oct 2012 08:59 AM PDT

The oil embargo against Iran has worked, assuming one defines "work" as a destruction of the Iranian riall which has fallen 33% in a week, 57% in three months and 75% in a year vs. the US dollar.

On Wednesday, the Tehran bazaar closed in turmoil and police used teargas and batons on demonstrators protesting the currency crisis.

Please consider Iran currency crisis sparks Tehran street clashes

Hundreds of demonstrators in the Iranian capital clashed with riot police on Wednesday, during protests against the crisis over the country's currency. Police used batons and teargas to try to disperse the crowds.

The day after President Mahmoud Ahmadinejad appealed to the market to restore calm, the Grand Bazaar – the heartbeat of Tehran's economy – went on strike, with various businesses shutting down and owners gathering in scattered groups chanting anti-government slogans in reaction to the plummeting value of the rial, which has hit an all-time low this week.

"Mahmoud [Ahmadinejad] the traitor … leave politics," shouted some protesters, according to witnesses who spoke to the Guardian. Other slogans were "Leave Syria alone, instead think of us," said opposition website Kaleme.com.

"The Bazaaris shouted 'Allahu Akbar' [God is great] as they closed down their shops in the morning," said a witness. "It's impossible to do business in the current situation." Amateur videos posted on YouTube which appeared to have been taken from Wednesday's protests, showed demonstrators encouraging Bazaaris to close down shops in solidarity. Security forces were soon sent to quell the protests.

"They used teargas to disperse demonstrators in Ferdowsi Street and also blocked the streets close to the protests in order to prevent people joining them," said another witness, who asked to remain anonymous. "Some shop windows in that area have been smashed and dustbins set on fire." A number of demonstrators had been arrested, according to Kaleme.

On Wednesday, many foreign exchange dealers and bureaux across the country refused to trade dollars and some currency-monitoring websites refused to announce exchange rates.

Hillary Clinton's Hand-Washing Maneuver

The hand-washing maneuver of the day goes to Hillary Clinton who stated "They have made their own government decisions - having nothing to do with the sanctions - that have had an impact on the economic conditions inside of the country."

Iran has undoubtedly made many poor economic decisions (but so has every other country on the planet). It is extremely disingenuous to suggest this has "nothing to do with sanctions".

Monthly 70% Inflation Rate

Steve Hanke, Professor of Applied Economics at Johns Hopkins University, has also been following the Iranian currency crisis. He pinged me with these thoughts yesterday.

Hello Mish

For months, I have been following the collapse of the Iranian rial, tracking black-market exchange-rate data from foreign-exchange bazaars in Tehran. Using the most recent data, I now estimate that Iran is experiencing a monthly inflation rate of nearly 70%, indicating that hyperinflation has struck in Iran.

Cordially,
Steve

Here is a chart and commentary from his blog Hyperinflation Has Arrived In Iran

Since the U.S. and E.U. first enacted sanctions against Iran, in 2010, the value of the Iranian rial (IRR) has plummeted, imposing untold misery on the Iranian people. When a currency collapses, you can be certain that other economic metrics are moving in a negative direction, too. Indeed, using new data from Iran's foreign-exchange black market, I estimate that Iran's monthly inflation rate has reached 69.6%. With a monthly inflation rate this high (over 50%), Iran is undoubtedly experiencing hyperinflation.

When President Obama signed the Comprehensive Iran Sanctions, Accountability, and Divestment Act, in July 2010, the official Iranian rial-U.S. dollar exchange rate was very close to the black-market rate. But, as the accompanying chart shows, the official and black-market rates have increasingly diverged since July 2010. This decline began to accelerate last month, when Iranians witnessed a dramatic 9.65% drop in the value of the rial, over the course of a single weekend (8-10 September 2012). The free-fall has continued since then. On 2 October 2012, the black-market exchange rate reached 35,000 IRR/USD – a rate which reflects a 65% decline in the rial, relative to the U.S. dollar.

Iranian Rial Black Market Exchange Rates

click in chart for sharper image

Reflections on Economic Warfare

The US has waged economic war on Iran and that is taking a huge toll. Better economic war than the military war Mitt Romney seems hellbent on starting, but I support neither.

The last thing the US and the world needs is another senseless war in the Mideast.

Once again note that hyperinflation is essentially a political event. Weimar Germany was triggered by war reparations, Zimbabwe by confiscation of property accompanied by capital flight (including human capital), and Iran by US and European embargoes (a clear act of war).

Those suggesting hyperinflation will hit the US are barking up the wrong tree. For further discussion including a chart of 27 hyperinflation episodes and their causes, please see Hyperinflation Nonsense in Multiple Places

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com/

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