France’s 7.2 billion euro tax is a non-event

France just raised taxes on the rich and is trying to get 7.2 billion euro in tax revenue in 2012 and 33 billion euro in 2013.

So what does this mean to the deficit of France? France’s GDP is 2.56 trillion euro. France’s debt is 90% of GDP. Its total debt is therefore 2.3 trillion euro.

What is 7.2 billion on 2.3 trillion euro? It’s 0.3%. So it basically does nothing to the French debt.

You could argue that it is a first step to decrease the yearly deficit. But the deficit is currently 70 billion euro/annum. So we have a 10% decrease in the deficit, which is a non-event. It’s like an obese person trying to lose weight by eating a smaller hamburger with less french fries. He is still gaining weight, but at a slower pace…

For 2013 it is estimated that France will have a 50% decrease in deficit, but France will still have a deficit.

And I believe France won’t be able to wait till 2014 to decrease the deficit, because Europe would be in much worse shape than today.

France's 7.2 billion euro tax is a non-event

France just raised taxes on the rich and is trying to get 7.2 billion euro in tax revenue in 2012 and 33 billion euro in 2013.

So what does this mean to the deficit of France? France’s GDP is 2.56 trillion euro. France’s debt is 90% of GDP. Its total debt is therefore 2.3 trillion euro.

What is 7.2 billion on 2.3 trillion euro? It’s 0.3%. So it basically does nothing to the French debt.

You could argue that it is a first step to decrease the yearly deficit. But the deficit is currently 70 billion euro/annum. So we have a 10% decrease in the deficit, which is a non-event. It’s like an obese person trying to lose weight by eating a smaller hamburger with less french fries. He is still gaining weight, but at a slower pace…

For 2013 it is estimated that France will have a 50% decrease in deficit, but France will still have a deficit.

And I believe France won’t be able to wait till 2014 to decrease the deficit, because Europe would be in much worse shape than today.

Gold again at François Hollande highs

I predicted already that the downtrend of gold in function of the euro was very odd. Everyone would assume that the “Hollande” effect would be beneficial to gold.

And today gold hit an all time high again, since François Hollande became president of France, as predicted…

If you’re a U.S. citizen, your chance to buy gold is right now, as the euro is in oversold territory. 10 year U.S. government bonds are also overbought, with yields dropping 7% to 1.629%. Looks like a bubble to me.

Chart 1: Gold Price: Period after French Election

The Rich People of France are Leaving… for Belgium

I talked about the “Hollande Effect” in a previous article. One of the biggest fears of rich people is the 75% tax on their income once Hollande became president. So what happened the day Hollande became president? A record of 1500 applicants came to Belgium to store their wealth exactly after the French election day, as reported by Dekeyser & Associés. One of those super rich was Gérard Mulliez, boss of Auchan super mart.

This comes to a surprise to me, because Belgium isn’t the country with the lowest taxes in Europe…, but rather the highest.