Horizon Entertainment at center of renewed film tax credit fraud investigation

Category: Credit Matters
Published: Saturday, 14 March 2015
Written by Admin

Following news of a video editor claimingHorizon Entertainment did not deserve all of the $1 million in motion picture tax credits it earned,State Inspector General Stephen Street has reopened an investigation into the business productions.

Streets office and Louisiana Economic Development SecretaryStephen Moret issued a joint statement with news of the investigation Friday (Feb. 27).

The case was the subject of a WVUE Fox 8story earlier this weekin which video editor John Beyer, who worked on Horizon Entertainments Saintsational TV series based on the New Orleans Saints dance team, saidhe didnt believe the production company spent close to what it claimed on tax credit forms.

I dont even think a quarter of a million was spent, Beyer told the TV station.

In order for the creators of a film to be awarded tax credits, the state requires an external audit of all expenses be submitted, along with other supporting documents.

Horizons documents apparently sounded an alarm with LED when they were initially filed in 2010, according to the statement released today. LED referred the case back then to the Inspector General.

That initial referral was investigated by the IG but did not result in prosecution. With new information revealed by FOX 8, LED has asked the IG to revisit all Horizon Entertainment productions that received film production tax credits, the statement reads.

The renewed investigation will also include a probe into Horizons Family Gras, which focused on Jefferson Parishsevent ofthe same name.

Read the statement in full, below:

LED has no tolerance for abuse of any state incentive program. On several occasions since 2008, LED has referred to the Office of State Inspector General (IG) film tax credit matters where LEDs staff has had suspicions of fraud, which could not be confirmed solely from the evidence available to LED, even after a review by a certified fraud examiner engaged by LED. In these instances, further investigation is required by a law enforcement agency that has the authority to subpoena records from third parties. LED also has worked cooperatively with the IG and FBI on some of these cases and others. Some of these cases have resulted in federal prosecutions and convictions while others remain in progress. In the case of Horizon Entertainment, which recently was the focus of an investigative TV report by FOX 8, LED referred its concerns about Horizon (including the Saintsational and Family Gras productions) to the IG in approximately late 2010. That initial referral was investigated by the IG but did not result in prosecution. With new information revealed by FOX 8, LED has asked the IG to revisit all Horizon Entertainment productions that received film production tax credits.As the investigation has been reopened, there will be no further comment from the Inspector General.



Zurik: Horizon's millions in film credits draw Kennedy's ire

Category: Credit Matters
Published: Thursday, 12 March 2015
Written by Admin

NEW ORLEANS (WVUE) - The more we examine the expenses reported by Horizon Entertainment in its production of The Sean Payton Show and Saintsational, the more questions we have. Now a top state official has his own questions about the case, and how the State Film Office handled it.

Offices in the FOX 8 building in New Orleans used to be the headquarters of Horizon Entertainment. Horizon rented 1,800 square feet of space. They used part of this space to produce "The Sean Payton Show" - 39 episodes over two years. Horizon told the state that production cost $5 million and received $1.5 million in state film tax credits.

Tucked in the records Horizon gave the state were rental costs for office space to produce the show. Horizon formed a shell company, TCPS Productions, to actually produce the Payton show. TCPS would rent cameras, personnel and office space from Horizon and receive tax credits for the money spent.

Thats perfectly legal - as long as the expenses were legitimate.

"Its a mess," says CPA Patrick Lynch after reviewing those records.

For the second year of "The Sean Payton Show," that shell company claimed it paid Horizon $62,500 for office space. They broke it down to $10,000 in rent a month.

Real estate experts say that $10,000 a month rent translates into 6,000 square feet of office space. So, according to real estate experts, the shell company was paying to rent about 6,000 square feet of space to produce the Payton show.

But that appears to be impossible, since Horizon only operated out of 1,800 square feet of space in FOX 8s studios.

"I think the whole motive is to inflate the production expenses at the production company level," Lynch says. "Theyre getting 30-cents-on-the-dollar income credits. So the more you can inflate the expense, the greater the income tax credits."

Horizon also produced the reality TV show "Saintsational." The shell company rented office space for that show, too, also costing $10,000 a month.

But theres more. Louisiana Media Company, the owner of this TV station and building, says Horizon received their 1,800 square feet of office space for free. They paid nothing.

But they still received tax credits on the office space rental.

"I want to see somebody angry," says La. Treasurer John Kennedy, who blames the State Film Office for approving these projects. "If I were king for a day, somebody would be fired here."

Kennedy says hes frustrated by the reaction from the head of the film office, Chris Stelly. In our interview, we asked him about that $5 million production of "Saintsational" that never aired. When we questioned Stelly about Horizons many questionable expenses, in many cases he simply repeated to us, "Thats what was presented to us in the audit at the time."

Kennedy tells us, "The Louisiana Film Office and Mr. Stelly - who I dont know, its not personal - but their attitude should have been, 'whoa! We will get on this. Were on this like a hobo on a ham sandwich."

Its important to note that, while Stelly pointed to the audit in our interview, the Department of Economic Development gave a more direct response last week:

"LED has no tolerance for abuse of any state incentive program. On several occasions since 2008, LED has referred to the Office of State Inspector General (IG) film tax credit matters where LEDs staff has had suspicions of fraud, which could not be confirmed solely from the evidence available to LED, even after a review by a certified fraud examiner engaged by LED. In these instances, further investigation is required by a law enforcement agency that has the authority to subpoena records from third parties. LED also has worked cooperatively with the IG and FBI on some of these cases and others. Some of these cases have resulted in federal prosecutions and convictions while others remain in progress. In the case of Horizon Entertainment, which recently was the focus of an investigative TV report by FOX 8, LED referred its concerns about Horizon (including the Saintsational and Family Gras productions) to the IG in approximately late 2010. That initial referral was investigated by the IG but did not result in prosecution. With new information revealed by FOX 8, LED has asked the IG to revisit all Horizon Entertainment productions that received film production tax credits. As the investigation has been reopened, there will be no further comment from the Inspector General."

Kennedy says the bigger issue is the audits that lead to the tax credits. Right now, the auditors are hired by the production companies themselves, and submitted to the state for approval.

"This business of basically trusting people to pick their own auditor and then not asking questions and writing a check... youd never see that in the real world," Kennedy insists.. "Only in government would you see that."

"Im not surprised, I guess, that its coming to light," says Brian Garton, who worked as an editor for Horizon. "I didnt know it was to this scale."

Garton worked for Horizon from September 2009 to early March 2010, the same time Horizon also produced much of "Saintsational."

"I was hired as a editor, originally said to be for the Saintsations show," he tells us. "During my time there, as far as I remember, there was no editing done."

But documentation from 2009 shows $85,250 was paid for editors and $225,000 for editing systems. Horizon received tax credits for having a total of six editors working on "Saintsational."

"As far as I know, there were never six editors in the building," Garton tells us. "I mean, at most, as a stretch, you could say there were three people editing. But the third person was splitting his duties with many different jobs."

For "Saintsational," Horizon received tax credits for five edit stations. Garton says there were only three and, during his time there, never used on "Saintsational."

"I had my edit bay," he recalls. "I dont remember the names of the rooms or anything. But I had my edit bay, there was another edit bay that was used. Again, these two rooms were the only ones that were going full time that I remember. They were pretty much full-time 'Sean Payton Show, except for small projects that bounced in and out."

When we interviewed Garton by Skype, he mirrored the comments made by another Horizon employee, John Beyer. They worked for the production company during different time periods.

Garton says the working conditions at Horizon could be described as tight. He says they were always pinching pennies, always told money was tight - which he cant understand, after looking at the $4.5 million Horizon received from the state.

"We were always told that we had less money than we should normally have to do the job we were doing," Garton tells us. "I remember one time there was a dispute about CDs or DVDs in the office, that there was too many DVDs being used, that Jason Sciavicco was angry at the PA for using too many DVDs. I mean, thats pennies per DVD, you know, a dollar per DVD at most."

Horizons owner, Jason Sciavicco, has declined to answer our questions about the expenses. Horizon attorney Walter Becker says nothing improper was done.

Copyright 2015 WVUE. All rights reserved.



Business events: Broward Coalition on Aging seminar March 12

Category: Credit Matters
Published: Saturday, 28 February 2015
Written by Admin

Future of Community Associations, 11 am12:30 pm, Deicke Auditorium,5701 Cypress Road, Plantation. Presented by Katzman Garfinkel. Free. 954-486-7774.

Manage your credit score, 5:30-7 pm, BrightStar Credit Union, 1600 South Federal Highway,Pompano Beach . Free Credit Matters workshop. 954-486-2728, Ext. 5017.

Build your business budget, 6:15 pm, Keiser University, 1500 NW 49th St., Fort Lauderdale. Broward SCORE workskhop. 954-356-7263

Town Hall meeting, 6:45-8:45 pm at The Hallmark of Hollywood, 3800 South Ocean Drive, Hollywood. Presented free by Kaye Bender Rembaum. 954-776-1999, Ext. 236.



Spain's 'Good' Deflation?

Category: Credit Matters
Published: Sunday, 22 February 2015
Written by Admin

Madrid is a great place to be, said Javier Bordas, owner of Opium, which he plans to open seven days a week. Youve got the football players, celebrities, and people love to party. Were optimistic.

It makes you wonder why on earth support for the radical Podemos party is surging at the polls. Surely, there must be a catch here somewhere?

Of course, Maria is only covering a story, an upside-bullish Spain-recovery one, and she does point out that Spains 23.7% unemployment rate is the second-highest in Europe after Greece, but still, it couldnt be that all the intense talking up of Spains recovery in domestic demand is also helping to sell some of that 3.34 billion euros worth of retail commercial property that went under the hammer in 2014 , now could it?

Certainly, the story must be a lot more palatable to the clique of property consultants who are currently doing the selling than it is to one of the 4 million Spaniards currently on the credit blacklist run by credit consulting firm ASNEF , who normally cant get hold of credit under any circumstances and will have a hard time joining in the current consumer boom even if they have a job. Spains Economy minister Luis De Guindos put it even more graphically :

Its hard not to defer purchases when youve got no money for them in the first place. In the case of Spanish unemployed I think theyve got more worries than waiting for a new sofa suite to drop by €50.

Nor is the good deflation argument especially convincing to anyone with sufficient economic common sense to understand that deflation in a heavily indebted economy can NEVER be unequivocally good. I doubt there are too many mortgage holders out there busily applauding the ongoing fall in house prices.

My intention here, however, is not to argue that Spains economic recovery has been hopelessly one-sided, which it has, but rather to try and pick my way through the ideologically loaded minefield of arguments which are currently being advanced about the significance and meaning of the deflation phenomenon in Spain.

So, Is Deflation A Problem?

Deflation is a protracted fall in prices across different commodities, sectors and countries. In other words, it is a generalised protracted fall in prices, with self-fulfilling expectations. Therefore, it has explosive downward dynamics. - Mario Draghi

One of the reasons the arrival of deflation in Spain has generated so much controversy, I think, is that many doubt the country is actually suffering the phenomenon at all (see Bank of Spain Governor Mario Linde , deflation risk in Spain continues to be low - November 2014 - or Economy Minister Luis De Guindos , Spain is not at risk of sliding into deflation - December 2014). Beyond policymakers and those whose job it is to talk up the Spanish recovery, there is also little perception that it is a real issue, possibly because many have come to doubt so many of the things the administration says that they arent even sure yet prices are falling. Beyond petrol and house prices, the fall is so small its not easy to perceive, especially when reductions are not shown in the form of like-for-like changes, but in the form of more complex offers and discounts.

In fact, statistics show that consumer prices were down in January by 1.5% over January 2014, while the GDP deflator for the whole of 2014 (the figure that is used to estimate the impact of inflation on overall output) was estimated at minus 0.7%, meaning that the inflation-corrected rise in GDP of 1.4% was only half that number - so statistically speaking at least, it is important.

But beyond those who simply - perhaps for definitional reasons - doubt that Spain is experiencing deflation rather than simple disinflation there are those who doubt falling prices really constitute a problem. This is the so-called good deflation argument. The FTs Tobias Buck sums up many of the arguments in his article Spanish Consumers Defy Deflationary Gloom , and economist/blogger Shaun Richards has a more theoretical version of the argument here .

The gist of the good deflation case is pretty simple: on the one hand, countries like Spain need falling prices and some kind of internal devaluation in their ongoing attempt to restore international competitiveness, and on the other, consumers arent so rational as to engage in long and complex calculations across infinite time just to work out whether it is better to purchase now-or-later products whose price is falling by only 1% a year.

At this point, it is perhaps worth noting what Mario Draghi says deflation is. Deflation, he tells us, is a generalised protracted fall in prices, accompanied by self-fulfilling expectations which has explosive downward dynamics.

Well, in this sense, little in the way of conclusions can be drawn from Spains initial contact with falling prices, since hasnt been that protracted (yet), and certainly has not developed self-fulfilling expectations: most people in Spain regard the situation as transitory. The self-fulfilling part of the definition relates to the possibility of a downward wage-price spiral, which mirrors the kind of spiral we see under inflationary dynamics but in the opposite direction. As prices fall, wage reductions can be offered - as we have seen in Japan - to maintain real wages constant, and these wage cuts then fuel further drops in prices. None of this is very evident in Spain so far, even if wages have fallen at some points in the crisis, and with this being an election year, the process is unlikely to take hold in 2015.

As for the explosive dynamics, I presume the explosive part refers to the impact of a wage price downward spiral on debt affordability, since debt-to-income ratios are constantly pushed up.

The idea that economies move into an outright contraction spiral simply because a small fall in prices is repeated over a number of years is a curious one whose origin isnt clear, and whose reality is to some extent denied - as FT Alphavilles Matthew Klein points out in a post entitled Did Japan Actually Lose Any Decades - by the fact that Japans economy is widely believed to have performed tolerably well all through the deflation years, with weaker consumption growth being more due to declining population (a problem which may also affect Spain in the future) than it is to a supposed phenomenon of purchase postponement. Its only when you start to look at Japans 245% debt-to-GDP level that you get to see where there might be a problem.

Even in the case of technological products, where price falls are constant and significant, people seem more likely to look for a combination of price and performance, since improvements are ongoing and unending, yet people do buy.

So if people are largely agreed that small but constant price falls dont - in and of themselves - produce widespread purchase postponement, and recognize in addition that Spain needs weaker inflation than Germany, then you might ask yourself - Why on earth are policymakers worried by the phenomenon? Yet, worried about it they are, since if they werent, why would the German government be acquiescing in sovereign bond purchases at the ECB (which, in principle, it is opposed to) to try to stop it digging in for the long haul?

Assuming you dont write this institutional concern off as yet another example of things only economists worry about, and go on to ask the question, you are likely to encounter three basic explanations: i) not all price falls are small, ii) there is an interest rate impact, and iii) those who are burdened by debts become even more burdened as time passes.

Purchase Postponement In Housing

Spanish housing offers us a clear example of something whose price has fallen considerably, around 40% since the 2007 peak, and whose price continues to fall (currently in the 3-5% per annum range).

Far from this fall in prices having stimulated demand - the deflation consumption boom argument - we are witnessing exactly the opposite effect: demand has collapsed, and is not recovering significantly (see my piece from April 2014, Firmly Anchored Expectations, No Postponement of Purchases? ). This is not surprising, since housing is a special sort of good (combining both use and investment), and the market is one where price movements tend to be self-reinforcing.

The Spanish housing market is still far from functioning normally - the number of new houses purchased in December was just over 7,000 - the lowest monthly level in more than a decade.

True, the number of second-hand houses being purchased is rising, but even the combined total is far from showing a sharp rebound.

Perhaps the most worrying thing about the fact that second-hand purchases are improving while new ones arent is that part of the explanation for this is that properties become reclassified as used 2 years after completion (so some of the second-hand houses being sold are, in fact, new), but this makes the situation with new houses deeply preoccupying, since there are more than half a million unsold housing units still classified as new (see this article on the Spanish property website Idealista), which means they have been built within the last two years.

The problem with the arrival of deflation in Spain is that this is going to create an environment where it becomes even more difficult for the housing market to really recover. In the meantime, constantly falling prices have had one consequence: Spaniards now prefer renting to buying - they have become more aware of the risk involved in owning a property. So perhaps rather than a simple process of purchase postponement, what we should be looking for are a broader set of behavioral changes over the longer term.

In any event, given the importance of the Spanish housing market to the economy in general - 75% of the countrys household wealth is tied up in property - the situation cannot be ignored: ending deflation in Spain would help push house price movements back into positive territory, and in so doing, would give a significant boost to the Spanish economy.

Then There Are Borrowing Costs

Moving beyond the issue of the supposed purchase displacement effect, Mario Draghi has a rather more powerful argument: the interest rate impact. Consumption growth in modern economies is as much about credit as it is about spending from current income. Too many people are still thinking about economic dynamics in terms of confidence and money stored under the mattress, or as some wit of a Bloomberg journalist put it, burying it beneath bathroom tiles . Credit matters to modern economies, as we have seen during the recent credit crunch. As consumer credit accelerates, economies grow, and normally when this happens, central bankers start raising interest rates to slow credit growth. In general, I think it is fair to say that those who think there is good deflation in Spain and those who think Spanish deflation is not so good agree about this.

Yet credit, curiously, is all about the temporal displacement of purchases. When credit is cheap and inflation is expected to be present, consumers tend to advance purchases. I dont know whether anyone wants to challenge this, but it is the cornerstone of any kind of interest rate policy. It is what gives the central bank, under normal conditions, the ability to apply counter cyclical policies in the face of recession. If this mechanism doesnt work, then there is a problem in the whole way we have been thinking about things.

Once interest rates reach the zero bound (I think it is impossible to separate discussion of deflation from the issues which arise in the context of a zero bound), then this mechanism hits a limiting factor, since while prices are in negative territory, conventional central banking theory makes bankers reluctant to follow by taking interest rates even deeper into the negative territory (although, it should be said, we are now increasingly seeing the negative nominal interest rate phenomenon in countries like Sweden, Denmark and Switzerland). As Mario Draghi put it when answering questions at the ECBs December 2014 press conference :

Now, let me make absolutely clear that we wont tolerate prolonged deviations from price stability, and the main reason is that if these deviations feed into inflation expectations, theyll cause a drop on medium to long-term inflation expectations, which by the way still are within a range consistent with medium-term price stability. But if these were to feed into inflation expectations, these lower outcomes of inflation, were to feed into lower inflation expectations, we would have a zero lower-bound nominal interest rate. This would be tantamount to an increase in the real interest rate.

Here, we find some key word expressions: prolonged deviations from price stability , lower long-term inflation expectations , increase in real interest rate . This situation is rather different from the one described by the Spanish economist Javier AndrÃs in the Tobias Buck article I mentioned earlier: The fall in prices, AndrÃs argued, is not strong enough, nor is it perceived to last that long, as to make it worthwhile for consumers to postpone the purchase of goods. In Spain at the moment, the deviations from price stability have not been strong enough or perceived to have lasted long enough to have an impact on consumer expectations.

In fact, deflation has been settling in for a lot longer than people in Spain think it has. The national statistics office maintain an ex-tax estimated EU HICP inflation rate, rather like the one the Bank of Japan maintains following the consumption tax rise in that country. Obviously, if you raise a consumption tax you raise inflation, but this kind of inflation is not thought to be positive (as we are seeing in Japan, the country fell back into recession after the increase), as it weakens consumption (as the various VAT rises have in Spain).

The ex-tax consumer price index tries to estimate underlying inflation without the tax, and - as the chart below reveals - if we use that measure, Spain has been hovering in deflation territory since late 2012. However, Spains citizens seem to have a kind of inflation bias after many years of high-ish inflation, and simply refuse to believe that prices have really started falling.

But Mr Draghi is worried (although NOT Mr Linde or Mr De Guindos, as we have seen) that uncorrected, they might eventually begin to believe and expect it, which is why he gives more importance to the issue and is taking measures accordingly. Indeed, such is the importance which the EU - as compared to Spanish - policymakers give to the issue, they are taking the measures even though their mere announcement has started causing a great deal of difficulty for central banks in countries like Switzerland, Sweden and Denmark. Again, it is noteworthy how by and large these central bankers are accepting such difficulties without protesting too much, since they understand why Draghi feels forced to implement them.

Mario Draghi argues that falling inflation expectations raise real interest rates by influencing the perceived cost of credit into the future. If consumers anticipate inflation, then that makes borrowing cheaper and people tend to advance purchases. Conversely, expected price falls make the cost of borrowing greater, make the desirability of advancing purchases via credit less, and in this sense, constitute monetary tightening. I am aware of an ongoing debate about whether interest rates really are a key factor influencing investment decisions, but I have never seen an argument suggesting that the cost of credit does not influence consumption. And so it is in Spain, since the demand for household borrowing is not surging, even though the countrys banks keep telling us they are now ready to lend .

Deflation Favors Savers Not Debtors

Deflation obviously favors those with money in the bank (unless the banks start charging negative rates on time deposits ), since the value of money steadily goes up. It is not so kind on those with debts, since as prices and incomes go down, debts remain unchanged and the burden of paying them increases.

Spain is an indebted country - the net international investment position (NIIP) is negative to the tune of around 100% of GDP - so it isnt the first place that comes to mind when you think of some kind of good deflation process. Japan, in comparison, has a positive NIIP of around 50% of GDP, making it a very different case.

The various sectors in Spains domestic economy are also very highly indebted, and the combined debt of the government, households and the business sector comes to about 275% of GDP, not that much less than it was at the start of the crisis. This is because while household and corporate debt has reduced, government debt has increased considerably. All of this means that if deflation sets in, it will be a serious problem for Spain.

Why Is It Likely Deflation Will Continue In Spain?

There are basically two theories for why eurozone countries are suffering from deflation at the moment. One of these is the idea of debt deflation , whereby overindebtedness creates a consumption drag, leading to a shortage of consumer demand while countries deleverage. This is certainly part of the problem that Spain is experiencing.

But there is second theory going the rounds ever since it was put into circulation by US economist Larry Summers at an IMF research conference in the autumn of 2013. The hypothesis Summers advances is based on ideas developed by Alvin Hansen in the 1930s, and the essential idea is that countries like Japan and those in the Euro area are experiencing some kind of demographically-driven secular stagnation. This is not the place to go into this theory in any depth, but basically the idea is that as working age population growth slows, comes to a halt and then turns negative, consumer demand starts to weaken and eventually decline. This affects the investment process, and it is the structural underinvestment which produces the demand shortfall, which means there is constant downward pressure on prices.

Paul Krugman provides a useful summary of the argument in his blog post Demography and the Bicycle Effect , and I offer a summary here . Of course, at this point it is only a hypothesis - the worrying thing is that in Spain, the possibility that this might be happening hasnt even been considered, let alone rejected.

So What Is It - Good Or Bad Deflation?

At the moment, Spains citizens have mainly seen only the good side of deflation: wages and pensions were up, while prices have fallen. Spanish hourly wages rose an annual 0.6% year-on-year in October 2014 (the last date for which we have available data), according to Eurostat; the countrys pensions were up 0.25% (despite the pension system running a loss of 1.3% of GDP), while consumer prices were down 1.1% year-on-year in December. In addition, 400,000 new jobs were created during the year. It is little surprise, then, to discover the statistics office report that price-corrected retail sales were up 1% on the year in 2014.

The question is, what happens next? Do workers and pensioners continue to receive above cost-of-living wage and pension increases? This being an election year, the chances are they do, which means more pressure on profit margins and more withdrawals from the pension reserve fund. And in the longer run, is this sustainable, or will wages and pensions start to fall in line with prices, producing the so-called spiral?

To get answers to these questions, we will need to wait to see in the years to come; but in the meantime, important changes may be occurring in consumer behaviour, not only in attitudes towards house purchase or in terms of any supposed postponement activity, but simply in the way people are becoming more sensitive to price movements and bargains. In this context, Justin McCurrys New York Times article on the Japanese experience - Spectre of deflation horrifies bankers, but Japan now has a taste for it - makes for interesting reading. In particular, his conclusion:

Spending habits honed over 20 years die hard. And if Japans experience can teach Europe anything, it is that government attempts to haul consumers out of the deflationary abyss are fraught with difficulty. An entire generation has come to embrace the deflationary devil they know. For the population at large, what started life as a reluctant thrift habit borne of necessity has quietly become the economic version of the Stockholm syndrome.

And heres another piece of evidence from Japan (The Real Housewives of Japan: Shopping for Bargains... Driving Deflation?) highlighting how years of deflation have led customers to expect price discounts, and have come to leverage online and social media in the search for ever better bargains.

Could 70,000 Japanese housewives tip this Asian giant into a deflationary spiral? As farfetched as that sounds, its become a major cause for concern in this nation of 128 million, which has been in an economic funk for two decades. These real housewives are part of a user-driven, social-networking site called Mainichi Tokubai, which delivers the best prices on specific grocery-store items to the fingertips of Tokyo-region consumers. To hear frustrated Japanese policymakers and retail executives tell it, these bargain-minded consumers and their equally frugal social-networking site are almost-single-handedly undercutting the Japanese economy.

The above article particularly caught my attention, since this is a phenomenon which is increasingly to be seen at work in Spain : people shopping around and expecting bargains, and using online media to help them in their search. In deflationary times, the evidence suggests the rise of a kind of consumer power where people come to expect permanent sales and discounts and virtually force these on retailers, to the great disadvantage of the small, local shop. This kind of behaviour obviously fuels deflation, and when entrenched, it is hard to change, as Stanley White noted in a 2012 Reuters article .

A bargain-hunting psychology is so entrenched in Japan - after two decades of stop-start economic growth, 15 years of falling wages and nearly 15 years of deflation - that the government will struggle to convince people that their incomes will improve enough for them to buy more expensive goods.

Spanish policymakers take note, and think twice in the future before you say Spain is simply suffering from good deflation.

See also Week Ahead Economic Overview on seekingalpha.com