Guest post by Azizonomics.
Our financial system is broken. Our political system is broken. Oligarchs and their cronies reap easy rewards — bailouts, crony capitalism, corporate handouts, liquidity injections, favourable “regulation” (that puts oligarchs’ competition out of a business) — while taxpayers pay the bill.
But nothing lasts forever.
Thanksgiving is very much the day of the black swan. Nassim Taleb used the example of a turkey fattened up for Thanksgiving as an example of a black swan phenomenon. The turkey sees itself being fed every day by the turkey farmer and assumes based on past behaviour that this will continued indefinitely until the day comes when the farmer kills the turkey. Nothing in the turkey’s limited experiential dataset suggested such an event.
Guest post by Lance Roberts of Streettalklive.
The recent market selloff has not been about the re-election of President Obama but rather the repositioning of assets by professional investors in anticipation of three key events coming between now and the end of this year – the “fiscal cliff”, the debt ceiling and the expiration of the Transaction Account Guarantee (TAG). Each of these events have different impacts on the economy and the financial markets – but the one thing that they have in common is that they will all be battle grounds between a dividend House and Senate.
While there has been a plethora of articles and media coverage about the upcoming standoff between the two parties, little has been written to cover the details of exactly what will be impacted and why it is so important to the financial markets and economy.
One of the primary reasons for the market selloff since the announcement of QE3 has been in anticipation of the some of the largest tax hikes in the history of America, which will take place at the end of the year. These tax hikes will impact families and businesses, the middle class and the rich, the economy and the markets.
In 2001, and then again in 2003, President Bush and Congress enacted tax cuts to help restart the economy post the tech bubble, 9/11 terror attack and recession. Primarily these tax cuts were focused on small business owners, families, and investors and, while dubbed the “Bush Tax Cuts”, they became the “Obama Tax Cuts” when they were extended in 2010.
CBO on the Fiscal Cliff situation and implications on the Economy.
Substantial changes to tax and spending policies are scheduled to take effect in January 2013, significantly reducing the federal budget deficit. According to CBO’s projections, if all of that fiscal tightening occurs, real (inflation-adjusted) gross domestic product (GDP) will drop by 0.5 percent in 2013 (as measured by the change from the fourth quarter of 2012 to the fourth quarter of 2013)—reflecting a decline in the first half of the year and renewed growth at a modest pace later in the year. That contraction of the economy will cause employment to decline and the unemployment rate to rise to 9.1 percent in the fourth quarter of 2013. After next year, by the agency’s estimates, economic growth will pick up, and the labor market will strengthen, returning output to its potential level (reflecting a high rate of use of labor and capital) and shrinking the unemployment rate to 5.5 percent by 2018.
Biderman on Obama.
Unless Barack Obama dramatically changes, I predict by the end of his second four year term he will have earned the legacy of being the worst fiscal president ever. Why? The US will be bankrupt after another four years of the same Obama we had for the past four.
Here’s my evidence, before Obama was elected in 2008 after tax take home for everyone who pays taxes was just under $7 trillion annualized. That $7 trillion number included capital gains, an income source the US Bureau of Economic Analysis does not include in national income. Why is capital gains not included? Is there a prejudice against income on capital? Who knows. It’s the government.
Biderman on nobody telling the truth with regards to the US Economy. Forget the ISM and other bullshit figures….
While vacationing at the Mauna Kea on the big island of Hawaii, which by the way is my favorite resort hotel on the planet, I realized during a dinner time conversation that no one is talking the truth about the US economy. The truth is that the US is being bankrupted by the actions of the Obama Administration hand in hand with the Bernanke Fed. Bankruptcy sooner or later has to occur when an individual, company or government keeps borrowing more then they can pay anytime soon. The US has borrowed and continues to borrow more money then it will ever be able to repay, and that is true even if economic growth zooms.
Weekend reading on taxes and politicians, by Vanity Fair.
For all Mitt Romney’s touting of his business record, when it comes to his own money the Republican nominee is remarkably shy about disclosing numbers and investments. Nicholas Shaxson delves into the murky world of offshore finance, revealing loopholes that allow the very wealthy to skirt tax laws, and investigating just how much of Romney’s fortune (with $30 million in Bain Capital funds in the Cayman Islands alone?) looks pretty strange for a presidential candidate.
Aperson who worked for Mitt Romney at the consulting firm Bain and Co. in 1977 remembers him with mixed feelings. “Mitt was … a really wonderful boss,” the former employee says. “He was nice, he was fair, he was logical, he said what he wanted … he was really encouraging.” But Bain and Co., the person recalls, pushed employees to find out secret revenue and sales data on its clients’ competitors.
The NYT must read article on Apple’s creative tax planning receiving some attention this weekend.
Apple’s headquarters are in Cupertino, Calif. By putting an office in Reno, just 200 miles away, to collect and invest the company’s profits, Apple sidesteps state income taxes on some of those gains.
California’s corporate tax rate is 8.84 percent. Nevada’s? Zero.
Setting up an office in Reno is just one of many legal methods Apple uses to reduce its worldwide tax bill by billions of dollars each year. As it has in Nevada, Apple has created subsidiaries in low-tax places like Ireland, the Netherlands, Luxembourg and the British Virgin Islands — some little more than a letterbox or an anonymous office — that help cut the taxes it pays around the world.
As things are heating up, we plan to continue giving our readers the most interesting aspects of the messy Spanish economy by bringing you the latest news.
Some of the latest out of troubled Spain via El Pais.
No bailout: Rajoy denies Spain will seek European funds (this most probably means there will be a bail out)
What’s next? New Pesetas?
Up, up and away, but it is not Apple. Much has been written on the topic, but just how big is “it”? Guest post by Doug Short.
Pop Quiz! Without recourse to your text, your notes or a Google search, what line item is the largest asset on Uncle Sam’s balance sheet?
|A) U.S. Official Reserve Assets
B) Total Mortgages
C) Taxes Receivable
D) Student Loans
The correct answer, as of the latest Flow of Funds report for Q4 2011, is … Student Loans.
The rapid growth in student debt has been a frequent topic in the financial press. One stunning chart that caught my attention illustrated the rapid growth in federal loans to students since the onset of the great recession. Here is a chart based on data from the Flow of Funds Table L.106, which shows the Federal Government’s assets and liabilities.