"Inflation has now been institutionalized at a fairly constant 5% per year. This has been scientifically determined to be the optimum level for generating the most revenue without causing public alarm. A 5% devaluation applies, not only to the money earned this year, but also to all that is left over from previous years. At the end of the first year, a dollar is worth 95 cents. At the end of the second year, the 95 cents is reduced again by 5%, leaving its worth at 90 cents, and so on. By the time a person has worked 20 years, the government will have confiscated 64% of every dollar he saved over those years. By the time he has worked 45 years, the hidden tax will be 90%. The government will take [in purchasing power] virtually everything a person saves over a lifetime."- G. Edward Griffin
So you have to invest to earn more than an average of 5% a year over you lifetime. Pension funds try for 9% and lately have trimmed that somewhat to maybe 8%. Still pie -in-the sky.
US Treasury bonds pay 3.75% for the privilege of tying your money up for 30 years - a lifetime. All that just to gurantee that the government gets 90% of your earnings. Remember the Feds get tax on the interest they pay you on these bonds!!!
Showing posts with label tax. Show all posts
Showing posts with label tax. Show all posts
Tuesday, October 12, 2010
Wednesday, September 1, 2010
Milton Friedman on spending
Quotable
“ I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending. The question is, "How do you hold down government spending?" Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half. The real danger we face is that number will creep up and up and up. The only effective way I think to hold it down, is to hold down the amount of income the government has. The way to do that is to cut taxes.”
Milton Friedman
“ I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible. The reason I am is because I believe the big problem is not taxes, the big problem is spending. The question is, "How do you hold down government spending?" Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half. The real danger we face is that number will creep up and up and up. The only effective way I think to hold it down, is to hold down the amount of income the government has. The way to do that is to cut taxes.”
Milton Friedman
Thursday, August 19, 2010
Billions spent on housing tax breaks accomplish little, experts say
The U.S. government spent $230 billion last year to support homeownership but accomplished almost nothing beyond putting money into the pocket of the rich, experts told a conference on housing policy. The rate of homeownership in the U.S.
is about the same as in Canada and less than that of Australia, Britain, Ireland and Spain, which all offer little in the way of homeownership tax breaks. The Urban Institute said tax incentives for U.S. mortgage holders are worth $5,459 a year to people making more than $250,000 but only $91 a year to those earning less than $40,000. USA TODAY
No one working on FNM/FRE is even paying attention to this it seems (click on heading to read the full article)
is about the same as in Canada and less than that of Australia, Britain, Ireland and Spain, which all offer little in the way of homeownership tax breaks. The Urban Institute said tax incentives for U.S. mortgage holders are worth $5,459 a year to people making more than $250,000 but only $91 a year to those earning less than $40,000. USA TODAY
No one working on FNM/FRE is even paying attention to this it seems (click on heading to read the full article)
Tuesday, July 27, 2010
Analysis: Geithner and Bernanke differ on a tax issue
U.S. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke have been in sync on most issues during the past three years, but recent comments from the officials suggest they are on opposite sides of a tax issue, according to The Wall Street Journal. Bernanke told lawmakers that he supports continuing tax rates that expire early next year.
Geithner, on the other hand, said those tax rates should be allowed to expire.
The Wall Street Journal
Geithner, on the other hand, said those tax rates should be allowed to expire.
The Wall Street Journal
Friday, July 23, 2010
The Tax Tsunami On The Horizon
Todays Investors Business Daily Editorial says it all...goodbye any economic recovery
Many voters are looking forward to 2011, hoping a new Congress will put the country back on the right track. But unless something's done soon, the new year will also come with a raft of tax hikes — including a return of the death tax.
Through the end of this year, the federal estate tax rate is zero — thanks to the package of broad-based tax cuts that President Bush pushed through to get the economy going earlier in the decade.
But as of midnight Dec. 31, the death tax returns — at a rate of 55% on estates of $1 million or more. The effect this will have on hospital life-support systems is already a matter of conjecture.
Resurrection of the death tax, however, isn't the only tax problem that will be ushered in Jan. 1. Many other cuts from the Bush administration are set to disappear and a new set of taxes will materialize. And it's not just the rich who will pay.
The lowest bracket for the personal income tax, for instance, moves up 50% — to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.
But the damage doesn't stop there.
The marriage penalty also makes a comeback, and the capital gains tax will jump 33% — to 20% from 15%. The tax on dividends will go all the way from 15% to 39.6% — a 164% increase.
Both the cap-gains and dividend taxes will go up further in 2013 as the health care reform adds a 3.8% Medicare levy for individuals making more than $200,000 a year and joint filers making more than $250,000. Other tax hikes include: halving the child tax credit to $500 from $1,000 and fixing the standard deduction for couples at the same level as it is for single filers.
Letting the Bush cuts expire will cost taxpayers $115 billion next year alone, according to the Congressional Budget Office, and $2.6 trillion through 2020.
But even more tax headaches lie ahead. This "second wave" of hikes, as Americans for Tax Reform puts it, are designed to pay for ObamaCare and include:
The Medicine Cabinet Tax. Americans, says ATR, "will no longer be able to use health savings account, flexible spending account, or health reimbursement pretax dollars to purchase nonprescription, over-the-counter medicines (except insulin)."
The HSA Withdrawal Tax Hike. "This provision of ObamaCare," according to ATR, "increases the additional tax on nonmedical early withdrawals from an HSA from 10% to 20%, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10%."
Brand Name Drug Tax. Makers and importers of brand-name drugs will be liable for a tax of $2.5 billion in 2011. The tax goes to $3 billion a year from 2012 to 2016, then $3.5 billion in 2017 and $4.2 billion in 2018. Beginning in 2019 it falls to $2.8 billion and stays there. And who pays the new drug tax? Patients, in the form of higher prices.
Economic Substance Doctrine. ATR reports that "The IRS is now empowered to disallow perfectly legal tax deductions and maneuvers merely because it judges that the deduction or action lacks 'economic substance.'"
A third and final (for now) wave, says ATR, consists of the alternative minimum tax's widening net, tax hikes on employers and the loss of deductions for tuition:
• The Tax Policy Center, no right-wing group, says that the failure to index the AMT will subject 28.5 million families to the tax when they file next year, up from 4 million this year.
• "Small businesses can normally expense (rather than slowly deduct, or 'depreciate') equipment purchases up to $250,000," says ATR. "This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be 'depreciated.'"
• According to ATR, there are "literally scores of tax hikes on business that will take place," plus the loss of some tax credits. The research and experimentation tax credit will be the biggest loss, "but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs."
• The deduction for tuition and fees will no longer be available and there will be limits placed on education tax credits. Teachers won't be able to deduct their classroom expenses and employer-provided educational aid will be restricted. Thousands of families will no longer be allowed to deduct student loan interest.
Then there's the tax on Americans who decline to buy health care insurance (the tax the administration initially said wasn't a tax but now argues in court that it is) plus a 3.8% Medicare tax beginning in 2013 on profits made in real estate transactions by wealthier Americans.
Not all Americans may fully realize what's in store come Jan. 1. But they should have a pretty good idea by the mid-term elections, and members of Congress might take note of our latest IBD/TIPP Poll (summarized above).
Fifty-one percent of respondents favored making the Bush cuts permanent vs. 28% who didn't. Republicans were more than 4 to 1 and Independents more than 2 to 1 in favor. Only Democrats were opposed, but only by 40%-38%.
The cuts also proved popular among all income groups — despite the Democrats' oft-heard assertion that Bush merely provided "tax breaks for the wealthy." Fact is, Bush cut taxes for everyone who paid them, and the cuts helped the nation recover from a recession and the worst stock-market crash since 1929.
Maybe, just maybe, Americans remember that — and will not forget come Nov. 2.
Many voters are looking forward to 2011, hoping a new Congress will put the country back on the right track. But unless something's done soon, the new year will also come with a raft of tax hikes — including a return of the death tax.
Through the end of this year, the federal estate tax rate is zero — thanks to the package of broad-based tax cuts that President Bush pushed through to get the economy going earlier in the decade.
But as of midnight Dec. 31, the death tax returns — at a rate of 55% on estates of $1 million or more. The effect this will have on hospital life-support systems is already a matter of conjecture.
Resurrection of the death tax, however, isn't the only tax problem that will be ushered in Jan. 1. Many other cuts from the Bush administration are set to disappear and a new set of taxes will materialize. And it's not just the rich who will pay.
The lowest bracket for the personal income tax, for instance, moves up 50% — to 15% from 10%. The next lowest bracket — 25% — will rise to 28%, and the old 28% bracket will be 31%. At the higher end, the 33% bracket is pushed to 36% and the 35% bracket becomes 39.6%.
But the damage doesn't stop there.
The marriage penalty also makes a comeback, and the capital gains tax will jump 33% — to 20% from 15%. The tax on dividends will go all the way from 15% to 39.6% — a 164% increase.
Both the cap-gains and dividend taxes will go up further in 2013 as the health care reform adds a 3.8% Medicare levy for individuals making more than $200,000 a year and joint filers making more than $250,000. Other tax hikes include: halving the child tax credit to $500 from $1,000 and fixing the standard deduction for couples at the same level as it is for single filers.
Letting the Bush cuts expire will cost taxpayers $115 billion next year alone, according to the Congressional Budget Office, and $2.6 trillion through 2020.
But even more tax headaches lie ahead. This "second wave" of hikes, as Americans for Tax Reform puts it, are designed to pay for ObamaCare and include:
The Medicine Cabinet Tax. Americans, says ATR, "will no longer be able to use health savings account, flexible spending account, or health reimbursement pretax dollars to purchase nonprescription, over-the-counter medicines (except insulin)."
The HSA Withdrawal Tax Hike. "This provision of ObamaCare," according to ATR, "increases the additional tax on nonmedical early withdrawals from an HSA from 10% to 20%, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10%."
Brand Name Drug Tax. Makers and importers of brand-name drugs will be liable for a tax of $2.5 billion in 2011. The tax goes to $3 billion a year from 2012 to 2016, then $3.5 billion in 2017 and $4.2 billion in 2018. Beginning in 2019 it falls to $2.8 billion and stays there. And who pays the new drug tax? Patients, in the form of higher prices.
Economic Substance Doctrine. ATR reports that "The IRS is now empowered to disallow perfectly legal tax deductions and maneuvers merely because it judges that the deduction or action lacks 'economic substance.'"
A third and final (for now) wave, says ATR, consists of the alternative minimum tax's widening net, tax hikes on employers and the loss of deductions for tuition:
• The Tax Policy Center, no right-wing group, says that the failure to index the AMT will subject 28.5 million families to the tax when they file next year, up from 4 million this year.
• "Small businesses can normally expense (rather than slowly deduct, or 'depreciate') equipment purchases up to $250,000," says ATR. "This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be 'depreciated.'"
• According to ATR, there are "literally scores of tax hikes on business that will take place," plus the loss of some tax credits. The research and experimentation tax credit will be the biggest loss, "but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs."
• The deduction for tuition and fees will no longer be available and there will be limits placed on education tax credits. Teachers won't be able to deduct their classroom expenses and employer-provided educational aid will be restricted. Thousands of families will no longer be allowed to deduct student loan interest.
Then there's the tax on Americans who decline to buy health care insurance (the tax the administration initially said wasn't a tax but now argues in court that it is) plus a 3.8% Medicare tax beginning in 2013 on profits made in real estate transactions by wealthier Americans.
Not all Americans may fully realize what's in store come Jan. 1. But they should have a pretty good idea by the mid-term elections, and members of Congress might take note of our latest IBD/TIPP Poll (summarized above).
Fifty-one percent of respondents favored making the Bush cuts permanent vs. 28% who didn't. Republicans were more than 4 to 1 and Independents more than 2 to 1 in favor. Only Democrats were opposed, but only by 40%-38%.
The cuts also proved popular among all income groups — despite the Democrats' oft-heard assertion that Bush merely provided "tax breaks for the wealthy." Fact is, Bush cut taxes for everyone who paid them, and the cuts helped the nation recover from a recession and the worst stock-market crash since 1929.
Maybe, just maybe, Americans remember that — and will not forget come Nov. 2.
Friday, July 9, 2010
Geithner indicates good news on taxes for capital gains and dividends
Treasury Secretary Timothy Geithner said the White House wants to keep the top tax rate on dividends and capital gains at a proposed 20%.
The rate is 15%, so 20% would be a large increase, but it would be less than the 39.6% rate congressional Democrats want for dividends.
The Wall Street Journal
The rate is 15%, so 20% would be a large increase, but it would be less than the 39.6% rate congressional Democrats want for dividends.
The Wall Street Journal
Friday, June 25, 2010
This economic stuff really isn’t hard.
This economic stuff really isn’t hard.
“Taxing moves money and spending moves resources.”
In other words, why on God’s green earth would anyone with a pulse believe taking money (taxes) from the most productive side of the economy (private sector), which uses resources efficiently thanks to the invisible hand of the market, and give it to the most unproductive side of the economy (government) who continually wastes finite resources (spending), thanks to the visible boot of the market?
Three answers:
1) Brainwashed by the Temples of Keynesian Hell, often referred to as Ivy League economics departments
2) Hubris, and a deep-seated belief in one’s ability to structure the lives of others
3) Pay off political cronies and “interest” groups
I had the privilege of listening to the Nobel Prize winning economist Milton Friedman in a lecture series during my MBA Economics classes say much the same thing.
This opinion is courtesy of Jack Crooks at Black Swan Capital and the link to the full discussion is above. An interesting argument.. read it, it dosnt take long.
“Taxing moves money and spending moves resources.”
In other words, why on God’s green earth would anyone with a pulse believe taking money (taxes) from the most productive side of the economy (private sector), which uses resources efficiently thanks to the invisible hand of the market, and give it to the most unproductive side of the economy (government) who continually wastes finite resources (spending), thanks to the visible boot of the market?
Three answers:
1) Brainwashed by the Temples of Keynesian Hell, often referred to as Ivy League economics departments
2) Hubris, and a deep-seated belief in one’s ability to structure the lives of others
3) Pay off political cronies and “interest” groups
I had the privilege of listening to the Nobel Prize winning economist Milton Friedman in a lecture series during my MBA Economics classes say much the same thing.
This opinion is courtesy of Jack Crooks at Black Swan Capital and the link to the full discussion is above. An interesting argument.. read it, it dosnt take long.
Thursday, June 4, 2009
Government's Most Destructive Policy Yet
Right now, the so-called Waxman-Markey bill is snaking its way through the greasy halls of Congress.
"Waxman-Markey" is the name given to the new "cap and trade" bill designed to limit America's carbon emissions. It looks like it's the most expensive thing to hit the economy since the financial crisis began.
Even the normally mild-mannered Wall Street Journal called it "one of the most ambitious efforts to re-engineer American social and economic behavior in decades, presenting risks and opportunities for a wide array of businesses from Silicon Valley to the coal fields of the Appalachians."
First off, the stated objective of cutting carbon emissions by 83% by 2050 will go down in history as outrageous – akin to when Who drummer Keith Moon drove his Lincoln Continental into the pool at the Holiday Inn. I think members of Congress must be smoking the same thing Moon was.
To show you how patently ridiculous such a goal is, I turn to Questar's CEO, Keith Rattie. Questar is an oil and gas company. Rattie is an engineer. He has been in the business since the 1970s. He walks us through the basic math in a speech he made at Utah Valley University on April 2 called "Energy Myths and Realities." Rattie uses Utah as an example:
Utah's carbon footprint today is about 66 million tons per year. Our population is 2.6 million. You divide those two numbers and the average Utahan today has a carbon footprint of about 25 tons per year. An 80% reduction in Utah's carbon footprint by 2050 implies 66 million tons today to about 13 million tons per year by 2050. If Utah's population continues to grow at 2% per year, by 2050, there will be about 6 million people living in our state. So 13 million tons divided by 6 million people equals 2.2 tons per person per year.
Question: When was the last time Utah's carbon footprint was as low as 2.2 tons per person? Answer: Not since Brigham Young and the Mormon pioneers first entered the Wasatch Valley and declared, 'This is the place.'
You can extend this math over the whole country – a growing mass of 300 million people. To meet the Waxman-Markey bill's goals would mean we have to go back to a carbon footprint about as big as the Pilgrims' at Plymouth Rock circa 1620.
So I think the bill is absurd. I think it is also a great blow to what is left of American industry. But this is the way the world works. Politicians do dumb things.
Agriculture. Agriculture, for whatever reasons, is exempt from the new rules. So farmers don't have to worry about those manure pools out back or the flatulent cows emitting methane all over God's green meadows. Those big tractors? Burn up that diesel! Agriculture is a winner by virtue of not losing, like a hockey team that skates to a tie.
Steel. Big loser. U.S. Steel, AK Steel, and even foreign steel companies with U.S. operations all get a big kick in the family jewels on this one. Steelmaking emits all kinds of carbon dioxide. The worst-case scenario here is that the U.S. simply won't be making steel at some point in the future. The plants will all go to Brazil. China is already the biggest steel producer in the world. Now we just handed the country a bunch of new business. Avoid big steel in the U.S.
Oil refiners. Losers. This is an industry in which it is hard to make money most of the time as it is. Now, under the new bill, refineries are really screwed. Basically, they are on the hook for about 44% of U.S. carbon emissions. They would be among the biggest buyers of carbon emission allowances. I think with one stroke of the pen, the U.S. government just made the U.S. refining industry that much smaller. Lots of these older refineries will just have to close. U.S. imports for gasoline will rise.
I think the refinery industry already sees the writing on the wall. This is one reason why Valero, the biggest U.S. refinery, has been quick to get into the politically favored ethanol business. It's also expanding overseas. Avoid the refineries.
Trading desks. Winners. It figures. As if the government doesn't help financial firms enough, it is going to hand them a nice tomato in trading carbon credits. The head of Morgan Stanley's U.S. emission trading desk said: "Carbon, while relatively small, is a critical piece of our commodities offering." So some financial firms with trading desks in carbon get a nice little payday.
To sum up, this is only the beginning. At the end of the day, this obsession with carbon footprints means that Americans are going to have to pay a lot more for products that use fossil fuels. It means we are going to pay a lot more for energy. Obama and his crew can draw up whatever fantasies they want, but they can't repeal the laws of economics, which, like forces of nature, win out every time.
So there will be plenty of losers.
"Waxman-Markey" is the name given to the new "cap and trade" bill designed to limit America's carbon emissions. It looks like it's the most expensive thing to hit the economy since the financial crisis began.
Even the normally mild-mannered Wall Street Journal called it "one of the most ambitious efforts to re-engineer American social and economic behavior in decades, presenting risks and opportunities for a wide array of businesses from Silicon Valley to the coal fields of the Appalachians."
First off, the stated objective of cutting carbon emissions by 83% by 2050 will go down in history as outrageous – akin to when Who drummer Keith Moon drove his Lincoln Continental into the pool at the Holiday Inn. I think members of Congress must be smoking the same thing Moon was.
To show you how patently ridiculous such a goal is, I turn to Questar's CEO, Keith Rattie. Questar is an oil and gas company. Rattie is an engineer. He has been in the business since the 1970s. He walks us through the basic math in a speech he made at Utah Valley University on April 2 called "Energy Myths and Realities." Rattie uses Utah as an example:
Utah's carbon footprint today is about 66 million tons per year. Our population is 2.6 million. You divide those two numbers and the average Utahan today has a carbon footprint of about 25 tons per year. An 80% reduction in Utah's carbon footprint by 2050 implies 66 million tons today to about 13 million tons per year by 2050. If Utah's population continues to grow at 2% per year, by 2050, there will be about 6 million people living in our state. So 13 million tons divided by 6 million people equals 2.2 tons per person per year.
Question: When was the last time Utah's carbon footprint was as low as 2.2 tons per person? Answer: Not since Brigham Young and the Mormon pioneers first entered the Wasatch Valley and declared, 'This is the place.'
You can extend this math over the whole country – a growing mass of 300 million people. To meet the Waxman-Markey bill's goals would mean we have to go back to a carbon footprint about as big as the Pilgrims' at Plymouth Rock circa 1620.
So I think the bill is absurd. I think it is also a great blow to what is left of American industry. But this is the way the world works. Politicians do dumb things.
Agriculture. Agriculture, for whatever reasons, is exempt from the new rules. So farmers don't have to worry about those manure pools out back or the flatulent cows emitting methane all over God's green meadows. Those big tractors? Burn up that diesel! Agriculture is a winner by virtue of not losing, like a hockey team that skates to a tie.
Steel. Big loser. U.S. Steel, AK Steel, and even foreign steel companies with U.S. operations all get a big kick in the family jewels on this one. Steelmaking emits all kinds of carbon dioxide. The worst-case scenario here is that the U.S. simply won't be making steel at some point in the future. The plants will all go to Brazil. China is already the biggest steel producer in the world. Now we just handed the country a bunch of new business. Avoid big steel in the U.S.
Oil refiners. Losers. This is an industry in which it is hard to make money most of the time as it is. Now, under the new bill, refineries are really screwed. Basically, they are on the hook for about 44% of U.S. carbon emissions. They would be among the biggest buyers of carbon emission allowances. I think with one stroke of the pen, the U.S. government just made the U.S. refining industry that much smaller. Lots of these older refineries will just have to close. U.S. imports for gasoline will rise.
I think the refinery industry already sees the writing on the wall. This is one reason why Valero, the biggest U.S. refinery, has been quick to get into the politically favored ethanol business. It's also expanding overseas. Avoid the refineries.
Trading desks. Winners. It figures. As if the government doesn't help financial firms enough, it is going to hand them a nice tomato in trading carbon credits. The head of Morgan Stanley's U.S. emission trading desk said: "Carbon, while relatively small, is a critical piece of our commodities offering." So some financial firms with trading desks in carbon get a nice little payday.
To sum up, this is only the beginning. At the end of the day, this obsession with carbon footprints means that Americans are going to have to pay a lot more for products that use fossil fuels. It means we are going to pay a lot more for energy. Obama and his crew can draw up whatever fantasies they want, but they can't repeal the laws of economics, which, like forces of nature, win out every time.
So there will be plenty of losers.
Thursday, April 2, 2009
War on poor Southerners
Barack Obama got elected for two reasons
1. It felt so good to so many people to vote against Bush & Co.
And...
2. He promised the world to people who like to believe you can get something for nothing.
Everyone who believes this nonsense will eventually get what they deserve. But smokers who believe are going to "get it" immediately. Obama's massive cigarette tax increase - put into effect today - is going straight for the pocketbooks of smokers. Most smokers are poor, so it's basically a tax on poor people.
The tax increase will also depress cigarette sales... which is particularly harmful to Southern states with low cigarette tax rates. It greatly increases the amount per pack a Southerner will pay for his smokes.
You asked for it America... here come the taxes.
1. It felt so good to so many people to vote against Bush & Co.
And...
2. He promised the world to people who like to believe you can get something for nothing.
Everyone who believes this nonsense will eventually get what they deserve. But smokers who believe are going to "get it" immediately. Obama's massive cigarette tax increase - put into effect today - is going straight for the pocketbooks of smokers. Most smokers are poor, so it's basically a tax on poor people.
The tax increase will also depress cigarette sales... which is particularly harmful to Southern states with low cigarette tax rates. It greatly increases the amount per pack a Southerner will pay for his smokes.
You asked for it America... here come the taxes.
Monday, February 23, 2009
The "stimulus" timed to next election campaign
It is interesting to note that the "stimulus" package of spending just passed has been touted by politicians from congress to the White House as the medicine the economy needs.
It is ironic that the vast bulk of spending dosn't come on stream this year 2009 or even next year 2010 but really hots up in 2011. Just in time for the next presidential election er re-election, campaign.
So those of you who think that politicians cared to read the details of this behemoth spending bill, let alone been given time to think through the unintended consequences of these expenditures must have been at the same party that Michael Phelps attended.
Between now and the start of the next election campaign, we are going to see ever more strained relations with our trading partners who are going to be strong armed into buying the trillion dollars of Treasury securities we must sell. They are ,of course, going to extract tribute by forcing us to pay ever higher interest rates.
That means that every other interest rate in this country that is keyed off treasuries must go up in tandem. Poof goes the real estate/mortgage rescue... So the banking system will paralyze..
And of course unemployment is going to hit 8% this year and 9% to who knows maybe even 10% next year. So tax revenues will drop... it does work that way ya know, no income so no tax liability...oh yes we do tax unemployment benefits..we dont?? just wait a while.
Then of course, that exquisitely timed political calculation kicks in. Spend untold billions of dollars into an economy with rising unemployment (nevermind that the banking system will be in a mess), and rising prices and dropping real estate values and rising bankruptcies, foreclosures and demands for costly social services.
But wait... the solution is obvious!! Raise tax rates on those who can afford to pay!!Easy peasy!!
About 5% ish of taxpayers by then will fall into that magic $250,000/yr rich category. Or is that $100,000 or $75,000 I forget. But then we can always go back and see where our esteemed Veep defined rich.
Oh yes... the most wonderful political fairy tale is that higher tax rates wont ever change the behaviour of those suffering the tax raise. Their behaviour dosn't change..no no they meekly pay up. The DONT hire accountants to find any and all loopholes, or buy legal tax shelters, or switch their behaviour so that they avoid rising into the higher tax brackets. No No they dont do that despite 5000 years of economic history to the contrary with nary an exception (there are a few but weapons and death threats were involved--our legal system would never stand for that).
This time its different. Ask Nancy Pelosi. The arithmetic is too elegant to mess up with reality. Or Chuck Schumer who wants us to join him in his arrogant conviction that people "dont really care about a little pork". I believe Marie Antoinette referred to it as cake but she lost her head anyway. Watch out Chuck!!!
Prediction: the people WILL notice. Beware o politicians. You might have to get a real job where your pay actually does depend on your performance and making tthe correct choices. The greatest politician job security bill ever foisted on a weary and scared nation will come back to bite you.
Chuck..lowest ever approval ratings for Congress are that way for a reason. Remember it cost Marie Antoinette her head. Will this cost this nation its head? We are a few heartbeats away from finding out.
If you have any investments sell them now and sit on the cash.... I predict that very soon you will get VERY much bigger returns from US treasury debt than available now.
It is ironic that the vast bulk of spending dosn't come on stream this year 2009 or even next year 2010 but really hots up in 2011. Just in time for the next presidential election er re-election, campaign.
So those of you who think that politicians cared to read the details of this behemoth spending bill, let alone been given time to think through the unintended consequences of these expenditures must have been at the same party that Michael Phelps attended.
Between now and the start of the next election campaign, we are going to see ever more strained relations with our trading partners who are going to be strong armed into buying the trillion dollars of Treasury securities we must sell. They are ,of course, going to extract tribute by forcing us to pay ever higher interest rates.
That means that every other interest rate in this country that is keyed off treasuries must go up in tandem. Poof goes the real estate/mortgage rescue... So the banking system will paralyze..
And of course unemployment is going to hit 8% this year and 9% to who knows maybe even 10% next year. So tax revenues will drop... it does work that way ya know, no income so no tax liability...oh yes we do tax unemployment benefits..we dont?? just wait a while.
Then of course, that exquisitely timed political calculation kicks in. Spend untold billions of dollars into an economy with rising unemployment (nevermind that the banking system will be in a mess), and rising prices and dropping real estate values and rising bankruptcies, foreclosures and demands for costly social services.
But wait... the solution is obvious!! Raise tax rates on those who can afford to pay!!Easy peasy!!
About 5% ish of taxpayers by then will fall into that magic $250,000/yr rich category. Or is that $100,000 or $75,000 I forget. But then we can always go back and see where our esteemed Veep defined rich.
Oh yes... the most wonderful political fairy tale is that higher tax rates wont ever change the behaviour of those suffering the tax raise. Their behaviour dosn't change..no no they meekly pay up. The DONT hire accountants to find any and all loopholes, or buy legal tax shelters, or switch their behaviour so that they avoid rising into the higher tax brackets. No No they dont do that despite 5000 years of economic history to the contrary with nary an exception (there are a few but weapons and death threats were involved--our legal system would never stand for that).
This time its different. Ask Nancy Pelosi. The arithmetic is too elegant to mess up with reality. Or Chuck Schumer who wants us to join him in his arrogant conviction that people "dont really care about a little pork". I believe Marie Antoinette referred to it as cake but she lost her head anyway. Watch out Chuck!!!
Prediction: the people WILL notice. Beware o politicians. You might have to get a real job where your pay actually does depend on your performance and making tthe correct choices. The greatest politician job security bill ever foisted on a weary and scared nation will come back to bite you.
Chuck..lowest ever approval ratings for Congress are that way for a reason. Remember it cost Marie Antoinette her head. Will this cost this nation its head? We are a few heartbeats away from finding out.
If you have any investments sell them now and sit on the cash.... I predict that very soon you will get VERY much bigger returns from US treasury debt than available now.
Tuesday, January 20, 2009
Mortgage Workou 3: Benefits to Mortgage Holders under water on the Mortgage
a. Current law-abiding households who are current on their mortgages and are seeing negative real value of their primary residence will be able to remain in their homes at affordable cost with a potential for some upside appreciation in the value of their property and a participation in the realization of that potential together with Govt on sale of their property.
b. Banks and other mortgage owners will have a value, real and ascertainable, assigned to each and every such distressed mortgage AND they will have, therefore a viable asset to sell to mortgage repackagers on Wall Street; this frees up capital to lend out on new mortgages under more appropriate terms (20% downpayment, 30% max housing cost : household income)
c. Government gets a real, visible path to recovery of money appropriated to this program, with interest.
d. Government will be helping citizens who most need help and restoring their confidence in The American Dream.
e. Government will restore confidence in the banking system worldwide by establishing a system of mortgage valuation that establishes a valuation methodology that could easily be cloned by private investors and capitalized on by the Financial Services industry worldwide.
f. Bankers and other lenders will now have a method of assessing the value of collateral offered interbank and lending between institutions, currently effectively at a standstill, can be reinvigorated.
g. No new government burocracy needed. FNMA/FHLMC become effective arms of the Federal Reserve who is charged with housing stability as a third mandate.
The result will be a very viable, self-funding solution to the current housing/banking crisis.
Homeowners will see their property values written down to reasonable values. Mortgages then become easy to value as the underlying properties have a value. Homeowners have an affordable mortgage payment, freeing up discretionary income for spending on other goods and services.
Most importantly, homeowners will not be tempted to walk away from unaffordable payments, or houses worth less than they owe, Foreclosure and bankruptcy is avoided completely.
There is a very real potential for gain by the government. Interest on mortgages comes into the Fed Reserve balance sheet. Potential for profit exists on sale of properties. No new government agencies need to be established.
The banking system is unclogged and consumer confidence is restored. All without requiring additional tax burdens on unborn generations.
b. Banks and other mortgage owners will have a value, real and ascertainable, assigned to each and every such distressed mortgage AND they will have, therefore a viable asset to sell to mortgage repackagers on Wall Street; this frees up capital to lend out on new mortgages under more appropriate terms (20% downpayment, 30% max housing cost : household income)
c. Government gets a real, visible path to recovery of money appropriated to this program, with interest.
d. Government will be helping citizens who most need help and restoring their confidence in The American Dream.
e. Government will restore confidence in the banking system worldwide by establishing a system of mortgage valuation that establishes a valuation methodology that could easily be cloned by private investors and capitalized on by the Financial Services industry worldwide.
f. Bankers and other lenders will now have a method of assessing the value of collateral offered interbank and lending between institutions, currently effectively at a standstill, can be reinvigorated.
g. No new government burocracy needed. FNMA/FHLMC become effective arms of the Federal Reserve who is charged with housing stability as a third mandate.
The result will be a very viable, self-funding solution to the current housing/banking crisis.
Homeowners will see their property values written down to reasonable values. Mortgages then become easy to value as the underlying properties have a value. Homeowners have an affordable mortgage payment, freeing up discretionary income for spending on other goods and services.
Most importantly, homeowners will not be tempted to walk away from unaffordable payments, or houses worth less than they owe, Foreclosure and bankruptcy is avoided completely.
There is a very real potential for gain by the government. Interest on mortgages comes into the Fed Reserve balance sheet. Potential for profit exists on sale of properties. No new government agencies need to be established.
The banking system is unclogged and consumer confidence is restored. All without requiring additional tax burdens on unborn generations.
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