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A man dressed as Mr. Monopoly (H. RUMPH, JR)
A man dressed as Mr. Monopoly (H. RUMPH, JR)

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How the rich feel: Hike taxes on mega-rich, not plain rich Add to ...

These are stories Report on Business is following Tuesday, Oct. 4. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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What the rich think Not that you'd expect anything different, but most rich Americans would like to stay as rich as they can by not having to pay higher taxes.

A recent poll by The Harrison Group research firm and American Express Publishing shows that just 23 per cent of America's well-to-do - those whose discretionary income is at least $100,000 - support boosting taxes for households bringing in more than $250,000. That's what President Barack Obama wants to do.

As you climb the income ladder, though, according to the results reported by Reuters, support grows. Almost 50 per cent support tax hikes for those earning at least $500,000, and 65 per cent support a boost for those in the $1-million class. I wonder how many of those surveyed are below that threshhold?

Markets roiled Talk about investor whiplash.

Markets were in a foul mood for most of today as fears that Greece will default roiled stock and currency markets, though North America picked up later in the day.

Stocks first tumbled in Asia and then in Europe, followed by the Dow Jones industrial average , the S&P 500 and Toronto's benchmark S&P/TSX composite in North America. The Dow Jones and S&P 500 later moved into positive territory, and the TSX regained ground, though it still closed lower.

The Canadian dollar sank below 95 cents (U.S.), dipping as low as 94.02 cents but closing at 94.80 cents.

Playing most into the market fears are concerns that Greece is headed for a default. It has already missed its deficit targets for 2011 and 2012 and sees a continuing recession, while leaders of the euro zone have been unable to persuade investors they have the situation in hand. Fears are pressuring bank shares in particular.

Get well soon? All it took was a brief mention of a cheap new app for the updated iPhone 4S to send the shares in another industry tumbling.

Just as it upset and transformed the music industry, it's now emerging as a threat to greeting cards.

As he unveiled the updated iPhone today, a senior executive of Apple Inc. also showed off a new app to create greeting cards on the device.

There are 21 different designs, and then they're printed, embossed and mailed by Apple, for a price of $2.99 (U.S.) in the United States or $4.99 elsewhere on the globe. Or, they can be sent via e-mail for free.

Shares of American Greetings Corp. , the century-old company behind American Greetings, Carlton Cards and others, slipped, as did those of Shutterfly Inc. , an online-based group.

International Greetings PLC, which is traded in London, also fell.

So did shares of Apple Inc. as it unveiled the updated iPhone 4S, rather than an iPhone 5.

But the new one has lots of new stuff, like a dual-core processor that will make it much, much faster than the old version. There's also a better camera.

Moody's hits Italy Moody's Investors Service cut Italy's government bond ratings late today, but the move was after markets closed.

Moody's said in a statement it trimmed the rating to A2 with a negative outlook, from Aa2, citing the "long-term funding risks" for sovereign debt in euro zone countries with fat debt levels, such as Italy.

The ratings agency also cited the risks to economic growth amid a weaker global outlook, and the time needed to implement new targets and turn around Italy's fortunes given economic and politicial uncertainty.

"There is increasing uncertainty for the government to achieve fiscal consolidation targets," Moody's said.

"Since more than half of the consolidation measures are based on government revenue growth, the plans are vulnerable to the high level of uncertainty around economic growth in Italy and elsewhere in the EU," it said, though it did cite some positive factors.

"Moreover, political consensus on additional expenditure cuts can be difficult to achieve. As a consequence, the government may find it challenging to generate the primary surpluses that are needed to place the public debt-to-GDP ratio and the interest burden on a solid downward trend. Moody's expects Italy's public debt-to-GDP ratio to reach 120 per cent at the end of this year, up from 104 per cent at the start of the global crisis."

Over the rainbow The finance ministers of the embattled euro zone have put off an €8-billion bailout payment to Greece until mid-November as they review an agreement they made in July with debt holders, taking the situation right down to the wire and threatening to upset markets even further.

But that's okay, according to Greece's Finance Minister Evangelos Venizelos, who said today Greece can make it through until then. I feel so much better.

It's looking more and more like private debt holders will be taking a bigger hit than the 21-per-cent they agreed to in July because, according to the chief of the 17-member monetary union, the finance ministers are looking again at whether they should share more of the pain. Thus, they delayed their meeting originally scheduled for mid-October.

"This was somewhat of a surprise given that markets had been led to believe that Greece would run out of money on the 14th October," said CMC Markets analyst Michael Hewson.

"It was also hinted that Europe may have to revisit the details of the debt exchange program which currently stands at 21 per cent."

To borrow from The Wizard of Oz, what Europe needs is a brain, a heart and some nerve. The analogy's not a bad one given that leaders of the euro zone have been living in a land of make believe for about two years now, seemingly unable to come to grips with the reality of the situation.

A brain: Europe has many great economic and financial minds, but they need to think as one. The region is divided by competing interests, which shouldn't be a surprise, politics and an absolute lack of unity. Obviously, what's best for Greece might not be best for Germany, but this is a group that is long past the need to think and solve together.

"As Eurolanders fail to achieve a common voice to address their own problems, wealth is being destroyed around the world," said Carl Weinberg, chief economist at High Frequency Economics.

A heart: The answer in many parts of the monetary union has been to slash and burn, throwing people out of work, raising taxes and capping pay levels. The Greek government, for example, is ripping the heart out of the Greek people. Just yesterday, it warned of a longer recession, amid a jobless rate already at 16 per cent. Athens is so intent on meeting what have shown to be unrealistic targets that it is ignoring the suffering of its people. Obviously, it needs to slash its debt, but it needs to do so in a way that doesn't promise to cripple its economy for years to come. You simply can't have such austerity levels without ensuring a stalled economy and ongoing grief.

"I’ve given up planning for the future," Amalia Dougia, a single mother who has been out of work for two years, told Reuters. "I just accept life as it comes. I’ve thought about suicide, but I have to look after my children.”

The nerve: For months now, leaders of the euro zone have lacked the nerve, and the ability, to act forcefully to contain the debt crisis. They've thrown good money after bad and, time and time again, simply kicked the can down the road. What's needed now - even though the euro zone says it's not on the table - is a managed bankruptcy that will give investors some certainty and allow Athens to find some stability.

"While everyone denies that a Greek default is possible, Greece is moving closer to running out of cash every day," said Mr. Weinberg. "No one can agree on a way to get cash to Greece, and no one seems to understand that a default will be postponed by only a few months if Greece gets more cash now. There is nothing anyone can do to stop it."

In the eye of the storm European banks are in the eye of this particular storm because of credit risks, notably the France-Belgium banking group Dexia, whose shares plunged today, forcing governments to promise to back up the institution.

“We are going to take action concerning our banks, and the decision taken so far is to act with a guarantee,” said Belgium's Finance Minister Didier Reynders.

While the governments promised action, Reuters quoted sources as saying the most likely solution will be to break the bank into two, with its troubled operations put into a so-called bad bank and its stronger units sold.

Deutsche Bank hit Germany's giant Deutsche Bank issued a profit warning today and unveiled plans to slash 500 jobs. It also said in a statement that it would take impairment charges related to Greek debth of about €250-million.

"The intensifying European sovereign debt crisis led to sustained uncertainties among market participants in the third quarter and thus to significantly reduced volumes and revenues in particular the corporate banking and securities (CB&S) corporate division," the bank said.

"... The bank expects that against this background as well as ongoing market turbulence the planned pre-tax target of €10-billion from its core businesses is no longer achievable for 2011."

It said, however, it still expects a third-quarter profit and "a robus earnings level" for the year.

Central bankers press governments Two of the world's top central bankers warned their governments today there's only so much they can do.

The comments came from Federal Reserve Chairman Ben Bernanke, in testimony to the Joint Economic Committee in Washington, and European Central Bank chief Jean-Claude Trichet, speaking to the European Parliament.

"Monetary policy can be a powerful tool, but it is not a panacea for the problems currently faced by the U.S. economy," said Mr. Bernanke.

"Fostering healthy growth and job creation is a shared responsibility of all economic policymakers, in close co-operation with the private sector. Fiscal policy is of critical importance, as I have noted today, but a wide range of other policies - pertaining to labour markets, housing, trade, taxation, and regulation, for example - also have important roles to play."

Mr. Trichet, in turn, said the ECB can take action "but under no circumstances can we replace governments." He added that "to be in denial that we are in the worst crisis since World War II that would be the most terrible mistake you could make.”

We're No. 1 Forbes magazine has ranked Canada as the world's top country for business, up from No. 4 last year, partly because of the introduction of the Harmonized Sales Tax in B.C. and Ontario.

Now, if only the people of B.C. had decided to keep the HST, we might keep that ranking. (That's tongue-in-cheek. I hate paying the HST. I just happen to live in Ontario, rather than B.C.)

In its rankings, Forbes looked at 11 areas in 134 countries, including property rights, innovation, taxes, tech, corruption, personal, trade and monetary freedoms, red tape, investor protection and the performance of stocks.

Forbes noted that the Canadian economy has held up well compared to others, while the U.S. is in the grip of fear and Europe in the midst of a debt crisis, while its banks survived the financial crisis.

"During the run-up to every U.S. presidential election, countless Americans threaten to move to Canada if their preferred candidate does not emerge victorious," Kurt Badenhausen of Forbes writes. "Of course, few follow through with a move north. Maybe it is time to reconsider."

On the issue of its overall tax burden, Canada now ranks ninth, well up from 23rd spot in 2010. But ...

"Credit a reformed tax structure with a Harmonized Sales Tax introduced in Ontario and British Columbia in 2010," Forbes said. "The goal is to make Canadian businesses more competitive. Canada’s tax status also improved thanks to reduced corporate and employee tax rates."

And this too: "As an affluent, high-tech industrial society in the trillion-dollar class, Canada resembles the U.S. in its market-oriented economic system, pattern of production, and affluent living standards."

Rounding out the top 10 behind Canada were New Zealand, Hong Kong, Ireland, Denmark, Singapore, Sweden, Norway, Britain and the United States.

U.S.-China tensions escalate Trade tensions between the United States and China are heating up in the wake of a U.S. Senate vote yesterday to debate a bill aimed at countries that hold their currencies at low levels. That means China. If it all came to pass, the U.S. government could punish such nations with duties.

Chinese officials hit back today, warning such a move could only hurt. And it didn't sugar coat the warning of a trade war.

"In the context of a sluggish global economy and weak confidence, an external environment where all countries work together to tide over difficulties through concerted efforts is of critical importance," the People's Bank of China said.

"At this juncture, the vote by the U.S. Senate cannot help address the problems of insufficient savings, trade deficit or high unemployment in the U.S.; on the contrary, it might seriously affect the progress of China's reform of the exchange rate regime and might also result in a trade war that no one would like to see," the central bank said in a statement posted on its website.

"From the perspective of the U.S. experiences, politicizing economic issues does not help solve the problems per se, but would rather complicate the problems, and adversely impact economic recovery and market confidence."

Law firms in merger deal International law firm Norton Rose is merging with Calgary based firm Macleod Dixon, effective next January.

The firm will be called Norton Rose Canada, with close to 700 lawyers based in Calgary, Montreal, Ottawa, Toronto, Québec, Caracas and Bogotá, The Globe and Mail's Jacquie McNish and Jeff Gray report.

Norton Rose Canada will be ranked among the top three largest Canadian legal practices. Norton Rose a global law firm that earlier this year merged with Montreal's historic law firm Oglivy Renault LLP.

Headlines of note

In Economy Lab Now that Ontario has smart meters, the policy challenge is: how can we use them to generate benefits for the average Ontario electricity consumer? Frances Woolley examines the issue.

In International Business Denmark’s new centre-left government has opted to spend and work its way out of the economic crisis in sharp contrast to the austerity models that have emerged in many other European countries, Clare MacCarthy of The Financial Times reports.

In Globe Careers Managers must be careful not to encourage the wrong sort of rivalry and they need to pick their moment to take spats public, Andrew Hill of The Financial Times writes.

From today's Report on Business

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