Subprime: Calculated Risk has done a terrific job chronicling the credit crap over the last year or so. The reference the following subprime report
The report is worth your looking over. I think that it is well written, and best of all, it has pictures and we know the worth of pictures.
One of the fallouts from this "crisis" will be the effect on state and local revenue. With the boom in housing, that creates the need for schools, water/sewer and other locally delivered services. In my area, over the past 4-5 years, the real estate basis has doubled (in the example following it more than tripled). Local Commissioner's of the Revenue recognized a huge windfall when they went through reassessment. I provided an example of this in one of my blogs. You may wish to visit it here. I recognize that it is only one example, but I don't think that I'd need to look further to find similar ramps!
The politicization of tax discussion nauseates me. It is always so polarized. But let's be clear on a few basic tenets:
1. If you spend more than you take in you have a deficit.
2. Deficit = debt.
3. As spending > than income continues, you pile on more debt.
4. As spending = income results, debt stabilizes.
5. As spending < income is realized, debt decreases.
Now let's suppose you want to do something about the imbalance. There can be two objectives. Objective 1 is to cure the current imbalance so as to not take on any more debt. Objective 2 is to not only cure the current imbalance but also reduce (if not eliminate) the accrued deficit (deficit=debt).
There's not a lot of moving parts here, it is merely income and spending--debt/deficit happens to be the byproduct of the relationship of the first two. So to fix the imbalance, you need to do something along the lines of increasing income and/or decreasing spending. Now where the fighting comes in is that one party believes that if you increase taxes you are effectively reducing income because the free-market grinds to a halt. Much along the same lines that if you tax advantage hedge fund managers, all commerce will go to its needs. I think not. And to be fair, the other party believes that some folks do not pay enough.
Now we want to reduce the corporate tax rate to make our corporations more competitive. Corporations have had the best profitability, are wallowing in cash and the only thing they've been able to do with all of that is pay non-performing executives exorbitant amounts and buy back stocks. And, it's worth noting that the pay of most workers has barely kept up with inflation. I know that. I worked for a Fortune 500 company and I had to manage to a pay increase that did NOT keep up with inflation.
Remember that most of the arguments that you hear about any issue are "people talking their book."
I have no book to talk. But I do know this: First, we have to increase income--and I don't think that incentivizing more "investment" through more tax breaks is going to do it. If so, we would have already seen the results. Second, we have to find a way to reduce our spending. While our "entitlements" which are characterized in such a way that recipients are seen as "freeloaders" (and I resent that a bit because I've paid into these programs with my
own hard earned money as did my employer--which at times was ME).
As with anything, "The devil is in the details," And sadly, the devils in this case are the special interest groups who throw boatloads of money at lobbying for their interest.
I don't look forward to the coming Presdential election. All of the fingerpointing and name calling truly offends me. Unfortunately, it's Politics 101 to discredit the other person--and it's very effective. Politics plays off the same emotionality as the market pickpockets. I do see looming problems ahead largely due to both demographic and economic shifts. I want to see politicians who are committed to what is good for all of us rather than the pandering to a few special interests--and I say that with equal enmity toward both parties--each very skilled in this regard.
My only hope is that people will be so disgusted (and many are now) that we will witness a grassroots effort to rejuvenate and simplify the issues at hand rather than PANDER to special interests--whomever they might be. For myself, I'm not sure where to start, but I feel that my internal pilot has been lit.
Don't worry. I do not plan to make my blog a political anything. I avoid political and religious discussions largely because they are so emotional for many people; accordingly discussion is generally impossible. The thing that I love about my book club, is that we are a pretty diverse group, and somehow we manage to hold these discussions without resorting to fisticuffs. Why? I think that it is because we have a genuine affection and respect for each other.
When I had to negotiate difficult contracts, I always started off our discussions (and these were generally negotiations that took place over many months) with this simple statement: I want to be clear about our expectations for negotiating contracts. The contract and its discussions that we are both undertaking is going to be complex and difficult. We come to the process with an open mind and the singular desire to negotiate a fair and equitable contract that both parties will walk away from feeling good about."
Now you might think that statement hokie. There was a ruthlessness in the 80's about negotiating for maximum, unilateral advantage over others. (Yes, that is infused with testosterone!). But I will attest that "my way" was very effective. During the course of negotiations (which we laughingly started to peg to holidays--that's how far apart some of the milestones were!), if we began to get lopsided, it was a sincere tenet to bring the group back to. Very centering for a group.
The lesson (for me at least!)? When you come to difficult discussions in your work or personal life, (a) have an simple and sincere (I call that elegant) statement about what you want to accomplish; (b) share it clearly with the other party; (c) work toward that goal with energy and passion; and (d) treat all parties with respect. There is no goal that cannot be accomplished with these simple, effective tenets in hand.
I see often the point "you have to respect the opinions of others." I think that you treat people with respect. There are many people that I respect, but some of their opinions I have absolutely no respect for and don't feel any compunction to feel respect for it.
The Subprime Lending Crisis
The Economic Impact on Wealth, Property
Values and Tax Revenues,
and How We Got Here
Report and Recommendations by the Majority Staff
of the Joint Economic Committee
Senator Charles E. Schumer, Chairman
Rep. Carolyn B. Maloney, Vice Chair
----------------------------------------------------------------------The Economic Impact on Wealth, Property
Values and Tax Revenues,
and How We Got Here
Report and Recommendations by the Majority Staff
of the Joint Economic Committee
Senator Charles E. Schumer, Chairman
Rep. Carolyn B. Maloney, Vice Chair
The report is worth your looking over. I think that it is well written, and best of all, it has pictures and we know the worth of pictures.
One of the fallouts from this "crisis" will be the effect on state and local revenue. With the boom in housing, that creates the need for schools, water/sewer and other locally delivered services. In my area, over the past 4-5 years, the real estate basis has doubled (in the example following it more than tripled). Local Commissioner's of the Revenue recognized a huge windfall when they went through reassessment. I provided an example of this in one of my blogs. You may wish to visit it here. I recognize that it is only one example, but I don't think that I'd need to look further to find similar ramps!
The politicization of tax discussion nauseates me. It is always so polarized. But let's be clear on a few basic tenets:
1. If you spend more than you take in you have a deficit.
2. Deficit = debt.
3. As spending > than income continues, you pile on more debt.
4. As spending = income results, debt stabilizes.
5. As spending < income is realized, debt decreases.
Now let's suppose you want to do something about the imbalance. There can be two objectives. Objective 1 is to cure the current imbalance so as to not take on any more debt. Objective 2 is to not only cure the current imbalance but also reduce (if not eliminate) the accrued deficit (deficit=debt).
There's not a lot of moving parts here, it is merely income and spending--debt/deficit happens to be the byproduct of the relationship of the first two. So to fix the imbalance, you need to do something along the lines of increasing income and/or decreasing spending. Now where the fighting comes in is that one party believes that if you increase taxes you are effectively reducing income because the free-market grinds to a halt. Much along the same lines that if you tax advantage hedge fund managers, all commerce will go to its needs. I think not. And to be fair, the other party believes that some folks do not pay enough.
Now we want to reduce the corporate tax rate to make our corporations more competitive. Corporations have had the best profitability, are wallowing in cash and the only thing they've been able to do with all of that is pay non-performing executives exorbitant amounts and buy back stocks. And, it's worth noting that the pay of most workers has barely kept up with inflation. I know that. I worked for a Fortune 500 company and I had to manage to a pay increase that did NOT keep up with inflation.
Remember that most of the arguments that you hear about any issue are "people talking their book."
I have no book to talk. But I do know this: First, we have to increase income--and I don't think that incentivizing more "investment" through more tax breaks is going to do it. If so, we would have already seen the results. Second, we have to find a way to reduce our spending. While our "entitlements" which are characterized in such a way that recipients are seen as "freeloaders" (and I resent that a bit because I've paid into these programs with my
own hard earned money as did my employer--which at times was ME).
As with anything, "The devil is in the details," And sadly, the devils in this case are the special interest groups who throw boatloads of money at lobbying for their interest.
I don't look forward to the coming Presdential election. All of the fingerpointing and name calling truly offends me. Unfortunately, it's Politics 101 to discredit the other person--and it's very effective. Politics plays off the same emotionality as the market pickpockets. I do see looming problems ahead largely due to both demographic and economic shifts. I want to see politicians who are committed to what is good for all of us rather than the pandering to a few special interests--and I say that with equal enmity toward both parties--each very skilled in this regard.
My only hope is that people will be so disgusted (and many are now) that we will witness a grassroots effort to rejuvenate and simplify the issues at hand rather than PANDER to special interests--whomever they might be. For myself, I'm not sure where to start, but I feel that my internal pilot has been lit.
Don't worry. I do not plan to make my blog a political anything. I avoid political and religious discussions largely because they are so emotional for many people; accordingly discussion is generally impossible. The thing that I love about my book club, is that we are a pretty diverse group, and somehow we manage to hold these discussions without resorting to fisticuffs. Why? I think that it is because we have a genuine affection and respect for each other.
When I had to negotiate difficult contracts, I always started off our discussions (and these were generally negotiations that took place over many months) with this simple statement: I want to be clear about our expectations for negotiating contracts. The contract and its discussions that we are both undertaking is going to be complex and difficult. We come to the process with an open mind and the singular desire to negotiate a fair and equitable contract that both parties will walk away from feeling good about."
Now you might think that statement hokie. There was a ruthlessness in the 80's about negotiating for maximum, unilateral advantage over others. (Yes, that is infused with testosterone!). But I will attest that "my way" was very effective. During the course of negotiations (which we laughingly started to peg to holidays--that's how far apart some of the milestones were!), if we began to get lopsided, it was a sincere tenet to bring the group back to. Very centering for a group.
The lesson (for me at least!)? When you come to difficult discussions in your work or personal life, (a) have an simple and sincere (I call that elegant) statement about what you want to accomplish; (b) share it clearly with the other party; (c) work toward that goal with energy and passion; and (d) treat all parties with respect. There is no goal that cannot be accomplished with these simple, effective tenets in hand.
I see often the point "you have to respect the opinions of others." I think that you treat people with respect. There are many people that I respect, but some of their opinions I have absolutely no respect for and don't feel any compunction to feel respect for it.
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4 comments:
Zacks is saying that this is the 21st straight quarter with double digit earnings growth.
I can't help but to cut in this front page quote from today's Wall Street Journal. In describing pork barrel politics in Pennsylvania, Congressman John Murtha has,
"Over the past decade, Concurrent Technologies Corp., a defense-research firm that employs 800 here, got hundreds of millions of dollars thanks to Rep. Murtha despite poor reviews by Pentagon auditors. The National Drug Intelligence Center, with 300 workers, got $509 million, though the White House has tried for years to shut it down as wasteful and unnecesary. Another beneficiary: MTS Technologies, run by a man who got his start some 40 years ago shining shoes at Mr. Murtha's Johnstown Minute Car Wash."[my emphasis]
Some things just never change in Washington.
Your model is not accurate.
You do not account for inflation. Inflation essentially allows a government to right off it debt in real terms by devaluing the currency. This method has been used since the time money existed. The old way was to put less precious metals in your coin. We are a little more sophisticated today, but it is not far removed from the early days of print money, when they simply let the printing presses run.
Russell--I think that you are a closet economist! I was merely trying to provide a very elemental discussion. But yes, inflation does play a part the same way that it does for individuals. However, theory and practice often part ways and this is no exception. A bank would be no more swayed by an elegant discussion of inflation and devalued currency regarding your eroding balance sheet and spend thrift way than others evaluating the fiscal responsibility of our nation.
It's like going out and binge drinking and being able to drink the cure in the a.m.--the cure does not excuse the behavior which is still detrimental.
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