If you take the time to read this you will see that bank credit has never been higher, interbank lending is ripping along just nicely and commercial paper (for other than financial institutions) is doing just fine.
Federal Reserve Bank of Minneapolis
Research Department
Facts andMyths about the Financial Crisis of 2008
V.V. Chari, Lawrence Christiano, and Patrick J. Kehoe
October 2008
ABSTRACT
The United States is indisputably undergoing a financial crisis. Here we examine four claims about the way the financial crisis is affecting the economy as a whole and argue that all four claims are myths. Conventional analyses of the financial crisis focus on interest rate spreads. We argue that such analyses may lead to mistaken inferences about the real costs of borrowing and argue that, during financial crises, variations in the levels of nominal interest rates might lead to better inferences about variations in the real costs of borrowing.
http://www.minneapolisfed.org/research/WP/WP666.pdf
My conclusions?
-- We've printed too much money
-- Basic economics teach us inflation will follow a short period of downturn
-- The world is not ending
Monday, October 27, 2008
Sunday, October 26, 2008
Brother Can You Spare A Dime?
Back on my post of October 6th, I asked who was next to ask for a bailout? And now this from the AP:
Oct 25, 2:53 PM (ET)By MARTIN CRUTSINGER
WASHINGTON (AP) - The bailout is now the hottest lobbying game in town.
Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.
The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.
These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.
The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.
Lobbying efforts are intensifying.
Full story is here.
Here is a starter list of groups that I believe should be at the top of the list:
(1) States that spend and borrow more than they can possibly take in or pay off. Starting with California and New York.
(2) Municipalities that spend and borrow more than they can take in or pay off. Starting with cities in California and New York.
(3) Mainstream Media: ABC, CBS, NBC, New York Times, etc. whose ad revenue has plummeted because no one trusts their reporting anymore.
(4) Major unions because their membership may get laid off during a prolonged downturn which could have a negative affect on dues collections (especially since their coffers are depleted from donating money to the candidates of their choice.
(5) Non-governmental groups whose donations are facing a down turn due to weakening economy. This would only apply to secular institutions (religious affiliates are 48th on this list). Groups such as ACORN and Moveon.org would top my list.
Who would you add to this top five?
Also, I still think we need to sell Alaska. And I want to once again thank the midwest for agreeing to foot the bill as well since the commerce centers on either coast are having a tough go of it.
Oct 25, 2:53 PM (ET)By MARTIN CRUTSINGER
WASHINGTON (AP) - The bailout is now the hottest lobbying game in town.
Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history.
The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession.
These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well.
The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.
Lobbying efforts are intensifying.
Full story is here.
Here is a starter list of groups that I believe should be at the top of the list:
(1) States that spend and borrow more than they can possibly take in or pay off. Starting with California and New York.
(2) Municipalities that spend and borrow more than they can take in or pay off. Starting with cities in California and New York.
(3) Mainstream Media: ABC, CBS, NBC, New York Times, etc. whose ad revenue has plummeted because no one trusts their reporting anymore.
(4) Major unions because their membership may get laid off during a prolonged downturn which could have a negative affect on dues collections (especially since their coffers are depleted from donating money to the candidates of their choice.
(5) Non-governmental groups whose donations are facing a down turn due to weakening economy. This would only apply to secular institutions (religious affiliates are 48th on this list). Groups such as ACORN and Moveon.org would top my list.
Who would you add to this top five?
Also, I still think we need to sell Alaska. And I want to once again thank the midwest for agreeing to foot the bill as well since the commerce centers on either coast are having a tough go of it.
Saturday, October 25, 2008
The Final Circumfusion
Before we start on this 3rd and final segment on taxes, let's review our tally to date:
$90B tax revenue from the 30% Illusion. (posted on 2008.10.18)
$50B tax revenue from the 6% Profusion. (posted on 2008.10.21)
$80B tax revenue from the Final Circumfusion.
------------------------------------------------------
$220B total tax revenue potential.
All of this is very achievable and there is nothing you can do about it- even if you know it is going to happen.
The last $80B comes from closing the tax loophole on 401K accounts and similar personal retirements accounts. Now, I am not suggesting that our government seize the $3T in personal retirement accounts like Argentina since I believe that our personal retirement accounts are protected under the Fourth Amendment of the US Constitution. I am saying however, that the tax preferences offered these accounts are costly to our country and a significant drain on government's ability to achieve wealth fairness.
As of now, Americans can contribute to private retirement accounts on a before tax basis- meaning that the portion that is contributed effectively reduces their Adjusted Gross Income and therefore their tax liability. In addition, gains are not taxed until money is withdrawn thus delaying revenue to the government and possibly reducing that revenue as the citizen is most likely to be in a lower tax bracket when they start withdrawing. All this must stop. We just can't afford this largess anymore.
Would you like some more tea?
$90B tax revenue from the 30% Illusion. (posted on 2008.10.18)
$50B tax revenue from the 6% Profusion. (posted on 2008.10.21)
$80B tax revenue from the Final Circumfusion.
------------------------------------------------------
$220B total tax revenue potential.
All of this is very achievable and there is nothing you can do about it- even if you know it is going to happen.
The last $80B comes from closing the tax loophole on 401K accounts and similar personal retirements accounts. Now, I am not suggesting that our government seize the $3T in personal retirement accounts like Argentina since I believe that our personal retirement accounts are protected under the Fourth Amendment of the US Constitution. I am saying however, that the tax preferences offered these accounts are costly to our country and a significant drain on government's ability to achieve wealth fairness.
As of now, Americans can contribute to private retirement accounts on a before tax basis- meaning that the portion that is contributed effectively reduces their Adjusted Gross Income and therefore their tax liability. In addition, gains are not taxed until money is withdrawn thus delaying revenue to the government and possibly reducing that revenue as the citizen is most likely to be in a lower tax bracket when they start withdrawing. All this must stop. We just can't afford this largess anymore.
Would you like some more tea?
Tuesday, October 21, 2008
The 6% Profusion
If you liked my "30% Illusion" posting - Here's part 2.
We are still targeting the UNREPRESENTED SUCCESSFUL or the 3.7 million tax filers of people making between 200K/year and $1 million/year.
Here is the expanded data on the Unrepresented Successful (let’s call them US for short):
Average adjusted gross income is $350K
Average taxable income (after deductions) is $290K
Average federal tax paid is $74K for an effective tax rate of 25%
Average Combined W2 Box 1 is $192K
I am looking at the W2 because we must have aFICA phase out. For purposes of my study, I put the FICA phase out at an even $100K for 2009 which means $92K of W2 wages ($192K - $100K) are not subject to "payroll taxes".
Removing the FICA ceiling, another 6.2% can be taken from the $92K - call it security for social security. That means another $6K from US's net income each year.
So, the 3% Illusion takes from US about $24K from net income and another $6K based on the 6% Profusion proposed here. So US better get ready because we need to take about $2.5K every month from US so we can be fairer.
But hold on, it can't stop there because the 6% Profusion only nets an additional $21B in taxes. We need to include those making between $100K and $200K in this plan as well because it doesn't make sense to stop FICA at $100K and start it up again at $200K. In the spirit of simple fairness we are lifting the ceiling for everyone (equal protection?). This is important because while there are on 3.7 million of US tax filers there are another 10.0 million between $100K and $200K which will net an additional $28B dollars.
So let's add it all up: $90B from the 3% illusion tax + $21B from the 6% Profusion Tax on US + $28B from the 6% Profusion Tax on filers below $200K results is about $140B in new government revenues. Now that's worth going after.
And, even if you know what is going to happen, there is little you can do about it because you have no representation.
Taxation without representation. Anyone for tea?
We are still targeting the UNREPRESENTED SUCCESSFUL or the 3.7 million tax filers of people making between 200K/year and $1 million/year.
Here is the expanded data on the Unrepresented Successful (let’s call them US for short):
Average adjusted gross income is $350K
Average taxable income (after deductions) is $290K
Average federal tax paid is $74K for an effective tax rate of 25%
Average Combined W2 Box 1 is $192K
I am looking at the W2 because we must have aFICA phase out. For purposes of my study, I put the FICA phase out at an even $100K for 2009 which means $92K of W2 wages ($192K - $100K) are not subject to "payroll taxes".
Removing the FICA ceiling, another 6.2% can be taken from the $92K - call it security for social security. That means another $6K from US's net income each year.
So, the 3% Illusion takes from US about $24K from net income and another $6K based on the 6% Profusion proposed here. So US better get ready because we need to take about $2.5K every month from US so we can be fairer.
But hold on, it can't stop there because the 6% Profusion only nets an additional $21B in taxes. We need to include those making between $100K and $200K in this plan as well because it doesn't make sense to stop FICA at $100K and start it up again at $200K. In the spirit of simple fairness we are lifting the ceiling for everyone (equal protection?). This is important because while there are on 3.7 million of US tax filers there are another 10.0 million between $100K and $200K which will net an additional $28B dollars.
So let's add it all up: $90B from the 3% illusion tax + $21B from the 6% Profusion Tax on US + $28B from the 6% Profusion Tax on filers below $200K results is about $140B in new government revenues. Now that's worth going after.
And, even if you know what is going to happen, there is little you can do about it because you have no representation.
Taxation without representation. Anyone for tea?
Saturday, October 18, 2008
The 3% illusion
The data for the analysis that follows is located on the following IRS website: http://www.irs.treas.gov/taxstats/indtaxstats/article/0,,id=96981,00.html
Would you be willing to have your taxes increased a mere 3% so that most Americans can get a tax break? If this idea intrigues you, read on…
Let’s segment tax payers in to three groups:
THE INSULATED: These are the people making more than $1 Million/year who through their wealth, power, and access to Washington legislators are able to take as much as they give. There are about 350,000 of these filers. They will not be discussed in this article for obvious reasons.
SALT OF THE EARTH: 88 million tax filers representing people whose adjusted gross income is below $200K/year.
UNREPRESENTED SUCCESSFUL: 3.7 million tax filers of people making between 200K/year and $1 million/year. Here is the data on the Unrepresented Successful (let’s call them US for short):
Average adjusted gross income is $350K
Average taxable income (after deductions) is $290K
Average federal tax paid is $74K for an effective tax rate of 25%
To give the Salt of the Earth each a $1,000 tax refund (whether they paid $1,000 in taxes or not), we need about $90 billion of tax increases which must be obtained from US.
The way we get US to agree is to point out that a mere 3% increase in your effective tax rate to 28% is all that is needed to help out most Americans. Certainly the Salt of the Earth would vote in this type of tax increase and it would seem to me that a similar vote “for” would be done by US.
To make this simple, we would phase out all deductions and exemptions for US and attach the 28% effective tax rate directly to the adjusted gross income of US. The exciting feature for US is that the old higher tax rates under the Bush administration of 33% and 35% are reduced to 28% and there is no longer a need for the Alternative Minimum Tax.
Do I have your vote?
Would you be willing to have your taxes increased a mere 3% so that most Americans can get a tax break? If this idea intrigues you, read on…
Let’s segment tax payers in to three groups:
THE INSULATED: These are the people making more than $1 Million/year who through their wealth, power, and access to Washington legislators are able to take as much as they give. There are about 350,000 of these filers. They will not be discussed in this article for obvious reasons.
SALT OF THE EARTH: 88 million tax filers representing people whose adjusted gross income is below $200K/year.
UNREPRESENTED SUCCESSFUL: 3.7 million tax filers of people making between 200K/year and $1 million/year. Here is the data on the Unrepresented Successful (let’s call them US for short):
Average adjusted gross income is $350K
Average taxable income (after deductions) is $290K
Average federal tax paid is $74K for an effective tax rate of 25%
To give the Salt of the Earth each a $1,000 tax refund (whether they paid $1,000 in taxes or not), we need about $90 billion of tax increases which must be obtained from US.
The way we get US to agree is to point out that a mere 3% increase in your effective tax rate to 28% is all that is needed to help out most Americans. Certainly the Salt of the Earth would vote in this type of tax increase and it would seem to me that a similar vote “for” would be done by US.
To make this simple, we would phase out all deductions and exemptions for US and attach the 28% effective tax rate directly to the adjusted gross income of US. The exciting feature for US is that the old higher tax rates under the Bush administration of 33% and 35% are reduced to 28% and there is no longer a need for the Alternative Minimum Tax.
Do I have your vote?
Saturday, October 11, 2008
Bank Holidays
Is this a good thing or a bad thing?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5mpMUORBWM
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/10/AR2008101003147.html?hpid=topnews
I am sensing a "drum beat" from the press. In today's world the holiday can be effected by simply flipping a switch.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5mpMUORBWM
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/10/AR2008101003147.html?hpid=topnews
I am sensing a "drum beat" from the press. In today's world the holiday can be effected by simply flipping a switch.
Monday, October 06, 2008
Regrets--- I missed by 50%
Dear Friends:
At this point I am sure that I have no credibility with you. On my post of 9/14, I indicated that the government created a trillion dollars. Now with a $700B bailout, $84B for Car Makers, $2.5B in new spending, we are now at almost $2 Trillion.
I am truly sorry for not being more accurate.
Any bets on what the number will be in November? Ooops, I forgot to add the
$600B+ additional money supply added by the Fed this month too.... Geez I need a new crystal ball.
Now California wants a bailout. New Hampshire is getting in line. And, New York is bellying up to the trough. Thank god for Iowa, I quess they are going to pay the bill.
Rumor is that we are going to sell Alaska to eliminate our debt. Is that Constitutional?
Ted
At this point I am sure that I have no credibility with you. On my post of 9/14, I indicated that the government created a trillion dollars. Now with a $700B bailout, $84B for Car Makers, $2.5B in new spending, we are now at almost $2 Trillion.
I am truly sorry for not being more accurate.
Any bets on what the number will be in November? Ooops, I forgot to add the
$600B+ additional money supply added by the Fed this month too.... Geez I need a new crystal ball.
Now California wants a bailout. New Hampshire is getting in line. And, New York is bellying up to the trough. Thank god for Iowa, I quess they are going to pay the bill.
Rumor is that we are going to sell Alaska to eliminate our debt. Is that Constitutional?
Ted
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