The US economy de-couples?

The past couple of months have given US economy bears like myself plenty of cause for reflection.  Is there more life in the old dog than we thought? 

There are several reasons to think so and this has caused me to reconsider another article of faith: the US and UK economies are in a similar dire state for similar reasons and share similarly gloomy outlooks.  In reality Americans have far more grounds for optimism than Brits.  These are, to boil them down to bullet point form:

Growth – the US is growing at 2.8% on an annualized basis in sharp contrast to the flatlining or declining economies of Europe

House prices bottom out – After 5 years of misery and falling property prices there are signs of improvement.  Getting prices down to their long term average levels was painful but necessary to squeeze out the excesses of the boom. 

Falling debt – unlike most developed countries the US has actually seen overall debt levels fall.  The US government might still be running up the national debt but the private sector has cut indebtedness faster. See this chart comparing rich country debt levels.

Trade – the official trade gap has been shrinking and research suggests the American trade position is not as bad as the raw data suggests (the import of a manufactured good like an iPad is counted at its full value but a lot of that value actually belongs to the US multinationals who make the profit and provide the design and technology).

Reserve status retained – The dollar has benefited from not being the Euro,  or the Yen or the Pound for that matter, and is once again the undisputed reserve currency giving the US plenty of scope to continue its low interest rate policy and even splash out some QE if the Fed feels the need. 

Fiscal light at the end of the tunnel – at the height of the debt ceiling crisis last year the US looked like a fiscal basketcase but there are signs that the politicians will start to reduce the deficit.  They are helped by not being overtaxed.  Unlike the UK and Europe they could cut a lot of the deficit just be closing some tax loopholes and raising taxes on things like fuel.

Energy – the US is now a net exporter of fuel thanks to the boom in shale gas production. 

Corporate giants - corporate profits are at record highs.  The results from companies like Apple and Caterpillar took the breath away this week.

The contrast with the UK couldn’t be clearer.  Britain is stagnating and looks horribly overburdened with taxes and debt.  The house price boom excesses have never been unwound.  Bank and even business generally are under siege from protesters and EU regulation.  The challenge of energy security is being made harder by self-imposed green targets. The trade deficit is as bad as ever.

I may not a fully-fledged US bull but there is no doubt that it is looking a lot better bet than the UK right now.

From our website: Spanish non resident tax

Spain cuts spending - where the axe will fall

Last week I wrote about some tax rises that are in the pipeline for Spanish property owners (Spanish property owners face a double tax shock) and our main website now carries an article describing the 2012 tax rises for Spanish residents.  

The plan is to raise some €6 billion in new taxes to reduce the deficit which has risen to 8% of GDP versus a target this year of 6%.  However the new government is also taking an axe to public spending pencilling in nearly €9 billion of savings.

Here is the breakdown of the savings being sought:

Development €1.6 billon
Industry €1 billion
Economy €1.1 billion
Foreign Affairs €1 billion
Education €485 million
Employment €435 million
Finance €432 million
Health €409 million
Agriculture €400 million
Defence €340 million
Interior Ministry  €163 million
Justice €40 million

Local authorities are having their funding cut by more than €1 billion and there are €600 million in cuts planned from the Research and Development budget.

From the perspective of day to day living in Spain I would guess that the Health and Education (if you have got kids) cuts are the most worrying as these are normally areas which need increases and cuts may have a very noticeable impact.  

Public sector workers are going to get a pay freeze, a hiring ban and a longer working week (up from 35 to 37.5 hours) so expect lots of strikes.

Spanish property owners face a double tax shock

In among a welter of new taxes that have been introduced by the new conservative-led Spanish government, are a couple which will hit foreign owners of Spanish property:

(1) The non resident tax rate is set to rise to 24.75% from the current 24% level.  That doesn't sound much but it comes on top of the reintroduction of the wealth tax and a big crackdown on holiday home owners who neglect to pay their taxes (see our guide What to do if you get a letter from the Spanish tax office)

(2) IBI or local property taxes are also set to rise across the country by an average of €30 for each of the next two years as the government seeks to let local councils raise about another €1 billion in taxes.  It is supposed to be a temporary measure.

Older properties that haven't been revalued for 10 years will be the worst hit as the tax will go up 10%

If you want to see whether you will get off lightly or suffer then take a look at your last IBI bill and look for the "ano rev" or year of revaluation - if it is 2002 or prior it will be a 10% rise, 2002-6 6%, 2009 or later 4%.  Properties revalued between 2007-8 will see no increase as they were the peak property bubble years and the properties are overvalued any way.

How to find films showing in English in Spain

I am sure most people living in Spain who like the cinema have their own way of finding out what’s on where.  But I found it very awkward at first to get any accurate information, even with some resolute Googling. 

I was getting general information about VO films or the cinemas that sometimes show English language films but not the specifics.  Even when I did get to some listings they were usually out of date.

The solution is a site called Entradas.com which I have found to be up to date, comprehensive and reliable.

To get the information about English language films go to the site and select your province.  You can change the language to English if you want.  Crucially you need to then go to the “Cine” button and select “Cartelera VO” from the list.  

This will give the full list of "version original" listings in your province.  Obviously if the film was originally in English this will be the spoken language of the film with Spanish subtitles for the locals (the acronym VOSE denotes version original with Spanish subtitles).

I took the kids to the cinema this Christmas and there was only one VO film showing which didn't interest them so we ended up seeing a Chipmunks film dubbed into Spanish.  It was surprisingly easy to follow although hardly a complex plot to challenge my dodgy Spanish.

From our website:  What to do if you get a letter from the Spanish tax office