Is this any way to run an economy?

[GrGr]

Perestroika for the USA
by Paul Tolnai
link

Increasingly the US economy is beginning to look like that of the Soviet Empire before its collapse. The authorities there simply wallpapered over the rot of a sclerotic economy and declared all is well. (Helluva job, Leonid).

Imagine filing a claim with your insurance company and they ask you to loan them the money to cover your claim. You loan them the money and they pay the claim. No default here! No siree!

Remember the monoline insurance crisis -way back when. You know the crisis before the Auction Rate crisis, which was before the Bear Stearns crisis. Yeah, it's been a while - days ago. Many municipalities and agencies were only AAA because they had insurance from the monolines. Because of Blue Sky laws, many pension funds and other institutional investors are required to invest only in AAA paper. Had the monolines lost their AAA rating these funds would have been required, by law, to divest themselves of all the paper that would have been downgraded. So the Fed funds the banks who in turn invest in AMBAC. Now, supposedly all is well. Of course, the banks were counterparties to much of the paper insured by AMBAC.

The above scenario reminds me of Leonid Brezhnev's niece at a gymnastics competition. She lumbers onto the floor, awkwardly twirls, falls on her derriere a couple of times, finishes, smiles, and thrusts her arms victoriously into the air. The crowd awaits the judges' score:

Judge 1: ...10.0

Judge 2: ...10.0

Judge 3: ...10.0

Laugh and snicker if you want to, but the judges at least know that with their AAA rating of Tatiana's performance, they are not going to Siberia - and that is all that matters to them. Yes, you can laugh at the monoline bailout, but Wall Street knows that they've avoided a mass forced liquidation - and that is all that matters to them at the moment.

Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

Legendary commodity trader Jim Rogers asks "What's so bad about a recession?" Indeed! Had the monolines gone under, insurance would have been available from Warren Buffet's new company.

Soviet Russia collapsed, defaulted, and restructured. Its economy is growing, foreign reserves are accumulating, and the ruble is appreciating. China restructured with similar results. It's time for the US to return to its "from shirt sleeves to shirt sleeves" tradition with all the social mobility that that implies. But social mobility is a two way street and for others to move up, some must move down. The Fed has morphed into a meddling bureaucratic institution whose aim seems to be to simply prop up a decrepit privileged class - in the finest of Soviet traditions.

It's time for perestroika here as well.

Is this really the way forward for the US? Tax cuts for the rich? Socialism for the rich? The rich as a protected and priviliged class - Too Big To Fail? And a political system and treasury /banking system that works with the rich for the rich directly and indirectly through insider deals with no insight for the plebeian voters. This is not Democracy anymore. This is the Animal Farm. 'We can still Vote' you say - sure you can, for Pig candidate 1, Pig candidate 2 or Pig candidate 3. Some choice, the Pigs own the main stream media too, so Pig candidates get to hog the prime time and non Pig candidates get a few token seconds here and there to keep the illusion of choice going...

 

[StageLeft]

Well it certainly is strange that the largest fed budget in history (and 50% larger than that merely ~5 years ago) is throwing money at this problem with us covering the losses of rich banks. The defense is that we need to prop them up so that things don't get worse for all of us, but where does that stop? Airlines, for example, how much money has been thrown at them? Maybe it is time to let them fail and adjust to the market accordingly? This economy is on the precipice of a cliff and the government not only refers to it as a period of slow growth but watches the currency collapse and all it does is slash, slash, slash interest rates. Meanwhile, the lenders who have money aren't buying it and the stock market is down to levels from 2000.

You are right about the options, btw. I have hopes for Obama, for example, but is he really going to be much different? Bush has asked asked for much and Congress has continually granted it. They are complicit in this. Does it really matter which moron runs the show at this point? The government likely knows that the historical window of people and their ability to project where they'll be in the future is so short that even a time scale of 5 years is beyond their bounds, and so in the short term we get our cake even though it's a long acting poison.

 

[JeffreyLebowski]

Originally posted by: GrGr

Perestroika for the USA
by Paul Tolnai
link

Increasingly the US economy is beginning to look like that of the Soviet Empire before its collapse. The authorities there simply wallpapered over the rot of a sclerotic economy and declared all is well. (Helluva job, Leonid).

Imagine filing a claim with your insurance company and they ask you to loan them the money to cover your claim. You loan them the money and they pay the claim. No default here! No siree!

Remember the monoline insurance crisis -way back when. You know the crisis before the Auction Rate crisis, which was before the Bear Stearns crisis. Yeah, it's been a while - days ago. Many municipalities and agencies were only AAA because they had insurance from the monolines. Because of Blue Sky laws, many pension funds and other institutional investors are required to invest only in AAA paper. Had the monolines lost their AAA rating these funds would have been required, by law, to divest themselves of all the paper that would have been downgraded. So the Fed funds the banks who in turn invest in AMBAC. Now, supposedly all is well. Of course, the banks were counterparties to much of the paper insured by AMBAC.

The above scenario reminds me of Leonid Brezhnev's niece at a gymnastics competition. She lumbers onto the floor, awkwardly twirls, falls on her derriere a couple of times, finishes, smiles, and thrusts her arms victoriously into the air. The crowd awaits the judges' score:

Judge 1: ...10.0

Judge 2: ...10.0

Judge 3: ...10.0

Laugh and snicker if you want to, but the judges at least know that with their AAA rating of Tatiana's performance, they are not going to Siberia - and that is all that matters to them. Yes, you can laugh at the monoline bailout, but Wall Street knows that they've avoided a mass forced liquidation - and that is all that matters to them at the moment.

Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

Legendary commodity trader Jim Rogers asks "What's so bad about a recession?" Indeed! Had the monolines gone under, insurance would have been available from Warren Buffet's new company.

Soviet Russia collapsed, defaulted, and restructured. Its economy is growing, foreign reserves are accumulating, and the ruble is appreciating. China restructured with similar results. It's time for the US to return to its "from shirt sleeves to shirt sleeves" tradition with all the social mobility that that implies. But social mobility is a two way street and for others to move up, some must move down. The Fed has morphed into a meddling bureaucratic institution whose aim seems to be to simply prop up a decrepit privileged class - in the finest of Soviet traditions.

It's time for perestroika here as well.

Is this really the way forward for the US? Tax cuts for the rich? Socialism for the rich? The rich as a protected and priviliged class - Too Big To Fail? And a political system and treasury /banking system that works with the rich for the rich directly and indirectly through insider deals with no insight for the plebeian voters. This is not Democracy anymore. This is the Animal Farm. 'We can still Vote' you say - sure you can, for Pig candidate 1, Pig candidate 2 or Pig candidate 3. Some choice, the Pigs own the main stream media too, so Pig candidates get to hog the prime time and non Pig candidates get a few token seconds here and there to keep the illusion of choice going...

Don't forget, this in not a democracy. The United States is a Republic.

 

[BoberFett]

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

 

[blackangst1]

JHC theres nothing wrong with "the market" whatever that is. The only negative in "the market" is subprime lenders. Everything else is fine.

 

[piasabird]

USA = United Socialist Republic

 

[Dari]

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

QFT.

 

[Moonbeam]

Originally posted by: Dari

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

QFT.

Explain to me how the middle class won't get the shaft if the too big to fail fail.

 

[JS80]

Originally posted by: Moonbeam

Originally posted by: Dari

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

QFT.

Explain to me how the middle class won't get the shaft if the too big to fail fail.

Not only that doesn't the middle class benefit (it at least marginally) during boom times?

 

[Slick5150]

Originally posted by: JS80

Originally posted by: Moonbeam

Originally posted by: Dari

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

QFT.

Explain to me how the middle class won't get the shaft if the too big to fail fail.

Not only that doesn't the middle class benefit (it at least marginally) during boom times?

Yes, but the middle class has to play a risk-reward scenario while the "too bigs" can go for broke and get filthy rich while not facing the same repercussions for failure that everyone else has to play. I'm not against government bailouts, but shouldn't it be under the condition of "We'll give you the money, but we're raising your (upper class/business) taxes to cover it so that the middle class isn't left holding the bag"?

 

[Modelworks]

Originally posted by: blackangst1
JHC theres nothing wrong with "the market" whatever that is. The only negative in "the market" is subprime lenders. Everything else is fine.

Everything else for who ?

Sorry have many friends that are out of work.
Can't see how thats fine, unless you are part of the population who doesn't concern itself with us plebs.


Will anything change because of a new president.
Hardly.
You still got the same old politicians running the country

Did they bail out wall street because the fallout would be too bad or was it because it was the class of people involved ?

 

[BoberFett]

Originally posted by: Slick5150

Originally posted by: JS80

Originally posted by: Moonbeam

Originally posted by: Dari

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

QFT.

Explain to me how the middle class won't get the shaft if the too big to fail fail.

Not only that doesn't the middle class benefit (it at least marginally) during boom times?

Yes, but the middle class has to play a risk-reward scenario while the "too bigs" can go for broke and get filthy rich while not facing the same repercussions for failure that everyone else has to play. I'm not against government bailouts, but shouldn't it be under the condition of "We'll give you the money, but we're raising your (upper class/business) taxes to cover it so that the middle class isn't left holding the bag"?

Exactly.

The "too bigs" have no risk/reward. Apparently it's reward only.

Maybe that's a clue that we need to do away with "too bigs" who seem to be so important that they no longer have to follow the same rules as the rest of us.

 

[Dissipate]

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

Investors only pay a flat 15% on their gains too.

Anyone who simply works for a living is a sucker in this tax system. They are usually paying over 50% in taxes.

 

[piasabird]

There is a benefit to everything. All the countries that base their economy on the back of the US Dollar will fail a lot faster then the USA will. Maybe we can do what they do in 3rd world countries. Throw all foreign debt out the window and just internalize and have to hire americans to rebuild our own economy. I wonder can the USA just file World Bankruptcy and fire most of the people in the Federal Government and just start over from scratch. What would that do to the world economy?

 

[GroundedSailor]

Originally posted by: Dissipate

Originally posted by: BoberFett

Originally posted by: GrGr
Is this any way to run an economy? Let's face it, socializing Wall Street's losses is just socialism - socialism for the rich. Privatizing profits and socializing losses is the way the Soviet's played the game -with profits being privileges for the nomenklatura class (here the Wall Street crowd) and collective losses for the proles.

This is what disturbs me the most. When times are good, investors and speculators make mountains of cash, but when times are bad the government bails out the fools claiming it's "for the good of the economy" or "they're too big to fail". Either way, the middle class gets the shaft.

Investors only pay a flat 15% on their gains too.

Anyone who simply works for a living is a sucker in this tax system. They are usually paying over 50% in taxes.

Well if wall street socializes their losses why do they privatize their profits? They should be socialized too. If they want a bail out, the taxes on their profits should be doubled for the risk reward.

 

[blackangst1]

Originally posted by: Modelworks

Originally posted by: blackangst1
JHC theres nothing wrong with "the market" whatever that is. The only negative in "the market" is subprime lenders. Everything else is fine.

Everything else for who ?

Sorry have many friends that are out of work.
Can't see how thats fine, unless you are part of the population who doesn't concern itself with us plebs.


Will anything change because of a new president.
Hardly.
You still got the same old politicians running the country

Did they bail out wall street because the fallout would be too bad or was it because it was the class of people involved ?

you have a friend who is unemployed so the economy is shit? Overall there's not a problem. To address this specific issue, the unemployment rate has been between 4.5 and 5% since 1997, with a couple of years peaking at 6% due to the dot com bust. Prior to that, rates werent below 5% since 1973, with a peak of almost 11% in 1982.

what were you saying again?

 

[Dissipate]

Originally posted by: GroundedSailor

Well if wall street socializes their losses why do they privatize their profits? They should be socialized too. If they want a bail out, the taxes on their profits should be doubled for the risk reward.

Profits and losses should both be privatized, you don't solve socialism with more socialism.

The bottom line is this: the tax code is heavily in favor of investment income. If you buy stocks and hold them for at least a year you only pay 15%. When you work though, you have to pay FICA, state income tax & federal income tax, totaling over 50% in many cases. So labor is far and away the most heavily taxed activity in the economy. Also, with investments you choose when you pay your taxes. If your stocks are up in a particular year but decide not to sell the security, you can 'let it ride,' which means you let the equity interest compound. You could wait 20 years before having to pay a penny of tax on your investment, all the while the investments grow to multiple times what the initial investment was. When it comes to labor though, the government literally rips that money right out of your paycheck before it even touches your bank account. You don't get to earn even one nanosecond of interest or anything off that money, let alone compound year after year, like investments do.

But it doesn't end there. Any investor can claim up to $3,000 a year tax deduction for a capital loss as long as they sell their stock and do not buy the same symbol for 30 days. And if you lose more than $3,000 you can carry over the deduction for the capital loss to the next year up to $3,000 and the next year, indefinitely.

Essentially this amounts to up to a large percentage of $3,000 a year for risk free investments.

The people who are getting absolutely @ss raped on taxes are people who have no investments, depend entirely on their job for their income, and go into debt. You cannot deduct debt, but you can deduct a capital loss.

Of course, you have to ask yourself why this is. The reason is simple: the wealthiest people derive much more of their income from investments than they do labor, and of course they have much more influence over tax policy. Most people in the middle class don't realize any of this though. They let themselves get @ssraped on taxes on their labor, except for perhaps their 401(k). If they were smart, instead of going into debt they would max out their 401(k)s, and their IRAs, then have even more investments on the side, to take advantage of the $3,000 a year tax deduction on capital losses as well as the 15% flat tax on capital gains, which they can pay long after their investments have doubled, tripled or quadrupled off of the compounding interest. Anyone can open a brokerage account online nowadays.

 

[Genx87]

That 3K a year is a bit misleading. It only lowers your income. Which means you will only see a % of that back in a return. So it isnt 3K a year free. Anybody who loses 3K a year on purpose with the thinking they will get it back is foolish. I happened to run into that issue with a bad investment a few years ago. I'd much rather of had the money lost on the investment than the tax write off.

As for the rest. I mostly agree. We tax the producers which seems silly. We should be taxing consumption.

 

[Dissipate]

Originally posted by: Genx87
That 3K a year is a bit misleading. It only lowers your income. Which means you will only see a % of that back in a return. So it isnt 3K a year free. Anybody who loses 3K a year on purpose with the thinking they will get it back is foolish. I happened to run into that issue with a bad investment a few years ago. I'd much rather of had the money lost on the investment than the tax write off.

As for the rest. I mostly agree. We tax the producers which seems silly. We should be taxing consumption.

You are right, you get much more or less of that $3,000 back depending on your marginal tax rate.

 

[Modelworks]

Originally posted by: blackangst1
[

you have a friend who is unemployed so the economy is shit? Overall there's not a problem. To address this specific issue, the unemployment rate has been between 4.5 and 5% since 1997, with a couple of years peaking at 6% due to the dot com bust. Prior to that, rates werent below 5% since 1973, with a peak of almost 11% in 1982.

what were you saying again?

You really must work for the current admin.
You honestly believe everything is great.



Two plants near me closed up and moved overseas .
I've got 7 friends with no jobs, some who have worked for over 16 years at the same plant.

You think unemployment is low because you post the unemployment rate.


http://money.cnn.com/2008/03/0...economy/jobs_february/

Job losses: Worst in 5 years
Payrolls sink in February, fueling recession anxiety. Unemployment rate declines, but that's because there are fewer people in the workforce.

Job losses were widespread, reaching beyond the battered construction sector, which lost 39,000, and manufacturing, where job losses hit 52,000.

Retailers cut 34,000 jobs.

Temporary staffing firms cut nearly 28,000 from their payrolls, another warning sign of employers pulling back.

Hotels cut about 4,000 jobs, a sign that discretionary consumer spending could be on the wane.

Overall the private sector cut 101,000 jobs, with only a gain in government employment limiting losses.

Yeah the job market is wonderful

 

[EXman]

No it is all political. well 90%

 

[Bird222]

Originally posted by: Dissipate

Originally posted by: Genx87
That 3K a year is a bit misleading. It only lowers your income. Which means you will only see a % of that back in a return. So it isnt 3K a year free. Anybody who loses 3K a year on purpose with the thinking they will get it back is foolish.

You are right, you get much more or less of that $3,000 back depending on your marginal tax rate.

Unless you are in more than a 100% tax bracket you are not going to get back more than 3k. You are always gonna save less than your deductions in taxes.

 

[JS80]

Originally posted by: Modelworks

Originally posted by: blackangst1
[

you have a friend who is unemployed so the economy is shit? Overall there's not a problem. To address this specific issue, the unemployment rate has been between 4.5 and 5% since 1997, with a couple of years peaking at 6% due to the dot com bust. Prior to that, rates werent below 5% since 1973, with a peak of almost 11% in 1982.

what were you saying again?

You really must work for the current admin.
You honestly believe everything is great.



Two plants near me closed up and moved overseas .
I've got 7 friends with no jobs, some who have worked for over 16 years at the same plant.

You think unemployment is low because you post the unemployment rate.


http://money.cnn.com/2008/03/0...economy/jobs_february/

Job losses: Worst in 5 years
Payrolls sink in February, fueling recession anxiety. Unemployment rate declines, but that's because there are fewer people in the workforce.

Job losses were widespread, reaching beyond the battered construction sector, which lost 39,000, and manufacturing, where job losses hit 52,000.

Retailers cut 34,000 jobs.

Temporary staffing firms cut nearly 28,000 from their payrolls, another warning sign of employers pulling back.

Hotels cut about 4,000 jobs, a sign that discretionary consumer spending could be on the wane.

Overall the private sector cut 101,000 jobs, with only a gain in government employment limiting losses.

Yeah the job market is wonderful

stop surrounding yourself with losers and unions.

 

[blackangst1]

Originally posted by: Modelworks

Originally posted by: blackangst1
[

you have a friend who is unemployed so the economy is shit? Overall there's not a problem. To address this specific issue, the unemployment rate has been between 4.5 and 5% since 1997, with a couple of years peaking at 6% due to the dot com bust. Prior to that, rates werent below 5% since 1973, with a peak of almost 11% in 1982.

what were you saying again?

You really must work for the current admin.
You honestly believe everything is great.



Two plants near me closed up and moved overseas .
I've got 7 friends with no jobs, some who have worked for over 16 years at the same plant.

You think unemployment is low because you post the unemployment rate.


http://money.cnn.com/2008/03/0...economy/jobs_february/

Job losses: Worst in 5 years
Payrolls sink in February, fueling recession anxiety. Unemployment rate declines, but that's because there are fewer people in the workforce.

Job losses were widespread, reaching beyond the battered construction sector, which lost 39,000, and manufacturing, where job losses hit 52,000.

Retailers cut 34,000 jobs.

Temporary staffing firms cut nearly 28,000 from their payrolls, another warning sign of employers pulling back.

Hotels cut about 4,000 jobs, a sign that discretionary consumer spending could be on the wane.

Overall the private sector cut 101,000 jobs, with only a gain in government employment limiting losses.

Yeah the job market is wonderful

A percentage is a percentage. 4% of a million is the same overall picture as 4% of 1000. When looking at the country as a whole.

I never said it is great. There are PARTS of the economy that arent great, but most are. Employment is one of them. Youre trying to skew actual numbers with percentages. Which is a...well...skewed and incorrect picture. For example. If you pay $100,000 in taxes that seems outrageous. Unless you throw in your taxable income is $900,000.

With the exception of sub prime market, what exactly is the problem? You talk about all these jobs going overseas. Then where in the hell is everyone working? Sure, there is a lower percentage but higher number of people than there were 15 years ago unemployed, but that also means there are more people WORKING than 15 years ago.

 

[Lalakai]

the biggest thing that pisses me off about the entire affair that currently ended with the Bear buyout; how many times have the Republicans told us that government should stay out of the market place and let market forces guide themselves. I guess the exception to that that rule is when the business meltdown affects the rich, then the government uses tax money to bail them out. Anyone want to wager the buyout that would be offered if Haliburton needed some help?

nope, no democracy here. just corrupt politicians.