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Untitled Document

LAWS AND REGULATIONS

The USA offers protections and guarantees regarding private property, individual liberties and corporate liberties that safeguard both the free market and investors. Regulations and consolidated criminal and civil laws that, on the one hand, support business activities and, on the other hand, severely punish economic and financial crimes have always guaranteed protection of investors, who are regarded as being the key to growth. In recent years, there have been several financial scandals in the USA and the system has always reacted in the same way by severely punishing the culprits. All levels of society believe that everyone has equal opportunity and everyone is equal before the law.

There is more: these principles and values are regarded as intangible pillars supporting the individual freedom that is guaranteed in the Constitution. Moreover, they are shared by the two major political parties and the population in general.

There are no entry barriers to foreign investors and very few bureaucratic restrictions to entrepreneurial activities, which are encouraged and supported. Once a foreign investor has acquired knowledge of the language and the laws, there are no further restrictions to business activities, which are regulated by efficient laws and a simple, effective tax system.

Moreover, professional registers (particularly for lawyers and certified public accountants) guarantee protection of new investors. Taxpayers are respected for their role within a system non-repressive tax audits.

Business successes are seen by the political class and the general population as being the merit of entrepreneurs, managers and employees and are publicized as positive examples, while unlawful deeds are publicly decried.

The two major parties have different attitudes towards tax policy, which sometimes results in different tax brackets being applied amongst the fifty states. This is because real estate taxes are the most significant source of tax income at the state level. While this leads to remarkable differences in taxation levels from one state to the next, those differences are actually not critical.

LEADERSHIP

The USA is currently the only remaining global superpower and this position of strategic superiority is undoubtedly going to last for a long time as there are no other nations or confederations capable of challenging its geopolitical role nor of matching military, economic and political power. This statement is based on facts alone and has nothing to do with a personal like or dislike of US President or ideology.

Even in this moment of financial crisis, which has caused investors to abandon financial markets and major movements of wealth due to abrupt swings in ratings and listings, North American financial markets still dominate the scenario, confirming the old saying that "a cold for the USA becomes an influenza epidemic for the rest of the world".

Putting aside the causes and interpretations of these events, as well as the applied and studied financial treatments, the fact remains that no capital is leaving the USA for other economic areas. On the contrary, whenever the crisis becomes more acute, the US dollar exchange rate improves, a fact that is certainly due to a reduction in major speculations, as well as a return on investments of financial instruments in US dollars. Financial markets of all major exporting countries, including both Russia (overwhelmed not only by the financial crisis but also by the drop in crude oil prices) and Japan, have suffered, on the average, far more serious losses than North American markets. The same is true for emerging countries, such as China, Korea, India and Brazil, which are benefitting from surpluses thanks to exports while suffering slowdowns in growth. We are all well aware of the major decreases in profits being suffered by oil exporting countries due to falling crude oil prices.

The only current rival of the US for world leadership is the European Union. The rival, or rather the "friendly rival", has already surpassed the USA with regards to economic size, gross domestic product, overall consumption and population. Its currency, the Euro, has already shown its market strenght against the US dollar, becoming a fearsome competitor in international business. Regarding the international bond market, the amount of bonds issued in Euros has exceeded that issued in dollars, a clear sign of both the shifting interest from the US Dollar to the Euro as a safe-haven currency and of the overall size of the "Euroland" economy.

However, despite these results, the EU risks remaining a "political dwarf", especially after the draft of its new constitution was voted against by two important member states, France and the Netherlands (even though the chairperson delegated to write the draft was French). Moreover, the differing foreign policies of member states often have harrying effects. In fact, more than half a century after the Union was established by the signing of the Treaty of Rome in 1957, it still does not have a seat on the UN Security Council, the global organization par-excellence. Not only do the European members of the council show no desire to abdicate their places in favor of the European Union itself, whenever they asked to intervene in world hot spots, their positions on issues are often the antithesis of the EU position.

At the climax of the financial crisis, not only was Europe conspicuously absent, as if the Old Continent had not been affected, but when European governments finally decided to take action, all decisions, however coordinated, were made individually and all measures were applied only nationally. The image of the EU perceived by the rest of the world was that each individual member state protected only their national interests. This behaviour, which openly clashed with the EU's technical regulations and even more so with its monetary policy, had nonetheless, satisfied most nations and political factions. In Italy, there had been open debate about safeguarding the government's control of strategic companies, banks being first and foremost. However, not a single objection had been raised whereas, just a few months ago, any similar action or position would have unleashed political and media turmoil. People understood that, in the crux of a crisis, all the companies, especially banks, would first act in defense of their head offices even at the risk of depriving their "foreign branches" of resources needed to grant credit to the production system. This is a risk that no EU member state can afford to take right now. The fact remains that decisions made within a member state, which are not aimed at a Union-wide level, risk being of no use to economic subjects that now regard Europe as a single, large nation and act accordingly. Even if, as we all hope, these measures had full effect and normality was restored, the renationalization of European companies could hardly be stopped.

In the current global scenario, the USA is the only true "union" with unified political leadership. The EU has proven to be more of an alliance of sovereign states and governments with each member focusing primarily on defending its individual interests.

One last, but not least, important remark is that the "tactical and strategic superpower" role being played by the US Armed Forces, along with being politically unacceptable, is completely incompatible with the current financial status of European countries or other local powers. This situation will very likely continue for some years to come.

POPULATION

The USA is the only western country with a positive population growth rate. Population growth figures are constantly updated at this White House website www.popclock

ECONOMY

 

The USA has the highest GDP and one of the highest per capital incomes in the world

with significant quarterly increases and an uninterrupted expansion cycle despite talk of recession over the last two years. In fact, while the explosion of the current financial crisis has slowed down the growth for the US economy, it has not taken it into decline.

The most recent IMF report estimates that the US economic growth rate for 2009 will be +0.1%, while estimated growth for Germany, which was +1% in the April 2008 reports, is zero. Since Germany is the true engine of European economic growth, the +0.2% figure for France and -0.2% for Italy, Germany's primary business partners, come as no surprise.

We must keep in mind that the US economy has been leading world growth for the last decade and, thanks to the strength of its imports, has been pulling such countries as China and India out of the depths of underdevelopment. North American imports of consumer goods from developing countries have become the new fuel of global growth. The consequent expansion of Asian economies has then become another driving force allowing the US economy to grow even more. It is not easy to say what will happen in the future. Presently, the strong bond that links all world economies has not only turned the troubles of the world's greatest importing country into a tragedy for major exporters but also made clear that global growth depends on the good health of the world's leading economy. Therefore, joint efforts undertaken by the major world economic stakeholders should start having a positive effect soon.

The US productivity shows an uninterrupted growth.

Over the last three years, there has been a significant flow of foreign investments, which has halted the trend of the previous years. These trends have also been reinforced by the gradual weakening of the US dollar.

 

Here are the most recent (September 2008) quarterly figures for the US GDP (Gross Domestic Product). After the stunning growth of +4.8% in the second quarter of 2007, the downturn of -0.2% in the fourth quarter of last year generated some pessimism, which the +0.9% rise in the first quarter of 2008 has not entirely erased. The fact that the GDP then soared to a solid +2.8% in the second quarter of 2008 seems to have disproven the hypothesis that the decrease at year-end 2007 and the small growth of the first quarter of 2008 were clear signs of recession. The IMF also estimates that next year there will be growth, albeit limited.

The strong GDP growth in the most recent quarter has also been helped by the hefty +18.5 increase in foreign real non-residential fixed investments compared to a rate of 8.6% in the previous quarter.

It may be useful to complement these data with a statistical report by the BEA (Bureau of Economic Analysis) which analyses direct foreign investments in the USA sorting them by country of origin. These quarterly data have been updated only to the third quarter of 2006. It is particularly interesting to note the progress of Italian investments in the USA, which, in the first 9 months of 2006 alone, amounted to 3.39 billion dollars, compared to 4.13 billion dollars in the five previous years from 2000 to 2005. This substantial increase is particularly due to the third quarter of 2006, which saw 2.93 billion dollars of investments.

The inflation ratio reported in September 2008 was 4.9% bringing the average of the current year to +4.5% compared to 4.1% in 2007 and 2.5% in 2005. A substantial contribution to the higher inflation rate reported in the fist 9 months of 2008 has come from a +16.6% increase in energy costs and +7.2 rise in food costs. Production has decreased slightly to 1.6%.

The US unemployment rate reported in September 2008 was 6.1% lowering the third quarter average to 6% compared to the 5.3% average in this year's second quarter. Job loss has been most felt in the construction, production and trade sectors, while raw materials extraction and healthcare have reported an employment increase. The above rise in unemployment is particularly significant if we consider that, compared to last year, the overall number of unemployed people has increased by 2.2 million with an increase in the unemployment rate of 1.4%. Despite this increase, the current US unemployment rate is equivalent to the average unemployment rate in Germany.

CONCLUSIONS

The USA is an ideal location for those wishing to make real estate investments in a "low risk" country. It is the best choice for mid-term foreign investments, especially in the real estate sector, due to its: current economic situation, geopolitical leadership, which remains stable even in moments of sever crisis, favorable tax and regulatory system, high population growth rate, positive migration flow, average prices for built up land and areas, market opportunities, and favorable exchange rates.

 

 

 

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