There is a symmetry in the heavy-handed behavior of the Feds and the reporters in mainstream media, especially given the budgetary cutbacks in the latter. First, foreign affairs.
By all accounts, al-Qaeda is in Pakistan more than Afghanistan. The U. S. has provided aid to the former to engage in civil war against its "militants" in the traditionally independent mountainous areas near Afghanistan who are sympathetic to and presumably harboring al-Qaeda leadership. The authorities provide a statement that makes for a good headline: South Waziristan offensive very successful, says Qureshi.
But read on . . .
Foreign Minister Shah Mehmood Qureshi said the military has made significant headway in the region, part of the tribal belt where United States officials say Al-Qaeda is plotting attacks on the west.
‘The operation so far has been very successful. The resistance that we were expecting initially did not come with the same stiffness as we expected,’ he said on the sidelines of a conference of developing nations in Kuala Lumpur.
The resistance was less than expected. Hmmm . . .
Think guerrilla warfare might be in the offing?
At home, the negligent/uninformed and incoherent response to the evolving financial crisis by the Bush administration, the Fed, and Congress-- that is, the Government, continues under a new administration. Thus I call it the Bushbama Continuity from a Big Finance perspective. The powerful against the people; look at the unemployment rate vs. Goldman Sachs' bonus pool to guess who's winning.
Just as mortgage-holders are doing with many mortgagees, it's an "extend and pretend" strategy on the economy. Pump Q3 up with a CARS/cash-for-clunkers clunker of a program-- one which would not accept a literally clunker for trade-in if when it was purchased new was fuel efficient-- annualize the pitiful growth including this sham-- and declare victory. The stock market cheered for a day on low volume and dropped more the next day than it rose the day of the announcement.
As stated here many times, and as supported by Bill Gross' analysis at PIMCO of long-term asset prices, the prices of financial assets has gotten well above that which is supportable by real incomes of actual human beings. The happy end will be for real incomes to rise while real asset prices stay roughly stable. The truly unhappy trajectory will be for real incomes to not rise, or even fall, while asset prices drop to be in line with or even below trend in relation to incomes. Perhaps there will be a meeting in the middle, or incomes and asset prices will both rise. No one knows, but this relationship is so basic that the prudent course is to expect a reversion to a more traditional, sensible and sustainable relationship. From a social standpoint, it's a no-brainer: people trump prices of financial assets.
The U. S. is borrowing from relatively poor Chinese and OPEC members to fund a bankrupt Pakistan's war in the mountains and its own war in Afghanistan. Similar but larger borrowings from abroad are funding a senseless propping up of financial institutions and the stock- and bond-holders thereof.
Whatever the national security merits of the war activities, the best we will get out of them will be terrorism averted. There are no known important natural resources in Pak-ghanistan. So the borrowed money is a drag on the economy in that regard. Domestically, I'm all in favor of finance in theory, but I'm more in favor of borrowing money when there is a projected positive return on capital that exceeds the cost and risk of taking on debt.
The markets know all this. They too have been pretending that there is a strong durable recovery underway.
Let us hope that it occurs. It is not here yet, however, and markets can swing from ebullience about a brilliant hoped-for future to pessimism about a horrible future despite the arrival of that brilliant future; thus they can decline below today's level even after the economy turns up strongly (if that occurs). The government should turn its attention away from propping up industries that were hot in the past such as autos, finance and the military and work on accelerating America's transition to clean growth industries. It's a small thing but indicative of the wrong trend to see the House leadership come up with a healthcare proposal that taxes medical device makers for any reason. The U. S. is the world leader in medical devices. That field already provides positive cash flow to America in its trade with other countries and has huge secular growth potential. It would be far better to tax old polluting industries in which we have a negative external balance of trade, such as petroleum products and autos, which have no real growth potential and pollute the world, and also to withdraw the gigantic subsidies on homes--which cannot be exported.
Until there is true change I can believe in--which historically takes crisis or passage of time to bring on-- I thus remain fundamentally bearish on American financial assets, even if economic activity picks up as it likely will for at least a while after a lostt decade of no private job growth.
Copyright (C) Long Lake LLC
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Sunday, November 1, 2009
Thursday, February 26, 2009
No Way Out
Obama’s Budget Proposes Up to $750 Billion More Bank-Rescue Aid (Bloomberg.com)
The (senior administration) official, speaking on condition of anonymity, said the White House hasn’t decided whether the $750 billion in additional aid to the financial industry will be needed. He said it will be put in the budget as (a) “placeholder.”
Placeholder? How is that ruse any better than pretending that Iraq and Afghanistan War appropriations were off-budget?
That sounds bad, but wait: budgetary hope is on the way- it's only going to cost $250B:
The official said the aid would appear in the budget as about $250 billion because the rules require policymakers to record the plan’s net cost to taxpayers. The government anticipates it would eventually recoup some, though not all, of the money expended to help financial companies.
As was the senior administration official, I would also want to be anonymous having to come clean about this turkey.
Mr. Obama continues Mr. Bush's policies of giving your money to large financial companies. The rationale makes no sense other than that he likes them better than he likes them better than he likes taxpayers. He wants them to be healthy so they can make a profit by charging you to borrow money from them- even though their money came from you (via your Federal Government), which you either borrowed from someone else or your central bank created out of thin air.
Fiscal rectitute is however demonstrated in the Obama Administration, by proposing to take money away from Americans of varying income levels:
1) The budget would eliminate the Advance Earned Income Tax Credit, a tax break for low-income earners that government officials have said is poorly administrated.
2-5) The administration proposes to finance the budget in part by limiting tax deductions for couples earning more than $250,000 a year, raising taxes on hedge-fund managers, cutting defense spending and paring subsidies to insurance companies participating in the government’s Medicare health-care system.
#1 speaks for itself. Just two night ago, the President promised that if you earn under $250,000, you will see no tax increase. Well, that promise didn't last long!
#2: "High earners": In what part of America is a couple earning $270,000 rich? Certainly not in metro New York, L.A., S.F., D.C., or Miami. These often-professional people are just the ones who present the best credit risks to lenders when they want to expand their professions or small local businesses. So under the Obama logic, they need to pay higher taxes so that "aid" can be given to the largest, worst-managed financial companies, so that these companies can charge them prime + 2 to expand their businesses. Looking-Glass logic, for sure.
#3: Hedge-fund managers: Not much money there these days!
#4: Cutting defense spending: How does that square with ramping up the war in Afghanistan and candidate Obama's plan to enlarge the size of the military? And when push comes to shove, what's more important: a robust Citigroup, or a robust national defense? At least the benefits (if any) of military spending are shared by all of us.
#5: Health insurance company (managed care) cuts: As a doctor, I say good for the Administration on this one given how detestable both the concept and the reality of Medicare HMOs are, but I suspect that 90% of the country would agree with me that between money going to health care insurers or some other part of health care and money going to Citigroup et al, it should go to the health care system one way or the other.
This blog has argued from inception last year that on the financial crisis, there was going to be no real difference between the Obama Administration and that of George Bush. Case proved. Guilty as charged.
And so the crisis continues, with our Government raising taxes on the successful and poor alike in order to feed the black holes caused by the greedy gamblers known as banksters.
Copyright (C) Long Lake LLC
The (senior administration) official, speaking on condition of anonymity, said the White House hasn’t decided whether the $750 billion in additional aid to the financial industry will be needed. He said it will be put in the budget as (a) “placeholder.”
Placeholder? How is that ruse any better than pretending that Iraq and Afghanistan War appropriations were off-budget?
That sounds bad, but wait: budgetary hope is on the way- it's only going to cost $250B:
The official said the aid would appear in the budget as about $250 billion because the rules require policymakers to record the plan’s net cost to taxpayers. The government anticipates it would eventually recoup some, though not all, of the money expended to help financial companies.
As was the senior administration official, I would also want to be anonymous having to come clean about this turkey.
Mr. Obama continues Mr. Bush's policies of giving your money to large financial companies. The rationale makes no sense other than that he likes them better than he likes them better than he likes taxpayers. He wants them to be healthy so they can make a profit by charging you to borrow money from them- even though their money came from you (via your Federal Government), which you either borrowed from someone else or your central bank created out of thin air.
Fiscal rectitute is however demonstrated in the Obama Administration, by proposing to take money away from Americans of varying income levels:
1) The budget would eliminate the Advance Earned Income Tax Credit, a tax break for low-income earners that government officials have said is poorly administrated.
2-5) The administration proposes to finance the budget in part by limiting tax deductions for couples earning more than $250,000 a year, raising taxes on hedge-fund managers, cutting defense spending and paring subsidies to insurance companies participating in the government’s Medicare health-care system.
#1 speaks for itself. Just two night ago, the President promised that if you earn under $250,000, you will see no tax increase. Well, that promise didn't last long!
#2: "High earners": In what part of America is a couple earning $270,000 rich? Certainly not in metro New York, L.A., S.F., D.C., or Miami. These often-professional people are just the ones who present the best credit risks to lenders when they want to expand their professions or small local businesses. So under the Obama logic, they need to pay higher taxes so that "aid" can be given to the largest, worst-managed financial companies, so that these companies can charge them prime + 2 to expand their businesses. Looking-Glass logic, for sure.
#3: Hedge-fund managers: Not much money there these days!
#4: Cutting defense spending: How does that square with ramping up the war in Afghanistan and candidate Obama's plan to enlarge the size of the military? And when push comes to shove, what's more important: a robust Citigroup, or a robust national defense? At least the benefits (if any) of military spending are shared by all of us.
#5: Health insurance company (managed care) cuts: As a doctor, I say good for the Administration on this one given how detestable both the concept and the reality of Medicare HMOs are, but I suspect that 90% of the country would agree with me that between money going to health care insurers or some other part of health care and money going to Citigroup et al, it should go to the health care system one way or the other.
This blog has argued from inception last year that on the financial crisis, there was going to be no real difference between the Obama Administration and that of George Bush. Case proved. Guilty as charged.
And so the crisis continues, with our Government raising taxes on the successful and poor alike in order to feed the black holes caused by the greedy gamblers known as banksters.
Copyright (C) Long Lake LLC
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