The news this week is certainly attention grabbing. For my money, I suspect the most interest will fall on the indictment of Paul Manafort. I have read the indictments, and it is clear that while some of them are probably there for lawyer talk, there are two really serious ones. The first is he laundered money, at least $18 million worth, and maybe a lot more, and the second is that money mostly went for his personal benefit and he did not declare it as income. Tax evasion has been a classic way of sending bad guys to prison, an example being one Alphonse Capone.
The most obvious question to answer is, did he do it? If he did, it was not very bright of him to manage the US presidential campaign because politics, being what it is, sends too many people looking for a way to discredit you. Having committed obvious crimes, even if so far nobody has noticed, is an obvious weakness. The most obvious weakness is that Manafort is supposed to have avoided tax, but that also assumes he owned the money, as opposed to acting as an agent for the owner of the money. The indictment names a few properties, and I assume Manafort’s name will be on the property ownership papers as the owner. If so, he will be in trouble. However, he will be less so if he can prove he is merely an agent for the true owner. If he tries that, then he could be effectively admitting guilt to being an agent for a foreigner without registering, which is one of the other indictments. Interestingly, this appears to be being tried in a State court, rather than a Federal court. Does a State court really have jurisdiction over Federal matters? We await further developments.
One of the more interesting indictments is that he acted against the interests of the United States by carrying out contract work for Yanukovich, then President of Ukraine. Since when is it against the interests of the United States Government to carry out work for a democratically elected President of a foreign government that is not a declared enemy of the United States?
The other interesting issue is Catalonia. The Catalan regional parliament has voted to declare independence from Spain, on the basis that 90% of the 43% that voted in a nominally illegal referendum voted for independence. The Spanish Prime Minister, Mariano Rajoy, declared the vote and the declaration to be illegal, although what that means remains to be seen. The Catalan President, Carles Puigdemont, had paused and I thought he might even step away from going ahead with the declaration, but he has elected to declare seccession. Meanwhile, the UK, Germany and France have supported Spanish unity. So, what now? Puigdemont nominally faces up to 30 years in jail, but I doubt that that will be enforced unless something goes really wrong between now and then.
On the other hand, Madrid has apparently arrested a number of senior Ministers of the Catalna government who declared independence, and presumably they will try them in court. Puigdemont is apparently in Brussels, and claims he will not return to Spain until the threat of arrest is removed. Whether that will work is a matter of interest, but from Madrid’s point of view, they may not care. Puigdemont out of the way is probably just as useful to them and they do not want a political martyr.
Suppose the Catalans did secede, what would happen? The main “reason” for independence cited is to preserve the language, and to give a feeling of independence. They also feel that Catalonia pays €10 billion more to Madrid than it gets back in spending. Of course, not counted in that “paid back” are the services Madrid pays for, such as border patrol, customs, international relations, defence, a central bank, the tax service and air traffic control are some of them. As an independent country, it would have to set up these. There is also a sense of selfishness here; why should we send money to the poorer parts of Spain?
However, even in finance, there is a problem. The Catalan regional government owes €77 billion, of which about 2/3 is owed to Madrid. Then, of course, Madrid would expect Catalonia to share its proportion of the Spanish national debt. Further, two thirds of Catalonia’s exports go to the EU, and if Catalonia seceded it would be out of the EU, and would have to go to the back of the queue to get back in. Spain would then have the power of veto. Further, if it gained independence, it would have to leave the euro zone, and again Spain, and friends, could block re-entry. Either way, it would have to set up its own currency in the meantime. Of course countries like San Marino uses the euro without being an EU member with the eorozone’s approval, since they are so small. Nobody knows whether Catilonia would qualify, but Spain could block that. Apparently Kosovo and Montenegro use the euro without the EU’s approval. After all, a bank note is a bank note. However, a problem will arise if they ever need credit. If you use someone else’s currency, you have to earn it. Who knows what will happen?