EU wealth tax and the end of US capitalism: One Bank makes outrageous predictions for 2024

The Wall Street Bronze Bull looks toward an empty Broadway in Lower Manhattan, New York, on August 28, 2011, as Hurricane Irene strikes the city and tri-state area with rain and high winds.

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The EU’s wealth tax, the “end of capitalism” in the US and a major health crisis arising from obesity drugs are some of the “outrageous predictions” put forward by Saxo Bank in a report published on Tuesday.

Looking ahead to 2024, the Danish Investment Bank suggested that the world is “at an inflection point, the familiar road of the last decade is about to end.”

Predictions focused on a series of “unlikely but underappreciated” events that, if they occurred, would “send shock waves through financial markets.” Forecasts are not representative of the official views of the Bank.

“It’s all about provoking thought processes, and what I’ve found over the last 21 years is that when boards are planning ahead they like it, central banks like it to reduce risk. And I think our clients like it because it’s engaging. “It’s like a good dinner table conversation where people push against each other,” Steen Jacobsen, chief investment officer at Saxo Bank, told CNBC on Tuesday. Giving.”

The EU becomes ‘Robin Hood’

As the EU needs more money for long-term policy goals including climate change mitigation, health care, education and the war in Ukraine, Peter Garnery, head of equity strategy at Saxo Bank, suggested the bloc’s leaders could apply 2% of the money. Tax.

If the population “realized how little role billionaires are actually paying in taxes,” he predicted, it would be more likely that social unrest would repeatedly flare up across the continent.

Citing the Global Tax Evasion Report 2024, Garnari said that despite its huge welfare system compared to the US, the EU has 499 billionaires (in US dollar terms), a wealth comparable to that of billionaires in North America and the East. Pay the lowest personal tax in percentage. Asia.

“The pre-tax income rate of billionaires in France is comparable to that of US billionaires, despite the fact that the entire population is paying between 46-50% in taxes on average, which is a violation of the basic principle of reciprocity in the Netherlands. It’s even better to become a billionaire, Garnery said, because the average tax rate is lower than what American billionaires pay.

Garnery estimated that a 2% wealth tax on EU billionaires would raise 42 billion euros ($45.5 billion) to finance key policy goals, while a comprehensive 2% tax on multi-millionaires could raise this to 100–150 billion euros. Is.

Garnari predicted, “The European Union’s modern version of Robin Hood shocks the European luxury industry. Recent studies have shown a strong correlation between the pursuit of luxury goods and income levels and wealth inequality.”

“The EU Commission’s new wealth tax immediately dampened market expectations for future demand for luxury goods and investors abandoned European luxury stocks.”

This will see shares of the French luxury giant lvhmThe report estimates Europe’s second-largest company by market capitalization has fallen 40%, while luxury automakers such as Porsche and Ferrari will also suffer losses.

Obesity drugs pose health crisis

The success of new GLP-1 obesity drugs has been a key fixture in 2023, with the wildly popular Wegovi leading Denmark’s lead. Novo Nordisk Replacing LVMH as Europe’s most valuable publicly listed company.

But Saxo strategists said this creates the risk that dependence on such drugs increases to such an extent that the population reduces exercise and increases consumption of junk food.

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Should this coincide with governments and US health insurers seeing anti-obesity drugs as potential cost savers, demand could skyrocket and far exceed supply, leaving those without access. Who have started the course of treatment and are therefore exposed to this change in lifestyle habits.

“Global adult obesity rates are set to increase from the current 39% to 45% in 2024, leading to many other side effects, such as increased incidence of diabetes or even increased heart disease, decreased muscle strength, More injuries and reduced normal immune system functionality lead to a decline in global productivity due to increased illnesses and sick days,” Garnry and fellow strategist Charu Chanana predicted in the report.

end of american capitalism

Against an increasingly uncertain geopolitical backdrop, Althea Spinozzi, senior fixed income strategist at Saxo, hypothesized that the US government could be forced to further increase defense spending, while the Federal Reserve is still in the midst of a second wave of inflation. Monetary policy may also have to be tightened.

To avoid social unrest, Congress may be forced to increase fiscal spending, which would push the budget deficit above 10% of GDP and mean that the government should urgently boost demand for US Treasuries.

Spinozzi said, “The focus turns to the stock market, where the ‘Magnificent Seven’ have now become twelve, thanks to missed recessions and government aid programs directed at lenders and homeowners.” The group currently includes Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla.

“Joining the club are Eli Lilly, Novo Nordisk, JPMorgan Chase, LVMH and ASML. As the ‘Twelve Titans’ increase their valuations multiple times within a few months, the disparity between investors and non-investors is widening. She goes.”

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Recognizing that political stability depends on the continued ability to finance a large deficit through US Treasury issuance, thus lowering interest rates, the government should increase the attractiveness of domestic bonds over stocks.

Spinozzi speculates, “Under intense pressure from the White House, Congress has made capital gains and interest income tax-free on the U.S. treasury. With government debt in the hands of domestic investors, funding costs become less volatile. “

“This dramatic move symbolizes the end of capitalism, as money flows from private corporations to the public, and holding risky assets becomes more expensive. In contrast, the ‘Twelve Titans’ consolidate their market dominance as they invest in long-term “Benefited from low cost of funding, while the rest of the stock market collapsed.”

Other outrageous predictions include: oil reaching $150 per barrel and Saudi Arabia subsequently purchasing European soccer’s Champions League to take it global; A generative AI deepfake that is leading to a national security crisis; Robert F. Kennedy Jr. won the US presidential election; Japan is being forced to abandon its yield curve control policy; And a coalition of deficit countries is forming the “Club of Rome” to restructure global trade dynamics.

The bank has made a set of “outrageous predictions” every year for the past decade and some of them have actually come true or at least come close.

In 2015, Saxo predicted that the UK would vote to leave the European Union after the United Kingdom Independence Party landslide, he predicted that Germany would enter recession in 2019, which the country narrowly avoided, and he bet Predicted that Bitcoin will experience a meteoric rally in 2017.

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