Thinking the Unthinkable: A U.S. Rating Downgrade - WSJ.com:
"As posited in a recent opinion piece on the new health legislation, the populace has been effectively led by the current administration and the Congress to believe they can have accessible, affordable health care provided by taxing the wealthy and those who decide not to buy coverage. Those who decide not to buy coverage - their true identity as young people who have other financial needs - is downplayed.
So the world of California (and many other states with liberal social agendas) and unions becomes the overpowering political philosophy.
Frankly, the record of this philosophy isn't too sanguine. One thinks of GM going bankrupt (unions), grossly underfunded State public employee and teacher pensions (unions), uncontrollable deficits (California, New York), a continuing exodus of businesses (Michigan), a reluctance to form new businesses and small businesses (socialist Europe), etc.
So, as with those who felt the unsustainability of endlessly rising housing prices, it would appear prudent to question the sustainability of policies that inhibit the private sector and, in an unbridled fashion, expand the public sector.
Greece is feeling the sudden wake-up call of a big jump in rates.
In the 1970's, the US witnessed the same and rates didn't stop at 6% (Greece currently).
Much of Western Europe and the US may all get hit at the same time (just like with banks all deciding to cut-off a families credit lines at the same time)."
Wednesday, March 31, 2010
Monday, March 22, 2010
What If We Just Raised Taxes? - Editorial Commentary - Thomas G. Donlan - Barrons.com
Q&A: What If We Just Raised Taxes? - Editorial Commentary - Thomas G. Donlan - Barrons.com:
Responses to some of the questions raised in the comments on the article:
Q: Have zero interest rates, bank bailouts, tons of Federal spending and the promise of another federal entitlement done anything to move us closer to accepting reality?
A: People feel 'entitled' to things they don't have to earn or pay for.
I was astonished to hear a friend tell me how many of his US friends felt 'entitled' to health care - without having to pay for it.
Clearly the average Chinese doesn't put this burden on his or her society.
So, the US goes for the 'Greek solution'. As the Greeks blame the German's for exporting to Greece, the US blames the Chinese currency manipulation (i.e. Chinese shipping goods to the US).
So, to make the US economy grow, the Chinese have to increase the value of their currency since they are out-investing and not squandering so much on entitlements. Seems like we're moving further and further from any kind of reality.
Q: What about the US considering a one-time asset tax to reduce the deficit? This tax could be levied on people with assets of $5 million or more with all revenues from the tax going to deficit reduction. And it would have the effect of "clawing back" from all those who benefited from the financial engineering of the past 10 years.
A: How about a tax on all government paid pensions (State, Federal, Local) over $40,000 a year of say 90%?
Q: Like most of my friends, I am paying a total tax rate 58 % of my earned income. This 58% total tax rate includes:
a) 33% federal income (I get hit by AMT)
b) 10% state and local income
c) 5% sales (assume I spend 30% of my take home with a local sales tax of 9)
d) real estate tax (equals about 10% of my gross income).
Add all the above taxes and you see that most of us are paying about 58% of our gross in total taxes.
A: You were kind enough to omit the extra costs employers must pay to support government mandated programs. (some estimate the employee's salary is only 1/5 of the employer's actual cost for the employment).
You also omit the 'transfer costs' built into supporting Medicare and Medicaid, where private payers pay more so M & M can pay less, etc.
Q: The elephant in the room is defense spending.
A: Clearly you don't like to think of Medicare, Medicaid, (and maybe mandatory health insurance) as a big animal; but, clearly they dwarf defense.
And, at least defense spending isn't run as an unfunded entitlement in which young people are made to pay for the old with the (at best hope) promise that their will be another young generation to fund their benefits.
All the talk is to tax the young more to pay benefits to older people that they didn't have to pay anywhere near the same costs for themselves.
Is this fair?
Responses to some of the questions raised in the comments on the article:
Q: Have zero interest rates, bank bailouts, tons of Federal spending and the promise of another federal entitlement done anything to move us closer to accepting reality?
A: People feel 'entitled' to things they don't have to earn or pay for.
I was astonished to hear a friend tell me how many of his US friends felt 'entitled' to health care - without having to pay for it.
Clearly the average Chinese doesn't put this burden on his or her society.
So, the US goes for the 'Greek solution'. As the Greeks blame the German's for exporting to Greece, the US blames the Chinese currency manipulation (i.e. Chinese shipping goods to the US).
So, to make the US economy grow, the Chinese have to increase the value of their currency since they are out-investing and not squandering so much on entitlements. Seems like we're moving further and further from any kind of reality.
Q: What about the US considering a one-time asset tax to reduce the deficit? This tax could be levied on people with assets of $5 million or more with all revenues from the tax going to deficit reduction. And it would have the effect of "clawing back" from all those who benefited from the financial engineering of the past 10 years.
A: How about a tax on all government paid pensions (State, Federal, Local) over $40,000 a year of say 90%?
Q: Like most of my friends, I am paying a total tax rate 58 % of my earned income. This 58% total tax rate includes:
a) 33% federal income (I get hit by AMT)
b) 10% state and local income
c) 5% sales (assume I spend 30% of my take home with a local sales tax of 9)
d) real estate tax (equals about 10% of my gross income).
Add all the above taxes and you see that most of us are paying about 58% of our gross in total taxes.
A: You were kind enough to omit the extra costs employers must pay to support government mandated programs. (some estimate the employee's salary is only 1/5 of the employer's actual cost for the employment).
You also omit the 'transfer costs' built into supporting Medicare and Medicaid, where private payers pay more so M & M can pay less, etc.
Q: The elephant in the room is defense spending.
A: Clearly you don't like to think of Medicare, Medicaid, (and maybe mandatory health insurance) as a big animal; but, clearly they dwarf defense.
And, at least defense spending isn't run as an unfunded entitlement in which young people are made to pay for the old with the (at best hope) promise that their will be another young generation to fund their benefits.
All the talk is to tax the young more to pay benefits to older people that they didn't have to pay anywhere near the same costs for themselves.
Is this fair?
The Doctors of the House: Democrats Must Take Responsibility for What Comes Next in Health Care - WSJ.com
The Doctors of the House: Democrats Must Take Responsibility for What Comes Next in Health Care - WSJ.com:
"The first verdict should arrive in terms of higher interest rates as people and countries stop buying treasury debt.
The Democrats have shown what their governance brings in states like California - business leaves, unemployment goes above the (old) national averages, budgets remain perennially out of balance and its the 'credit card culture' writ large!"
"The first verdict should arrive in terms of higher interest rates as people and countries stop buying treasury debt.
The Democrats have shown what their governance brings in states like California - business leaves, unemployment goes above the (old) national averages, budgets remain perennially out of balance and its the 'credit card culture' writ large!"
Saturday, March 20, 2010
An Emerging Global Threat - Barrons.com
An Emerging Global Threat - Barrons.com:
"Sadly, this whole article becomes an excuse for the US pursuing its own Keynesian policy of government spending and income transfers.
Instead of encourage saving and investment, the US continues to unabashedly encourage consumption first and foremost.
It's like 'Oh gee, the credit card company is at fault for allowing me to keep charging up my card at the shopping mall.'
And, as shown by Obama and Pelosi this weekend, they have a Caesar Chavez hubris to think they know better for the American people.
Since they can't blame their own fiscal policies (take a look at Greece for a country a bit further down the debt engorged line), they have to blame someone else - e.g. China.
Right now the US spends 17% of GDP on healthcare. Adding all of Obama's newly insured with a wider access to more benefits is surely not going to reduce this percentage of GDP going to health consumption.
The US doesn't want to work, it wants to consume. The government wants it to consume; and, the government doesn't want the average American to even consider the impact of this unbridled spending.
Currency revaluations are more of a red herring than a 'real' solution."
"Sadly, this whole article becomes an excuse for the US pursuing its own Keynesian policy of government spending and income transfers.
Instead of encourage saving and investment, the US continues to unabashedly encourage consumption first and foremost.
It's like 'Oh gee, the credit card company is at fault for allowing me to keep charging up my card at the shopping mall.'
And, as shown by Obama and Pelosi this weekend, they have a Caesar Chavez hubris to think they know better for the American people.
Since they can't blame their own fiscal policies (take a look at Greece for a country a bit further down the debt engorged line), they have to blame someone else - e.g. China.
Right now the US spends 17% of GDP on healthcare. Adding all of Obama's newly insured with a wider access to more benefits is surely not going to reduce this percentage of GDP going to health consumption.
The US doesn't want to work, it wants to consume. The government wants it to consume; and, the government doesn't want the average American to even consider the impact of this unbridled spending.
Currency revaluations are more of a red herring than a 'real' solution."
Friday, March 19, 2010
Michigan Tax Shift Pits Towns vs. Big Three - WSJ.com
WHICH COMES FIRST, TAXES OR JOBS? Michigan Tax Shift Pits Towns vs. Big Three - WSJ.com:
"Where is the comment or mention in the article of 'why is there this personal property tax anyway'?
Let's see?
a. The US moans about jobs leaving the country, companies outsourcing work to overseas;
b. The US generally has highly paid workers.
c. To compete and pay high wages, companies generally need to invest in advanced equipment.
d. Advanced equipment is expensive.
e. So, why not have government put a tax on having equipment?
Sure seems to me there's a reason Michigan has a high jobless rate. And, can we say they did it to themselves?"
"Where is the comment or mention in the article of 'why is there this personal property tax anyway'?
Let's see?
a. The US moans about jobs leaving the country, companies outsourcing work to overseas;
b. The US generally has highly paid workers.
c. To compete and pay high wages, companies generally need to invest in advanced equipment.
d. Advanced equipment is expensive.
e. So, why not have government put a tax on having equipment?
Sure seems to me there's a reason Michigan has a high jobless rate. And, can we say they did it to themselves?"
Tuesday, March 16, 2010
Greece takes steps to solve its problems, - WSJ.com
Why exports are needed: Greece takes steps to solve its problems, - WSJ.com:
"More on why exports matter and are a necessity for socialist states:
Talking about 'exports' and lack of 'consumer demand', one can't help but wish to see something mentioned about the 'labor conundrum' and the impact of taxes on 'economic utility'.
Economic utility basically describes the relative desirability of purchasing one good over another. At some point, the desirability (read: utility) goes out the window when the cost (read: economics) goes too high. So, if a consumer might like to buy a car for EUR 20,000 (his or her utility function) but VAT and other taxes raised the cost to say EUR 40,000 (as in Portugal), then the consumer will not want to buy the car.
Thus, as taxes distort the pricing mechanism, consumers naturally both can afford less and want less.
So, the consumer in question might actually be making cars, but the artificial expenses of the taxes drives the price out of his or her range of purchasability. Result: diminished consumer demand and eventually less production and fewer jobs.
This is the economic utility side.
The same is true with the labor conundrum, which reduces the pay of workers to provide the government with funds to pay benefits to others. (An egregious example of this would be New York City police benefits where there are far more retired officers collecting pensions than their are working officers.)
Thus, the worker may only get 1/5 of what it costs the employer to hire the worker. The other 4/5th goes to non-productive pockets. Thus, again, the worker has less to purchase goods with.
As above, less incentive to work, less purchasing power - eventually, less employment.
Hello the great union world of socialism and the Democratic party."
"More on why exports matter and are a necessity for socialist states:
Talking about 'exports' and lack of 'consumer demand', one can't help but wish to see something mentioned about the 'labor conundrum' and the impact of taxes on 'economic utility'.
Economic utility basically describes the relative desirability of purchasing one good over another. At some point, the desirability (read: utility) goes out the window when the cost (read: economics) goes too high. So, if a consumer might like to buy a car for EUR 20,000 (his or her utility function) but VAT and other taxes raised the cost to say EUR 40,000 (as in Portugal), then the consumer will not want to buy the car.
Thus, as taxes distort the pricing mechanism, consumers naturally both can afford less and want less.
So, the consumer in question might actually be making cars, but the artificial expenses of the taxes drives the price out of his or her range of purchasability. Result: diminished consumer demand and eventually less production and fewer jobs.
This is the economic utility side.
The same is true with the labor conundrum, which reduces the pay of workers to provide the government with funds to pay benefits to others. (An egregious example of this would be New York City police benefits where there are far more retired officers collecting pensions than their are working officers.)
Thus, the worker may only get 1/5 of what it costs the employer to hire the worker. The other 4/5th goes to non-productive pockets. Thus, again, the worker has less to purchase goods with.
As above, less incentive to work, less purchasing power - eventually, less employment.
Hello the great union world of socialism and the Democratic party."
Monday, March 15, 2010
Greece takes steps to solve its problems, - WSJ.com
Greece takes steps to solve its problems, - WSJ.com:
"All of the socialized countries find it hard to deal with the 'labor conundrum' - i.e. paying workers only a pittance of their real productivity in order to fund the profligate and proliferating role of non-producing government employees and social leeches (retirees, etc.).
Then, in surprise, they wonder why the public can't spend the money they never received.
Meanwhile, the economic utility value of $10 has been raised to $40. Gee - SURPRISE - people don't want to pay $40 for something worth $10.
Oh yes, it cost $10 to produce and distribute, but government needed the $30 ($40-10 = 30) to give to unproductive government employees, retirees, etc."
"All of the socialized countries find it hard to deal with the 'labor conundrum' - i.e. paying workers only a pittance of their real productivity in order to fund the profligate and proliferating role of non-producing government employees and social leeches (retirees, etc.).
Then, in surprise, they wonder why the public can't spend the money they never received.
Meanwhile, the economic utility value of $10 has been raised to $40. Gee - SURPRISE - people don't want to pay $40 for something worth $10.
Oh yes, it cost $10 to produce and distribute, but government needed the $30 ($40-10 = 30) to give to unproductive government employees, retirees, etc."
Friday, March 12, 2010
Fiscal Crises Hit Closer to Home - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Q&A - CAN STATES DEFAULT? Fiscal Crises Hit Closer to Home - Up and Down Wall Street Daily - R. Forsyth - Barrons.com:
This information is too valuable not to send to my blog - as many seem to think states can't default. (Thanks to Paul Esch)
"There probably will be state defaults, despite state constitutional provisions specifying that debts must be paid. The California Constitution already states that full funding of education is a higher priority than debt service.
Does anyone want to bet that the California courts would resist the temptation to declare the 'public health and safety' (a marvelously flexible term) is not a higher priority than debt service?
If the California courts decide to let the state welsh on its debts, the following text of the 11th Amendment to the US Constitution, ratified in 1795, tells us precisely what recourse creditors will have.
'The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.'
Chapter 9 of the US Bankruptcy Code only applies to municipalities and political subdivisions of the states precisely because the 11th Amendment forbids any legal action against the states by federal courts.
Readers, please do not state that this amendment is purely theoretical, and that no state has ever defaulted. Mississippi defaulted on its state debt after the Panic of 1837, and never paid its crediors anything. Sovereign immunity is alive and well in the United States."
Thursday, March 11, 2010
Wall Street Moves to Shape Look of CDS Rules - WSJ.com
Q&A: CDS Rules - WSJ.com
Question: Shouldn't we just the market self-regulate?
Answer: However, we do find it worthwhile to regulate the insurance industry - at least to a prudent extent with respect to things like life insurance. Here the buyer of policy has to has an "insurable risk". If this wasn't the case, and an insurance company has to issue insurance to those who wanted to "bet" on the life of another, it would be hard to use sound actuarial tools to estimate risk.
As such (and one could go on and on here), it would seem as though those who really wanted to protect themselves with credit insurance should be able to do so with a counterparty with full information (i.e. an insurable risk).
In the uncovered risk area, it is more like shooting craps in that the ability to increase the risk increases the potential reward; but, an earlier seller might not have knowledge that his risk will be increased by future events. As such, pricing could become much more distorted in terms of the CDS fulfilling a true business function.
The flip side is of course Basel II type regulations which remove a lender's responsibility to make prudent business decisions by turning everything into a process - which, in the case of AAA sub-prime paper blew up. But, no one who bought the stuff was thinking. They just knew the benefits of the credit rating and that's where smarts stopped.
Question: Shouldn't we just the market self-regulate?
Answer: However, we do find it worthwhile to regulate the insurance industry - at least to a prudent extent with respect to things like life insurance. Here the buyer of policy has to has an "insurable risk". If this wasn't the case, and an insurance company has to issue insurance to those who wanted to "bet" on the life of another, it would be hard to use sound actuarial tools to estimate risk.
As such (and one could go on and on here), it would seem as though those who really wanted to protect themselves with credit insurance should be able to do so with a counterparty with full information (i.e. an insurable risk).
In the uncovered risk area, it is more like shooting craps in that the ability to increase the risk increases the potential reward; but, an earlier seller might not have knowledge that his risk will be increased by future events. As such, pricing could become much more distorted in terms of the CDS fulfilling a true business function.
The flip side is of course Basel II type regulations which remove a lender's responsibility to make prudent business decisions by turning everything into a process - which, in the case of AAA sub-prime paper blew up. But, no one who bought the stuff was thinking. They just knew the benefits of the credit rating and that's where smarts stopped.
Happy Anniversary for Finance, Not Small Business - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
Happy Anniversary for Finance, Not Small Business - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
If one just thinks of GDP as a pie and realizes that the government had decided to "up" its share of the pie (be that pie taken in taxes or borrowed out of the economy), then the increase in government's share has to come from somewhere.
An example is what is going on now in California with respect to education and tuition in State colleges (as reported in the Wall Street Journal in the last few days).
The State put through extremely generous pension plans for state employees. The cost of these plans has grown so much, that the State had to transfer $3 billion dollars more than planned from the State's funds this year to pay these pensions (as said, 15,000 California pensioners receive over $100,000 per year and can retire at 50). So the State took $800 million from the universities and they are hiking tuition by roughly 30% to make up the shortfall. (A shortfall brought about by paying excess pensions under union contracts.)
As Obama and Pelosi are taking more money to pay entitlements and trying to unionize the world, this distortion is rippling through the economy.
If small business is the most vulnerable sector, is it a surprise they are feeling the most pain? (Somewhat like young people/college students!)
If one just thinks of GDP as a pie and realizes that the government had decided to "up" its share of the pie (be that pie taken in taxes or borrowed out of the economy), then the increase in government's share has to come from somewhere.
An example is what is going on now in California with respect to education and tuition in State colleges (as reported in the Wall Street Journal in the last few days).
The State put through extremely generous pension plans for state employees. The cost of these plans has grown so much, that the State had to transfer $3 billion dollars more than planned from the State's funds this year to pay these pensions (as said, 15,000 California pensioners receive over $100,000 per year and can retire at 50). So the State took $800 million from the universities and they are hiking tuition by roughly 30% to make up the shortfall. (A shortfall brought about by paying excess pensions under union contracts.)
As Obama and Pelosi are taking more money to pay entitlements and trying to unionize the world, this distortion is rippling through the economy.
If small business is the most vulnerable sector, is it a surprise they are feeling the most pain? (Somewhat like young people/college students!)
Tuesday, March 9, 2010
One Year Into Bull Market, Economists Divided Over Future - WSJ.com
WHAT ISN'T BEING DISCUSSED: One Year Into Bull Market, Economists Divided Over Future - WSJ.com:
"It would seem as though more attention should be being paid to the impact of government fiscal policy on jobs and profits and corporate prospects in the US vs. other countries.
It would seem as though the US is like a family that still has some credit on its bank cards and as it spends, it ignores the fact that its income doesn't cover its spending and lifestyle.
A question would be as to how this is going to all end. Obama seems to think (with Congress) that running up the government credit card can go on relatively indefinitely.
But, as every family knows, eventually the bank raises the interest rate and just paying minimum monthly credit card payments can severely crimp the family budget. In every other way also, high credit card debt constrains the family.
As such, most economists already recognize that job growth will be subpar. And, if these restraints on job growth can be directly attributed to government fiscal policies, then these will have an outsize impact on the entire economy (which eventually is what is reflected in stock prices).
Under Reagan and Bush, tax cuts supported job growth. Obama's budget deficits and union-centric policies, with all of the projected tax increases do not support job growth or investment.
I'd say the potential macro- situation trumps and econometric statistical projections of stock prices (as discussed in the above article)"
"It would seem as though more attention should be being paid to the impact of government fiscal policy on jobs and profits and corporate prospects in the US vs. other countries.
It would seem as though the US is like a family that still has some credit on its bank cards and as it spends, it ignores the fact that its income doesn't cover its spending and lifestyle.
A question would be as to how this is going to all end. Obama seems to think (with Congress) that running up the government credit card can go on relatively indefinitely.
But, as every family knows, eventually the bank raises the interest rate and just paying minimum monthly credit card payments can severely crimp the family budget. In every other way also, high credit card debt constrains the family.
As such, most economists already recognize that job growth will be subpar. And, if these restraints on job growth can be directly attributed to government fiscal policies, then these will have an outsize impact on the entire economy (which eventually is what is reflected in stock prices).
Under Reagan and Bush, tax cuts supported job growth. Obama's budget deficits and union-centric policies, with all of the projected tax increases do not support job growth or investment.
I'd say the potential macro- situation trumps and econometric statistical projections of stock prices (as discussed in the above article)"
Monday, March 8, 2010
N.Y. Fed's Repo Move Clips Gold - WSJ.com
N.Y. Fed's Repo Move Clips Gold - WSJ.com:
"Gee - let's see.
The government plans to borrow and borrow (read: more demand for money).
The government (plus others) don't project a big decrease in the unemployment rate (read: not much growth and not much more money to tax).
Business and consumers need money to borrow. The government needs money to borrow. The Fed is going to drain reserves (read: less money to borrow).
Oh yes, and the government wants the banks and brokers to have more equity (i.e. less leverage) - (read: less money to lend).
So, more demand for money, less money to lend? Could this mean higher (and much higher) interest rates?
And, if interest rates have to go up; and, we've already been told tax rates on business will be going up, can we expect job growth?
So, if no job growth (i.e. 16.8 or whatever percent one likes unemployment), more and more borrowing, what will the Fed do?
In the 1970's the term was 'stagflation'. Sure sounds like it will be worse this time around.
Hmmm, gold????"
"Gee - let's see.
The government plans to borrow and borrow (read: more demand for money).
The government (plus others) don't project a big decrease in the unemployment rate (read: not much growth and not much more money to tax).
Business and consumers need money to borrow. The government needs money to borrow. The Fed is going to drain reserves (read: less money to borrow).
Oh yes, and the government wants the banks and brokers to have more equity (i.e. less leverage) - (read: less money to lend).
So, more demand for money, less money to lend? Could this mean higher (and much higher) interest rates?
And, if interest rates have to go up; and, we've already been told tax rates on business will be going up, can we expect job growth?
So, if no job growth (i.e. 16.8 or whatever percent one likes unemployment), more and more borrowing, what will the Fed do?
In the 1970's the term was 'stagflation'. Sure sounds like it will be worse this time around.
Hmmm, gold????"
Saturday, March 6, 2010
The Woeful State of the States - Editorial Commentary - Thomas G. Donlan - Barrons.com
The Woeful State of the States - Editorial Commentary - Thomas G. Donlan - Barrons.com:
Interesting facts from the above editorial:
...
"New York City police and firefighters are allowed to retire after 20 years of service. The benefits are set by the state, and paid for by the city. The city has more of them on retirement than there are on active duty. Almost half the retired police and firefighters are under age 60, and more than a quarter of police retirees are under age 50...
...According to the Bureau of Labor Statistics, average wages and benefits in state and local government are higher than in the private sector -- $26.24 an hour in government, versus $19.45 an hour in private employment -- even though average cash wages are lower in government than in the private sector.
The difference is in the relatively invisible benefits accrued to government workers. Health benefits cost state and local government an average $4.43 an hour, compared with $2.01 for private employers. State and local governments award their workers an average $3.23 an hour for pensions and savings plans, compared with 94 cents an hour in the private sector...
...California, which was projecting revenues 49% lower than the spending necessary to continue all services and give expected salary and benefit increases.
a large part of state pension benefits are unfunded and uninsured. Consequently, states, most of which also run their localities' retirement plans, have played fast and loose with their pension promises...
...One of the less-noticed causes of the worldwide financial crisis was a desperate search for yield that was led by pension funds and, in turn, by state and local government pension funds."
Interesting facts from the above editorial:
...
"New York City police and firefighters are allowed to retire after 20 years of service. The benefits are set by the state, and paid for by the city. The city has more of them on retirement than there are on active duty. Almost half the retired police and firefighters are under age 60, and more than a quarter of police retirees are under age 50...
...According to the Bureau of Labor Statistics, average wages and benefits in state and local government are higher than in the private sector -- $26.24 an hour in government, versus $19.45 an hour in private employment -- even though average cash wages are lower in government than in the private sector.
The difference is in the relatively invisible benefits accrued to government workers. Health benefits cost state and local government an average $4.43 an hour, compared with $2.01 for private employers. State and local governments award their workers an average $3.23 an hour for pensions and savings plans, compared with 94 cents an hour in the private sector...
...California, which was projecting revenues 49% lower than the spending necessary to continue all services and give expected salary and benefit increases.
a large part of state pension benefits are unfunded and uninsured. Consequently, states, most of which also run their localities' retirement plans, have played fast and loose with their pension promises...
...One of the less-noticed causes of the worldwide financial crisis was a desperate search for yield that was led by pension funds and, in turn, by state and local government pension funds."
Thursday, March 4, 2010
Q&A: What's needed for rebuilding America? Buy American?
Question:
Wouldn't it help the economy if we had a buy American policy. We need to maintain and rebuild those sectors of manufacturing that have been lost. Real pay for real work.
But how do we square that with seeking the lowest-cost provider for goods and services?
Answer:
A good start would be to SCRAP all of the mandated additions to employment costs.
Perhaps it should be illegal to retire on a public pension until the average age of death (?75 or so) as the age the original social security plan was designed for by Bismark?
Clearly unions don't want to have a competitive environment when they demand early retirements at age 50 and, as with the UAW job bank, pay for not working.
If business can't afford to pay the cost of labor, it will either have to close down, invest and ask for more capable employees (thank the teachers unions here) or move out of the country.
It's always nice to have a green lawn, but it often takes water and fertilizer to keep it going. Starve it for either and you have the American economy.
Obama clearly can't see lawns need care - guess he grew up in the city?
Wouldn't it help the economy if we had a buy American policy. We need to maintain and rebuild those sectors of manufacturing that have been lost. Real pay for real work.
But how do we square that with seeking the lowest-cost provider for goods and services?
Answer:
A good start would be to SCRAP all of the mandated additions to employment costs.
Perhaps it should be illegal to retire on a public pension until the average age of death (?75 or so) as the age the original social security plan was designed for by Bismark?
Clearly unions don't want to have a competitive environment when they demand early retirements at age 50 and, as with the UAW job bank, pay for not working.
If business can't afford to pay the cost of labor, it will either have to close down, invest and ask for more capable employees (thank the teachers unions here) or move out of the country.
It's always nice to have a green lawn, but it often takes water and fertilizer to keep it going. Starve it for either and you have the American economy.
Obama clearly can't see lawns need care - guess he grew up in the city?
The Case for Bonds - Up and Down Wall Street Daily - R. Forsyth - Barrons.com
IS IT THE 1970'S OR THE 1980'S? - The Case for Bonds - Up and Down Wall Street Daily - R. Forsyth - Barrons.com:
"Perhaps the comparison to the 80's should be that of the 1970's?
In other words, if one asks the question - 'Is the environment for support for business getting better or worse?' - the answer might be a better harbinger of the direction of rates.
One can look at both Greece (foreign) and California (domestic) to see that a poor economy and too much borrowing eventually causes lenders to ask for higher rates.
Concomitantly, all developed countries have a less than stellar pro-business climate and all are borrowing and needing to borrow ever more to pay their promised and cherished social benefits.
So, while business may not be rushing to borrow and expand, that certainly isn't the case for governments!
And, sadly, businesses create jobs and wealth and government consumes wealth.
Clearly, the US is currently asking young people to give up a brighter future for themselves in order to provide for early retirees and the 'unfortunate'.
I'd say we've decided to add almost all young people into the 'unfortunate' category!"
"Perhaps the comparison to the 80's should be that of the 1970's?
In other words, if one asks the question - 'Is the environment for support for business getting better or worse?' - the answer might be a better harbinger of the direction of rates.
One can look at both Greece (foreign) and California (domestic) to see that a poor economy and too much borrowing eventually causes lenders to ask for higher rates.
Concomitantly, all developed countries have a less than stellar pro-business climate and all are borrowing and needing to borrow ever more to pay their promised and cherished social benefits.
So, while business may not be rushing to borrow and expand, that certainly isn't the case for governments!
And, sadly, businesses create jobs and wealth and government consumes wealth.
Clearly, the US is currently asking young people to give up a brighter future for themselves in order to provide for early retirees and the 'unfortunate'.
I'd say we've decided to add almost all young people into the 'unfortunate' category!"
Why Inflation Hawks Should Stand Down - WSJ.com
Why Inflation Hawks Should (or maybe they shouldn't) Stand Down - WSJ.com:
"Hmmm... as I recall, in wartime, when goods are in short supply (I assume money also), then prices go up.
Not that we are in wartime, however, as noted in this article, with a shortage of credit, the lifeblood of production is in short supply - i.e. implies less production. (Let alone Obama fiscal policies that are anti-growth, anti-jobs, anti-business.)
The government is borrowing and at some point will have to either pay higher rates to get the money from the increasing reluctant lenders or it will have to turn to the Fed for the money.
When money is borrowed, I recall the old saw that it was there because someone decided to forgo current consumption for future consumption. If the money doesn't represent someone producing something and then saving the rewards for that production, it can only come out of thin air (i.e. printed by the Fed).
In both of the above cases, it would appear that there are inflationary drivers.
Obama and his supporters are all like spenders with a credit card they think has almost no credit limit. As most Americans know or have known, credit card interest rates and minimum payments can really crimp a family budget.
Obama ignores these warnings because he first decides who in the country is deserving of having the government give them things they want and can't afford on their own (i.e. the beneficent father figure) and then just uses Treasury financing to pay for these benefits (the old Democratic credit card).
Let's just jump to say 'Hello California!' to see how this type of spending brought low a great economy.
It's true California hasn't seen prices go up; but, then again, it does have a Federal Reserve!"
"Hmmm... as I recall, in wartime, when goods are in short supply (I assume money also), then prices go up.
Not that we are in wartime, however, as noted in this article, with a shortage of credit, the lifeblood of production is in short supply - i.e. implies less production. (Let alone Obama fiscal policies that are anti-growth, anti-jobs, anti-business.)
The government is borrowing and at some point will have to either pay higher rates to get the money from the increasing reluctant lenders or it will have to turn to the Fed for the money.
When money is borrowed, I recall the old saw that it was there because someone decided to forgo current consumption for future consumption. If the money doesn't represent someone producing something and then saving the rewards for that production, it can only come out of thin air (i.e. printed by the Fed).
In both of the above cases, it would appear that there are inflationary drivers.
Obama and his supporters are all like spenders with a credit card they think has almost no credit limit. As most Americans know or have known, credit card interest rates and minimum payments can really crimp a family budget.
Obama ignores these warnings because he first decides who in the country is deserving of having the government give them things they want and can't afford on their own (i.e. the beneficent father figure) and then just uses Treasury financing to pay for these benefits (the old Democratic credit card).
Let's just jump to say 'Hello California!' to see how this type of spending brought low a great economy.
It's true California hasn't seen prices go up; but, then again, it does have a Federal Reserve!"
Monday, March 1, 2010
Greece Bailout Plan Takes Shape - WSJ.com
Greece Bailout Plan Takes Shape - WSJ.com
Somehow, it's hard to see that even a 9% deficit (the Greek target per papers in early March) - arrived at with considerable pain - is anywhere near either "no deficit" or an "amortizing deficit".
If interest rates are at 7% and the deficit is greater than 100% of GDP (Greece's case), then almost the entire deficit is going to be made up of interest payments (note: 'interest', not 'interest + amortization').
Clearly Obama and Pelosi hope to take the US down the same road (high deficits, expanding role of government); but, how to create a private job market to absorb all the excess government workers (Greece especially) and the unemployed (US), is ever harder when the rewards for job creators are getting taken by government and handed over to those not working or not paying for their benefits (this includes the over-entitled retirees).
There's no clear picture of how Greece can turn itself around that I've read!
Somehow, it's hard to see that even a 9% deficit (the Greek target per papers in early March) - arrived at with considerable pain - is anywhere near either "no deficit" or an "amortizing deficit".
If interest rates are at 7% and the deficit is greater than 100% of GDP (Greece's case), then almost the entire deficit is going to be made up of interest payments (note: 'interest', not 'interest + amortization').
Clearly Obama and Pelosi hope to take the US down the same road (high deficits, expanding role of government); but, how to create a private job market to absorb all the excess government workers (Greece especially) and the unemployed (US), is ever harder when the rewards for job creators are getting taken by government and handed over to those not working or not paying for their benefits (this includes the over-entitled retirees).
There's no clear picture of how Greece can turn itself around that I've read!
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