In May, US President Trump signed an overhaul to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Below Kerim Derhalli, CEO and founder of investment app Invstr, looks at the success of the bill and the potential impact of the changes.

While he may be often controversial, there’s no arguing that the most recent President of the United States hasn’t shied away from pushing through the issues that are close to his heart.

The rollback to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) is a latest personal win for Donald Trump as he aims to deliver on his promise of reversing a number of Barack Obama’s policies. Whether Obamacare or foreign policy, he is making inroads into unravelling the legacy of his predecessor.

But is the Dodd-Frank rollback the right move, and is this the right time?

In 2010, the American public was crying out for Dodd-Frank. The bill sent through the Senate came in the midst of the financial crash; people were broke and the sector was in turmoil. ‘Regulation’ was the watchword – reckless bankers must be brought under control – and so they were.

For the past eight years, Dodd-Frank has broadly been a success in achieving what it was set out to do – avoiding a repeat of the 2008 financial crisis by regulating the growth and proliferation of “too-big-to-fail banks”.

Beyond playing its part in making banks more accountable, if you look at any raft of metrics and studies, economic stability has returned to the US. How much of this is directly down to Dodd-Frank is a debate that can be argued either way.

One of the big wins for consumers that did come out of Dodd-Frank was the Consumer Financial Protection Bureau (CFPB) which, since its inception, has returned almost $15 billion dollars to more than 30 million Americans wronged by the finance industry.

It hasn’t all been rosy however. Larger ‘small’ banks in particular suffered under the regulation, which demanded tough and restrictive capital and planning requirements. In the views of many, this has stifled growth and the bipartisan bill to roll back Dodd-Frank seeks to remedy this.

The move lifts the threshold at which banks are deemed too big to fail to $250bn – a fivefold increase – and releases smaller and medium sized banks from stricter capital and planning requirements.

Since 2008, small banks have been overwhelmed by the complexity of the bill, leading to the loss of many community banks and credit unions across the United States. These small banks are a lifeblood to the US economy – responsible for nearly half of all small business loans and 15% of residential mortgages.

As well as this, the Federal Reserve have been virtually stripped of their ability to respond to further financial crises. This is primarily due to the law’s stipulations that the Fed’s lending must be broad-based and not directed towards single institutions.

The biggest hint at the bill’s demise came when one of the law’s architects themselves, Barry Frank, noted that he saw ‘areas where the law could be eased’.

So, what now? Is this the start of a return to that Wild West of overleveraged lending – are we back on the merry-go-round of bust and boom?

The short answer is ‘no’.

While it is difficult to forecast exactly how the US financial sector will be reshaped following the bill, with jobs on the rise in the United States, spending power also broadly in growth, and with the economy in relatively good shape, it does seem like the time is right for change.

We’re also in a very different world from 2008. The last decade has been an explosion of access to information and consumers are increasingly empowered to cut out intermediaries and take a more proactive approach to their finances. Trust in finance institutions continues to be at a critical low and, nowadays, Joe Public is in no mood for manipulation.

Social media means we now have access to more information – and outlets for outrage – than we ever had before. If the banks take any liberties, they’ll have nowhere to hide, and competition is fiercer than ever with the rise of disruptive challenger banks and fintech platforms.

The global economy remains on a tentative road to growth, but the fact that we’re not booming also means that there are not tidal waves of opportunity for the banks to surf on, either. In the world of finance, we are now more risk averse and nervous of the repercussions of failure.

Within this wider social and economic environment, it would appear that the rollback is the right move, and at the right time. The measures that remain in place are strong, but the concessions also look reasonable. We’re not mourning the demise of the Dodd-Frank bill – we can look forward with excitement to its future.

US President Donald Trump and Canadian Prime Minister Justin Trudeau were all jokes and smiles for the media as they met at the Group of Seven leaders summit in Quebec on Friday, but neither budged on the serious trade dispute between them.

In light of Donald Trump’s dramatic withdrawal from the Iran Nuclear Deal, Katina Hristova examines how the pullout can affect the global economy.

As with anything that he isn’t fond of, US President Donald Trump hasn’t been hiding his feelings towards the Joint Comprehensive Plan of Action between Iran and the five permanent members of The United Nations Security Council plus Germany. Pulling the US out of the agreement on the nuclear programme of Iran, which was signed during Obama's time in office, is something that Trump has been threatening to do since his 2016 election campaign. And he’s only gone and done it. Earlier this month, he announced America’s immediate withdrawal, saying that the US will reimpose sweeping sanctions on Iran’s oil sector and that “Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States”. And as if this isn’t alarming enough, President Trump has also said that the US will require companies to ‘wind down’ existing contracts with Iran, which currently ranks second in the world in natural gas reserves and fourth in proven crude oil reserve, in either 90 days or 180 days. This would hinder new contracts with Iran, as well as any business operations in the country.

Since Washington’s announcement, signatories of the Iran Nuclear Deal, still committed to the agreement, have embarked on a diplomatic marathon to keep the deal alive. On 25 May, Iran, France, Britain, Germany, China and Russia met in Vienna in a bid to save the agreement.

So how will this hurt the global economy?

Deals worth billions of dollars signed by international companies with Iran are currently hanging by a thread. The main concern on a global scale is that the US’ decision threatens to cut off a proportion of the world’s crude oil supply, which has already resulted in an increase in oil prices, with crude topping $70 a barrel for the first time in four years.

Additionally, European companies like Airbus, Total, Renault and Siemens could face fines if they continue doing business with Iran. Royal Dutch Shell, who is investing in the Iranian energy sector, is potentially one of the biggest companies to be affected by Trump’s withdrawal which could put billions of dollars’ worth of trade in jeopardy. As The Guardian points out: “In December 2016, Royal Dutch Shell signed a provisional agreement to develop the Iranian oil and gas fields in South Azadegan, Yadavaran and Kish. While drilling is still a long way off, sanctions are likely to put any preparations already being made on ice.”

French company Total, who’s involved in developing the South Pars field, the world’s largest gas field in Iran, is in a similar situation.

Airbus and Boeing, two of the key players in the international aviation industry, have signed contracts worth $39 billion to sell aircraft to Iran. As The Guardian reports, the most significant deal is an agreement by IranAir to buy 100 aircraft from Airbus.

A spokesman from Airbus said that jobs would not be affected. “Our [order] backlog stands at more than 7,100 aircraft, this translates into some nine years of production at current rates. We’re carefully analysing the announcement and will be evaluating next steps consistent with our internal policies and in full compliance with sanctions and export control regulations. This will take some time”. Rolls Royce is also expected to be indirectly affected if Airbus loses its IranAir order, as the company is the key engines provider to many of those aircraft models.

Another European company that will be hurt by the sanctions announcement is French Renault and PSA, who owns Peugeot, Citroën and Vauxhall. When sanctions were lifted back in 2016, Renault signed a joint venture agreement with the Industrial Development & Renovation Organization of Iran (IDRO) and local vehicle importer Parto Negin Naseh, worth $778 million, to make up to 150,000 cars in Iran every year. This is one of the largest non-oil deals in Iran since sanctions on the country were lifted. Last year, local firm Iran Khodro also signed a deal with the trucks division of Mercedes-Benz, with car production scheduled for this year.

Iranian firm HiWEB has been working alongside Vodafone to modernise the country’s internet infrastructure, but it looks like the partnership will have to be reconsidered.

The consequences

The White House and President Trump appear aware of the danger that a rise in oil prices on an international level pose to the economic growth of the Trump era, however, they also seem ready to embrace the economic and geopolitical challenges that are to follow. Although the consequences of US’ Iran Deal pullout are not perfectly clear in the short term, they will undoubtedly become more visible as sanctions take effect. The deal has its flaws, however, completely withdrawing from it and threatening the US’ closest allies can only compound those issues and create new ones. It is hard to predict what will unfold from here and where Trump’s strategy will take us. The one thing that is certain though is that the world doesn’t need more hostility.

While he retains a strong voter base in the conservative heartlands of North America, the Presidency of Donald Trump continues to be defined by an excess of smoke and a seemingly endless hallway of mirrors. Nothing embodies this better than the former real estate mogul's comprehensive tax reform plans, which has been presented as legislation for low and middle-income earners in the US.

While Trump's estimates suggest that the typical American family will receive a tax cut of $1,182, however, it will also offer huge breaks to wealthier citizens and the largest corporations in the US.

In fact, Trump's decision to slash the base corporate tax rate from 35% to just 21% represents the focal point of his proposed reforms, while it has already created considerable opportunities for entrepreneurs and investors alike. Here's how.

How Does Trump's Tax Reform Work and Who are the Initial Winners?

As well as slashing the corporate tax rate in the US by 14%, President Trump has provided sweeping tax reductions for special interests while also lowering the top federal tax rate from 39.6% to 37%.

Interestingly, the commercial tax cuts are permanent and will be sustained for the entire duration of the Trump administration and beyond, until the President's successor proposes his own reforms in the future.

While this will benefit all businesses to some degree or another in the US, those currently paying an inflated level of corporation tax will be the biggest winners. So too will corporations that hold considerable amounts in overseas cash and investments, with both of these tax breaks offering natural advantages to some of the largest and highest earning companies in the world.

Take Apple, for example, who at the time of writing hold an estimated 94% of its $269 billion cash reserves in overseas balances. As a direct result of Trump's tax reform, the CFRA estimates that the technology brand will be ultimately repatriate as much as $200 billion of this capital back into the US, while using the proceeds to buy back stock and boost its bottom line even further.

The same principle can also be applied to companies such as Amazon and Facebook, while JP Morgan analyst Sterling Auty has stated that US-based software stocks will also emerge as the largest beneficiaries of the tax reform. This includes prominent brands such as Intuit and Aspen Technology, who tend to have the majority of their revenue domiciled in the US and boast exceptionally high profit margins.

How will this Influence Investors?

Traders may be looking to take advantage of those companies that have benefited from the reforms, of course, and fortunately Trump's legislation has provided clear and obvious benefits for corporations that meet certain criteria relating to their business model and infrastructure.

More specifically, there should be a clear focus on companies that boast significant cash holding overseas, as well as those that have naturally high profit margins.

This includes a large majority of businesses in the vast and diverse technology sector, with brands such as Apple able to leverage their infrastructure, international reach and inflated margins to benefit significantly from Trump's multi-layered tax reform.

With over 15 years’ experience assisting US individuals to navigate the complexities of the US and UK tax legislation, James Murray is currently a Director at Frank Hirth. James has a focus on those international US citizens and Green-card holders who have an interest in a non-US structure including those in the asset management sector.

Frank Hirth has over 140 tax professionals across London, New York and Wellington providing US and UK tax compliance and advisory services to individuals, partnerships, trusts and companies. Most technical staff are fully qualified to ‘dual handle’ both regimes, to provide global tax efficiency. Established over 40 years ago Frank Hirth is recognised as the leading tax accounting practice for assisting with international US tax matters outside of the US.

What are the headlines from recent US tax reform?

The main headline of President Trump’s Tax Cuts tellgamestop Jobs Act 2017 (‘tax reform’) signed into law in December 2017 was very much in the corporate arena with a reduction of the Federal tax rate from an eye watering 35% to a more globally competitive 21%; as well as a move to a territorial system of taxation for US companies.

Individual US citizens, greencard holders and residents continue to be subject to US Federal tax on their worldwide income, irrespective of where they physically reside. The top Federal tax rate has been reduced to 37%, however, they have also withdrawn a number of favourable deductions that were previously available – resulting in only a marginal change in the effective tax rate in many cases.

Unfortunately, some of the changes targeted at US corporations have had what may have been unintended, and certainly unexpected, results for our international US clients who have business interests overseas.

In what way has it impacted Americans doing business outside the US?

These changes can result in certain income within non-US companies being attributed to the US shareholders on an arising basis for US personal tax purposes, as opposed to upon receipt of funds by way of dividend. As a consequence the US and UK tax points and character may not align and therefore can result in double taxation.

We are already seeing that this will require those US individuals with a certain level of interest in a UK company needing to reconsider how to best structure their business and the best strategy for extracting funds tax efficiently.

Has there been a change in the number of Americans living in the UK as the result of the reform? Why is this?

It is too early to tell or measure, particularly given the general uncertainty in the UK with Brexit. Over the last few years there has been a general increase in the number of US citizens choosing to relinquish their US citizenship although again this may be down to several factors. For instance, the implementation of FATCA has been instrumental in identifying those US individuals living overseas who may not have appreciated the tax implications of holding such a status.

Do you have any advice for American taxpayers residing in the UK?

Yes. The key is to ensure that high quality, joined up advice is sought as soon as possible. Navigating two very complicated tax regimes is a challenge and mitigating double taxation is vital. There are a number of anti-avoidance and anti-deferral measures within both the US and the UK legislation which, without the appropriate guidance, can lead to mismatches and other issues. This is even more apparent for long term UK residents following the changes to the UK deemed domicile rules that became effective 6 April 2017 as they can no longer access the UK’s remittance basis.

Managing the US and UK tax systems requires a deep understanding not only of each jurisdiction’s legislation, but most importantly how they interact with one another, including the use of tax treaties. There are many myths out there that can often be dispelled following discussion with an expert. We find that more than ever having tax advisors working closely and collaborating with wealth managers and lawyers often results in the client obtaining rounded, and not siloed, guidance as to how best manage their affairs.

Are there any substantial changes you anticipate in the future, good or bad?

Many of the US tax reform changes are due to sunset in 2026 and so are not permanent. It will be interesting to see what, if any changes occur, especially if the US administration changes. At present there has been no indication that any amendments will be passed to correct errors. There will however be increasing pressure to do so.

With the ongoing spat between the United States and China, which seems to be only getting uglier, Katina Hristova explores the history of trade wars and the lessons that they teach us.

Trade wars date back to, well, the beginning or international trade. From British King William of Orange putting steep tariffs on French wine in 1689 to encourage the British to drink their own alcohol, through to the Boston Tea Party protest when the Sons of Liberty organisation protested the Tea Act of May 10 1773, which allowed the British East India company to sell tea from China in American colonies without paying any taxes – 17^th and 18^th century saw their fair share of trade related arguments on an international level.

Boston Tea Party/Credit:Wikimedia Commons

Trade wars were by no means rare in the late 19^th century. One of the most infamous examples of a trade conflict that closely relates to Donald Trump’s sense of self-defeating protectionism is the Smoot-Hawley Tariff Act (formally United States Tariff Act of 1930) which raised the US already high tariffs and along with similar measures around the globe helped torpedo world trade and, as economists argue, exacerbated the Great Depression. As a response to US’ protectionism, nations across the globe began striking each other with an-eye-for-an-eye tariffs – countries in Europe put taxes on American goods, which, understandably, slowed trade between the US and Europe. As we all know, the Depression had an impact on virtually every country in the world – resulting in drastic declines in output, widespread unemployment and acute deflation. Even though most countries began to recover between 1932 and 1933, the world was hit by World War II shortly after that. In 1947, once the war was over, the World Trade Organisation (WTO) was established - in an attempt to regulate international trade, strengthen economic development and hopefully, avoid a second global trade war after the one from the 1930s.

Schoolchildren line up for free issue of soup and a slice of bread in the Depression/Credit:Flickr 

Another more recent analogy from the past that could be applied to the current conflict between two of world’s leading economies, is the so-called ‘Chicken War’ of 1963. The duel between the US and the Common Market began when European countries, feeling endangered by US’ new methods of factory farming, imposed tariffs on US chicken imports. For American poultry farmers, the Common Market tariffs virtually meant that they will lose their rich export market in West Germany and other European regions. Their retaliation? Tariffs targeting European potato farmers, Volkswagen campers and French cognac. 55 years later, as the Financial Times reports, the ‘chicken tax’ on light trucks is still in place, predominantly paid by Asian manufacturers, and has resulted in enduring distortions.

President Trump may claim that ‘trade wars are good’ and that ‘winning them is easy’, but history seems to indicate otherwise. In fact, a closer look at previous examples of trade conflicts seems to suggest that there are very few winners in this kind of fight.

For now, all we can do is wait and see if Trump’s extreme protectionism and China’s responses to it will destroy the post-World War II trading system and result in a global trade war; hoping that it won’t.

March started off with a bang when US President Donald Trump announced that his administration will impose steep tariffs on imported steel and aluminium in order to boost domestic manufacturing, saying that the action would be ‘the first of many’. This has brought about threats of retaliation by a number of the main US allies and the fear that Trump’s extreme protectionism may destroy the post-World War II trading system and result in a global trade war. Claiming that other countries are taking advantage of the US, the 45^th President seems confident about the prospects of a global trade war, tweeting: ‘Trade wars are good, and easy to win’ a day after his initial announcement. Although the tariffs are stiff, they are considerably small when seen in the context of US economy at large. However, the outrage that his decision has fuelled and the fact that China has already taken steps to hit back signal global hostility and economic instability.

The Response

Donald Trump’s decision from the beginning of March was followed by a chain of events, including the EU publishing a long list of hundreds of American products it could target if the US moves forward with the tariffs, the US ordering new tariffs on about $50 billion of Chinese goods and China outlining plans to hit the United States with tariffs on more than 120 US goods. In an attempt to soften the blow, the White House announced that it will grant exemption to some allies, including Canada, Mexico, the European Union, Australia, Argentina, Brazil and South Korea. Trump gave them a 1 May deadline to work on negotiating ‘satisfactory alternative means’ to address the ‘threat to the national security of the United States’ that the current steel and aluminium imports imposes. Trump said that each of these exempted countries has an important security relationship with the US. He also added:  “Any country not listed in this proclamation with which we have a security relationship remains welcome to discuss with the United States alternative ways to address the threatened impairment of the national security caused by imports of steel articles from that country”.

China vs. the United States

China is one country that is not listed. However, by the looks of it, China is not a country that will be discussing “alternative ways to address the threatened impairment of the (US) national security”. Instead, they fire back. China is the main cause of a glut in global steel-making capacity and it will be hardly touched by the US’ import sanctions. However and even though they do not want a trade war, they are ‘absolutely not afraid’ of one. Following Trump’s intentions for tariffs on up to $50 billion of Chinese products and the proposed complaint against China at the World Trade Organization (WTO) connected to allegations of intellectual property theft, China's Ministry of Commerce said it was "confident and capable of meeting any challenge”.

In response to Trump’s attacks, the Asian giant published its own list of proposed tariffs worth $3 billion, which includes a 15% tariff on 120 goods worth nearly $1billion (including fruit, nuts and wine) and a 25% tariff on eight goods worth almost $2 billion (including pork and aluminium scrap). Despite their actions, China’s Commerce Ministry urges the US to ‘cease and desist’, with Premier Li Keqiang saying: "A trade war does no good to anyone. There is no winner."

Is Trump going to win?

During his presidential campaign, one of Trump’s promises was to correct the US’ global imbalance, especially with China, however, it seems like his recent actions are doing more harm than good. Even if his tariff impositions result in a few aluminium smelters and steel mills in the short term, they risk millions of job losses in industries that rely on steel and aluminium; potentially endangering more jobs than they may save.

A country’s trade patterns are dictated by what the country is good at producing. China is known to be the world’s largest producer of steel, whilst steel is simply not one of the US’ strengths. Steel produced in America is 20% more expensive than that supplied by other countries. Naturally, it makes sense for US-based manufacturers to prefer buying their steel from overseas. Once Trump’s suggested tariffs are added onto steel and aluminium shipments from abroad, they will worsen US’ trade deficit and will impact the stock market. In an article for Asia Times, PhD candidate at the University of California at Berkeley Zhimin Li explains: “Domestic companies will inevitably suffer from higher input costs and lose their competitiveness. As a result, they will become less able to sell to foreign markets, leading to a deterioration of trade balances for the US.”

He continues: “Moreover, more expensive manufacturing materials will translate to higher prices at the cash register, putting upward pressure on inflation and prompting the US Federal reserve to raise interest rates even more aggressively than anticipated. This will add to investors’ anxiety and foster an unfavourable environment for equities.”

Looking at it all from China’s perspective doesn’t seem as scary or impactful. The tariffs on metals wouldn't hurt Chinese businesses considerably, as China exports just 1.1% of its steel to the US. But steel tariffs are not as significant as the coming fight over intellectual property.

On the other hand though, China has the power to do a lot to infuriate Trump. One of the products that the country depends on buying from the US are jets made by the American manufacturing company Boeing. However, Boeing is not China’s only option - they could potentially turn to any other non-US company such as Airbus for example. The impact of that could be tremendous, as in 2016 Boeing’s Chinese orders supported about 150 000 American jobs, according to the company’s then-Vice Chairman, Ray Conner.

China could also target American imports of sorghum and soybeans, whilst relying more on South America for soy. NPR notes: “Should China take measures against US soybean imports, it would likely hurt American farmers, a base of support for Trump.” An editorial in the state-run Global Times argues: “If China halves the proportion of the U.S. soybean imports, it will not have any major impact on China, but the US bean farmers will complain. They were mostly Trump supporters. Let them confront Trump.”

The list of potential actions that can threaten the American economy goes on, but the thing that we take from it is that the US could well be the one to lose, regardless of where China may apply pressure. So, is businessman Donald Trump, in an attempt to cure America’s international trade relations, on his way to be faced with possible unintended consequences and do more damage than good? Are his seemingly illogical policies threatening to make Americans poorer, on top of firing the first shots of a battle that no one, but him, wants to fight? Will this lead to hostility in the international trading system that will affect us all?

We’ll be waiting with bated breath.

Protagonist of this week's news, Alexander Nix is the executive at the centre of the Cambridge Analytica and Facebook controversy surrounding political campaign influence, sly data based marketing and supposed behind-our-backs data harvesting through everyone's favourite social media platform.

In this video CEO Today delves in to the life of Alexander Nix, a very private individual, listing some hobbies, interests and much of what he's been up to to get where he is today.

Following the Panama Papers leak of files from last year, earlier this month, the Paradise Papers leak once again threw light on the world elite’s hidden wealth. 3.4 million confidential documents relating to offshore investments were leaked to Suddeutsche Zeitung, the same German newspaper that took hold of the Panama Papers in April, 2016, which then shared them with the International Consortium of Investigative Journalists (ICIJ) and a network of more than 380 journalists. The files reveal that large corporations, heads of state, politicians, celebrities and High-Net-Worth individuals are investing huge amounts of money in offshore tax havens. Surprise, surprise. And whilst about 100 media outlets worldwide are pouring over the findings, that include the Queen’s private estate allegedly being invested in a Cayman Islands fund, as well as offshore dealings by Donald Trump’s cabinet members, advisers and donors, a lot of people have asked the question: “What exactly is the problem considering that tax avoidance is legal?”

Panama Papers vs. Paradise Papers

Of course, as with everything, opinions are divided with many ordinary people finding tax avoidance to be offensive and unfair, while others feel that it is a perfectly fine way to save some of their hard-earned money. However, does the muted response to the Paradise Papers scandal show that we don’t care as much anymore?

Following the leak’s predecessor, the Panama Papers, thousands of people gathered to protest, which immediately resulted in politicians stepping aside and losing their jobs. Iceland’s ex-Prime Minister, Sigmundur Davíð Gunnlaugsson, resigned amid widespread protests and outrage over allegations that his family had sheltered money offshore. In contrast, it seems like this time around, the public anger has been on a much smaller scale. Last year, US President Barack Obama called for international tax reform in the wake of the Panama Papers, whilst admitting that “The problem is that a lot of this stuff is legal, not illegal.” However, whilst some wealthy public figures suffered personally and governments and organizations have put out a handful of fixes in recent years, the system remains perfectly intact.

So, are we all silently waiting for that potential reform, or have we simply come to terms with the fact that tax avoidance is fine and the rich and powerful will continue dodging tax?

The morality of offshore tax havens

It is a fundamental principle of democracy that everyone obeys the law. The law applies to everyone. The law states that we have to pay taxes. Whilst in most cases, putting your money outside of your financial regulations is legal, many argue that dodging taxes is morally wrong. In addition, according to a  letter to world leaders from May 2016, more than 300 economists argue that: “The existence of tax havens does not add to overall global wealth or wellbeing; they serve no useful economic purpose.”

By sheltering trillions of dollars offshore ($10 trillion according to Boston Consulting Group), the world’s top end make their money untaxable, depriving governments of hundreds of billions of dollars of tax revenues each year. Niels Johannesen, an Economics professor at the University of Copenhagen discusses the consequences of this behaviour: “Either a lot of people pay more taxes [to compensate], or there’ll be less public goods - schools, hospitals, and so on.” He also adds: “Given that this offshore wealth is to a large extent owned by the very wealthiest… it is people who should be paying the highest taxes who are evading the most.”

Thus, not only do offshore tax havens not serve any economic purpose, but they’re also immoral and deprive economies of funds that could be used on improving public services. Some politicians are recognising the issue, such as the Leader of UK’s Labour Party Jeremy Corbyn, who promised that if his party wins the next General election, it would clamp down on tax havens and end loopholes. The Paradise Papers have once again highlighted the need for this to happen. Yet, the notion that the majority of those involved are ‘getting away’ with tax avoidance, paired with the seeming apathetic response from the public appear to be rather worrying.

Since 1968, there have been 1,516,863 gun-related deaths on US territory compared to 1,396,733 war deaths since the founding of the United States[i]. This means that up to 2015, according to data collected by Politifact, the death toll for citizens and visitors of the United States from domestic gun violence exceeds that of all the deaths from all the wars the US has participated in since its inception.

The statistics on US gun violence remain mind-boggling to many. A study by Health Affairs states that more than 100,000 people are shot each year in the US. 350 people are estimated to have been killed in American mass shootings[ii] this year, according to data gathered by GunsAreCool - a sarcastically named community that tracks gun violence in the country. In comparison, 432 people were killed in mass shootings in 2016 and 369 in 2015, which means that on average, more than one person is killed in a mass shooting for every day of the year. According to the Small Arms Survey via the Guardian, America has 4.4% of the world’s population, but almost half of the civilian-owned guns around the world.

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For both individuals and society as a whole, gun violence imposes heavy psychological burdens. The media regularly highlight the emotional cost, and rightly so. But what is the economic cost of US gun violence? What is the financial cost to society from all that carnage?

The price tag

Back in 2012, Mother Jones, the liberal magazine, launched a three-year investigation, following the Colorado cinema shooting rampage in July, when James Holmes killed 12 people and injured 70. The magazine went through the combined annual impact of a total of about 11,000 murders, approximately 22,000 suicides and 75,000 injuries that are the result of gunfire. The findings of the investigation showed that the annual cost of fatal and non-fatal gun violence to the US was $229 billion, representing 1.4% of total gross domestic product. In comparison, obesity in the US costs the country $224bn, which makes the economic impact of gun violence higher than that of obesity. These $229bn are also the equivalent of the size of Portugal’s economy or the equivalent of $700 for every American citizen.

The study notes that about $8.6bn is direct cost, including emergency care and hospital charges, the expense of police investigations, the price of court proceedings, as well as jail costs. According to the investigation, $169bn goes to the estimated impact of victims’ quality of life, based on jury awards for pain and suffering in cases of wrongful injury and death, and the rest $49bn account for lost wages and spending.

It is of course worth mentioning the positive economic impact that the gun and ammunition manufacturing industry has on the country, which according to IBIS World was $13.5 billion in 2015, with a $1.5 billion profit. However, it is also worth pointing out the distinction between the profit from manufacturing the very products used in shootings, in comparison to the financial loss seen due to gun violence.

The impact on US firearm manufacturers 

In recent years, firearms sales tend to increase and gun stocks tend to rally in the immediate aftermath of mass shootings in particular. Shares on gun manufacturers such as Sturm, Ruger & Co. (RGR, +1.91%) and Smith & Wesson maker American Outdoor Brands (AOBC, +0.74%) rose sharply right after the mass shooting in Las Vegas from earlier this month, when 59 people were killed and hundreds were injured. Only a few hours after the deadliest mass shooting in modern US history, shares of Sturm, Ruger & Co. rose 3%, American Outdoor Brands jumped 5%, while Vista Outdoor (VSTO, -0.67%) popped 2%. The explanation behind this is quite simple - investors predict a rise in sales as people buy firearms to defend themselves and their families in the event of another potential attack. Sales are also likely to spike due to the fear that an attack may result in law changes and guns becoming harder to buy.

Despite the fact that mass shootings lead to increased firearm sales, research by Anandasivam Gopal and Brad N. Greenwood published on 28^th May 2017, points out that when mass shootings occur, investors appear to be reducing their valuations of publicly traded firearms manufacturers – an effect driven by the threat of impending regulation. However, these tendencies were most prevalent in 2009 and 2010, but seem to disappear in later events, indicating the possible markets’ acceptance of mass shootings as the ‘new normal’.

How do local economies respond to increased gun violence?

A report by the Urban Institute, published on 1^st June 2017, found that surges in gun violence in the US can ‘significantly reduce the growth of new retail and service businesses and slow home value appreciation’. According to the study, higher levels of neighbourhood gun violence drives depopulation, discourages business and decreases property values, resulting in fewer retail and service establishments, fewer new jobs, lower home values, credit scores and homeownership rates. The report features interviews with local stakeholders (homeowners, renters, business owners, non-profits, etc.), who confirm the findings, which state that  ‘Business owners in neighbourhoods that experience heightened gun violence reported additional challenges and costs, and residents and business owners alike asserted that gun violence hurts housing prices and drives people to relocate from or avoid moving to affected neighbourhoods’. In Minneapolis for example, the report finds that each additional gun homicide in a census tract in a given year was associated with 80 fewer jobs the next year, while average home values in Minneapolis census tracts dropped by $22,000.

Is gun violence really the ‘new normal’?

It seems as if the US lawmakers, and indeed large swathes of the US population, are now willing to accept gun violence as a part of their daily lives in a manner that may shock others. But what is more surprising is that a country founded on capitalism permits this as the status quo in the knowledge that gun violence is having a severe and negative impact on the US economy. From hospital fees through to deterring business investment, mass shootings and gun crime are the cause of considerable financial losses to the United States. These acts of violence cost the country a great deal of money, but most importantly – they cost lives. And although markets have seemed to accept mass shootings as ‘the new normal’, should this be the case for the rest of us too?

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[i] That figure includes American lives lost in the revolutionary war, the Mexican war, the civil war (Union and Confederate, estimate), the Spanish-American war, the first world war, the second world war, the Korean war, the Vietnam war, the Gulf war, the Afghanistan war, the Iraq war, as well as other conflicts, including in Lebanon, Grenada, Panama, Somalia and Haiti.

[ii] Mass shooting being defined by the FBI as any incident where at least four persons are killed with a firearm in a random act with little or no premeditation.

Donald Trump is set to make a decision on the Chair of the Federal Reserve by Thursday this week. This decision will shape a big part of the US President’s economic legacy in the job.

The current chair of the Federal Reserve was appointed by President Obama in 2014 and is the first woman to hold the position.

Below Finance Monthly hears from a few expert sources on their thoughts surrounding the future prospects and overall impact of the appointment of a new US Fed Chief.

Joel Kruger, Currency Strategist, LMAX Exchange:

We worry investors could be setting themselves up for a letdown on this expectation the appointment of Jerome Powell as the next Fed Chair will generate a sustainable rally in risk assets. There is a danger associated with what has become a fixation on 'one dimensional role designation.' Central bankers should be neither inherently hawkish or dovish. The Fed's responsibility is to ensure it works in the best way possible to achieve its goals of maximum employment and price stability.

Considering where we're at in the cycle, there's simply little room for dovish central banking into 2018, much in the same way there was little room for hawkish central banking back in 2008, at the onset of the financial markets crisis. We believe we've reached the point where dovish leanings will no longer pair well with effective monetary policy, given an economic outlook contending with the very nasty combination of full employment, financial stability risk (from overinflated stocks), and the threat of rising inflation. We would also add that the prospect of Powell as the next Fed Chair is one that has been played out ad nauseam. This alone leaves risk assets vulnerable and exposed to a sell the fact reaction, albeit after what is likely to be an initial wave of euphoria.

Mihir Kapadia CEO and Founder, Sun Global Investments:

After months of speculation, President Donald Trump’s nominee for the Federal Reserve chairman seems likely to be Federal Reserve governor Jerome Powell. A former investment banker with Treasury experience during the Bush administration, Powell looks to be a reliable choice for the role. The markets have reacted positively to the suggestion that Powell is the frontrunner in recent weeks following the President’s interviews with each of the candidates.

However, Powell’s succession to the Fed chair is not necessarily secure. Other candidates include former Fed governor Kevin Warsh, seen as a more hawkish alternative to the polices of Yellen ad Stanford Professor John Taylor who would definitely be seen as more hawkish. Gary Cohn, Trump’s economic adviser, was also touted for the job, although the President has indicated his preference for Cohn to remain in the White House. Furthermore, current Fed chair Janet Yellen still remains a viable possibility.

Trump’s relationship with Yellen has been tricky to define. On the campaign trail, Trump was highly critical of Yellen and her tenure, and accusing her of being political. However, his stance has softened considerably since becoming President, praising her both personally and professionally, leading some to believe that he could yet choose her for another term. Of all the candidates, Jerome Powell represents a pragmatic compromise for the President – he represents a break from the past and a shift towards Trump’s administration whilst representing continuity as his policies are unlikely to differ substantially from Yellen’s. Whatever the President’s decision, the Fed chair will play a powerful role in shaping the economic identity of Trump’s America.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

President Trump claims to have well over $10 Billion dollars but his finances are still kept very secret. So how much money does Donald Trump really have? Watch this video and find out.