Posts Tagged ‘economy’

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By @anarchyroll

No thing quite says the Republican party of the United States of America like a tax cut.

Did you notice how quickly and easily Congress was able to push through a tax cut for the wealthy? Almost every other piece of legislation (except for military spending increases) that has been attempted to be passed over the past decade has been a textbook example of two-party democratic government not working. If 1980s Dominos Pizza was delivering this tax cut, the oligarchs would get it piping hot and received no discount..

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Every aspect of this Tax Cuts and Jobs Act of 2017 is a big, bright, and bold example of how the rich get richer and the poor get poorer in America. Follow the money is an age old expression. Congressional gridlock shows just how true that is. Because the only bills that have moved quickly through Congress have been military spending increases and this tax cut. The military industrial complex (who own he Democratic Party like violent pimps) and the oligarchs. King Kong ain’t got shit on them.

This bill is less about the Republican Party and more about who they represent and who they work for. Is it half of the American population? Is it a loud minority? A silent majority? Follow the money, who does this tax cut benefit?

Passing legislation has come to a halt in America since the last two years of the George W Bush administration. There was that one big exception, but almost every other bill has been stuck in legislative gridlock hell that is the United States Congress. Healthcare reform, immigration reform, financial regulation, digital privacy protection, et al have moved at painfully slow speeds if at all. Even common sense, bipartisan bills have had a hard time even seeing the light of day on the floor of either house of Congress.

But a tax cut for the wealthiest Americans? A 500 page bill involving one of the largest transfers of wealth in the history of the country? Less than a month is more than enough time. How does that happen? Why does that happen? Is that not why we fled England in the first place? I guess no taxation without representation only applies to taxes going up and not taxes going down, on less than two percent of the population.

Is this a tax cut to benefit people making less than one hundred thousand dollars per year? Less than fifty? Less than thirty?  Many might snicker and say those making so little don’t pay taxes anyway. That is the problem isn’t it? There are vastly more people in the current society who will benefit more in the day to day lives from taxes collected on the wealthy (social safety nets, community services) than by a one time, minor at best, windfall from a tax cut/credit.

The tax bill moved so fast through both houses that they have needed double, if not triple the amount of time to take the bills into conference committees to negotiate and fix the numerous, egregious math and budgeting errors. Drafting and finalizing a compromise bill behind closed doors has taken the place of proper on the floor debate as a result of this Congress moving at lightning speed to pass a bill that no one had time to read, let alone make logical decisions based upon critical thinking.

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Congress rushed through this bill like a college kid rushing to finish a final paper or cramming at the last-minute for a midterm. There are two key differences there and that is that when a college kid waits until the last-minute to do their deep work it only affects them and their roommates. The legislative branch of the United States of America however, effects just slightly more people than a dormitorium.

Greed and corruption like this used to have the cover of a lack of transparency. In the era of telephones and television and newspapers and radios and telegraphs it was much easier for politicians to say X, do Y, and say the result is Z. The age of the smartphone makes it easier to be shady, but much harder to keep it a secret. The wave of careers being ended by sexual misconduct allegations from Hollywood to Washington is evidence of this.

What is also apparent when held up to the light of day is the fact that this bill is amoral. Ethics, budgets, math do not apply to this trillion dollar wealth transfer. Negotiated in secret, passed before it could be read, full of so many errors that both the House and Senate versions needed to be negotiated so much they were both essentially rewritten. How does the urgency of this compare to the passing of hurricane relief to Puerto Rico?

The tax cut of 2017 that has been instituted by the Republican party has been called the Tax Cuts and Jobs Act of 2017 by some and the #TaxScamBill by others. Terms of endearment or damnation depending on which side of the political aisle and socioeconomic spectrum one falls on. What are facts and not opinions however are that this bill was so rushed it wasn’t read or proofread by the people who wrote it. That there were so many earmarks in there in such short order that many proved to be illegible when held up to the light of day or a camera

This tax cut is like putting your coat down at a bar, turning your back for a minute, then turning back to find someone going through the pockets and them playing dumb about it. They know what they’re doing, but are hoping to use ignorance as a guise for willful immorality.

 

 

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By @anarchyroll

America’s identity is its middle class. What makes America different than every other country that has come before it? The economic middle class…..guns, and obesity.

For real tho, it’s the middle class. We invented it. Before the United States of America there was no middle class. There was rich and there was poor.

What the middle class literally is, as well as what it metaphorically represents are both why people immigrate from all over the world, not just from the third world, to be in America. A country with an economic ladder for all people who work hard as opposed to caste systems? That concept is worth risking life and limb to millions of people each year. Legally and illegally people want into America.

Freedom/democracy is great too, but what good is freedom if you’re poor? What good is living if you live under literal oppression or economic oppression where there is only the super rich and the super poor? America, the land of opportunity; where ordinary people can simply work hard and be rewarded monetarily in a manner that enables not just animalistic survival, but also comfort, upward social mobility, and land ownership.

The socioeconomic middle class is Americana. Baseball, apple pie, barbecues, two week vacations, two car garage homes with a white picket fence. The images created by those words are the America middle class; the great reward for all born or adopted citizens who buy into the concept of American exceptionalism by giving their blood, sweat, and tears to a job for the middle two quarters of their life.

Without a middle class, America has no true identity. Freedom? Democracy? Those both existed before America. Flags? Bald eagles? Sports? White people oppressing minorities? Those all existed before America too believe it or not.
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There is a saying; Don’t tell me about the labor pains just show me the baby.

One can look at that chart and say there are still plenty of people in the middle class. One can point to the people who have improved their income status over the past ten to forty years. Both are valid points. There is still a middle class in America and people have moved economically upward out of the middle.

Want another valid point? Both democratic and republican presidential candidates are dedicating equal time to talk about the erosion of the middle class. In this polarized political era, for both sides, to completely agree on a non national security/terrorism issue?

How can the erosion of the middle class be immune from political party polarization? Sure they’ll disagree on how to fix it, but to be in complete agreement of the present moment problem? Sounds like what happens when a person reaches a midlife crisis. And a midlife crisis is nothing more than an identity crisis.

The erosion of the middle class is America’s identity crisis.

Are we a caste system? Are we an oligarchy? Are we a republic? Can our economic and political systems ACTUALLY co exist? Should we just buy a sports car?

The real questions always start with Who/What/When/Where/Why and How?

Who; has benefited from the erosion of the middle class?
What; exactly has been happening over the past thirty years to lead to this erosion?
When; was the middle class the most robust?
Where; specifically did the wealth lost by the middle class go?
Why; was the middle class so vibrant at its peak?
How; can the economic principles of then be adapted to modern time?

If one asks these questions, and does a few basic Google searches, the answers become pretty obvious pretty fast. But the answers to these questions don’t actually require searching the internet do they? Deep down inside, we all already know what’s been happening. We know where the middle classes’ money has gone. We know whose benefiting from the loss of the middle class. We would like to tell ourselves we don’t know why because we want to see and believe the best in people.

Have you heard the phrase, the rich get richer and the poor get poorer?

How about; All is fair in love and war.

Class War has been the new Cold War for about thirty years, which wouldn’t ya know, is about how long the Cold War has been over, and is how long the middle class has been eroding.

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by @anarchyroll
7/26/2014

If you don’t know who Warren Buffett is, all you need to know is that he’s the greatest living investor in the history of the American stock market(s). In the world of finance he’s the Michael Jordan, Muhammad Ali, Wayne Gretzky, and Babe Ruth. He is the man and has nothing resembling an equal.

Warren Buffett has also become the conscience of the finance sector the American economy.

This is evidenced by his refusal to put his wealth of wealth into commercial securities and derivatives. Whereas all other big banks, hedge funds, and trading houses can’t get enough of either.

In a recent issues of TIME magazine, Buffett called all commercial securities “weapons of mass destruction.”

Commercial mortgage-backed securities (CMBS) and derivatives were two primary instruments in the 2008 global economic meltdown, the worst economic collapse since The Great Depression.

Warren Buffett invests the old-fashioned way, when investing was investing. CMBS and derivatives are the tools that have turned Wall Street into a casino on steroids. CMBS and derivatives are the dice, the global economy is the table, the chips that big banks and hedge funds are playing with are the liquid assets of the global economy. Are the craps and gambling metaphors coming across clearly enough?

After all of the pain and devastation that derivatives trading has done to the global economy, there is certainly a strong case to be made that they should be done away with completely. But in the spirit of baby steps and pragmatism, how about we start with at least putting some kind, any kind of regulation on derivatives trading?

If commercial securities and derivatives aren’t good enough for the greatest living investor in America, perhaps it is best that we all steer clear of them. If someone with literally billions of dollars to burn doesn’t want to touch them, why would any person dependent on a robust 401k to be able to retire at 65 want their limited assets intertwined with the same investment instruments that collapsed the global economy barely a half decade ago?

 

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by @anarchyroll
7/14/2014

Wages have not kept up with inflation or the consumer price index for over thirty years. That is what is meant when you hear people talk about wage stagnation.

As long as wages remain stagnant compared to how much stuff costs there will never be a fully robust economic recovery.

Wage stagnation is why there is currently an all time record high of income inequality in America.

This is why you don’t need a degree in economics to understand why all debates over economic issues in America are made to seem overly complicated on purpose. Because if people were paid more for their time and effort, they could buy more things. But wouldn’t those things then be more expensive? Yes, but people would be making more money. It would be a cycle, kind of like the cycle our economy is on now but less vicious and soul crushing for the generationally poor.

You’ve heard about class warfare between the 1% of earners who possess more wealth than the other 99% of earners in the country, right? That is the heart of the Occupy Wall Street movements and protests. Why is there such a gap in income equality? Why is there class warfare? Why is there a sentiment that the “game” that is the US economy is rigged and the American Dream is dead? The underlying cause/answer is wage stagnation.

Wage stagnation is not an accident, it has been done very much on purpose for almost half a century. The haves don’t want to pay the have-nots an honest salary for their honest work and have been allowed to get away with it. The 1% could make the choice to pay their workers more. But other than it being the right thing to do, why? After all, paying the masses a living wage would mean less one-percenters could afford private yachts, jets, and islands.

Wage stagnation is tied directly to the rise in consumer debt (people use credit to pay for necessities they don’t have the money to have because they don’t get paid enough), student loan debt (parents and students need to take loans because they don’t get paid enough to pay for college tuition), and mortgage debt (not being paid enough to afford a home). Being able to afford a home is the center piece of the American Dream. To afford property, not simply to achieve financial prosperity as many would have you believe.

Until wage stagnation is addressed and done away with, very little else matters in terms of turning around America’s economy for 99% of the population. To deny this is to deny reality, or be apart of the minority of the population that is benefiting from the system as it is currently constructed. There is no gray area or in between.

A living wage is the only humane solution to this problem. But traditionally, humanity and the American economy don’t always go hand in hand. The fierce resistance to paying a living wage in America is only the most recent example.

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5/27/2014

What happens when the country that we borrow from needs to borrow from someone?

China is starting to see companies collapse and borrowing go up. Why should you care?

Because the United States of America is dependent on China whether we want to be or not, whether people know it or not. China now has to spend $4 to make a $1.

If China goes through a depression or a recession or even something resembling a recession, we are going to feel the negative effects here at home. Not just because they buy so much of our government debt, but because China is responsible for 1/3 of global economic input according to the article linked to above.

There’s no need to panic or ring a doomsday alarm. But China is in a debt crisis.When that language/terminology is used there must be cause for concern in the name of financial responsibility and fiduciary duty. Why is that the case? Why should you care about this?

China owns $1 Trillion with a T of US Government Debt.

That may not seem like a lot when you see the total amount of government debt. But a trillion dollars is a trillion dollars no matter how economists may try to justify it to themselves. Anytime a trillion dollars is involved, it’s safe to say that an eye and an ear should be paid to it at all times. Especially when a margin call from China could put us on a bullet train to a 2008 sequel. The sequel is never better than the original, but let’s keep this one in the territory of Casablanca and Old School and let the original stand alone with the test of time.

eanda logoajclogo2by @anarchyroll
5/22/2014

How many people went to jail for causing the 2008 economic collapse of not just the United States, but the entire global economy?

I thought the answer was zero, it turns out I was wrong. The answer is one, one person from Wall Street went to jail post 2008.

It’s not just an income inequality gap that exists and is expanding in America, there is also a judicial inequality gap. Since I’m white I’ve only noticed this recently. If I was a minority I would have likely not just written about the disparity, but would have been arrested and put in jail already.

Graph courtesy of Project.org

In America, white-collar criminal really is a double entendre. One for the type of crime, a second for the race of the criminal.

Though maybe it is time to update the image and the term. Something more appropriate would be green collar crime. Though the fact that almost all of the white-collar corporate CEO’s were/are white; it is the quantity of dead presidents in their offshore bank account that is the blade to their prison term skate.

What does it say about us as a society that we allow this kind of disparity to justice to become the norm? Is the damage caused by the architects of the ’08 collapse greater than, equal to, or less than the robbery of a single person? How about the rape of a single person? The murder of a single person? Selling drugs to a single person?

I’m not pretending to have an answer here. I am certainly not standing on a pedestal.

Was the damage caused by World Com and Enron akin to a serial robber? A serial killer? A serial rapist? A drug kingpin? How do we measure the collateral damage? Is the death by stabbing of a man in his early twenties different from a retiree who finds out they have lost all of their money in a Ponzi scheme and is destitute without the physical ability to earn for the rest of their life?

What about the people who kill themselves due to an economic depression? What if they have spouses and children? Is their loss, pain, and suffering different from a woman who gets robbed and raped at gun point walking home from the train station?

When entire neighborhoods and towns are put into foreclosure. Hundreds, thousands, millions without work, shelter, food, water, or hope for the future…are the people responsible for causing so much human tragedy somehow less evil, deserving less scorn, and less judicial prosecution than a teenager who runs over a kid while texting and driving? What about drinking and driving?

When blood is spilled, lives taken, innocence stolen in violent crimes we as a society hunt down the criminals, lock them up, throw away the key, and turn the other cheek while they are habitually raped in prison. Victims of violent crimes and their families are forever changed, unable to ever fill the hole created by an evil person that took something that can never be given back.

But is that psychological damage not shared by victims of massive financial crimes against society like in 2008? When we aren’t talking about a single person losing a job or life’s savings but a large percentage of the global population. Are the strains placed on society not akin to that placed on the immediate friends and families of violent crimes?

If not, can we at least as a society agree that we should lock up hedge fund managers, investment bankers, and Ponzi schemers that cause global recessions and depressions as strictly and regularly as we lock up drug dealers and users?

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by @anarchyroll
3/22/2014

Janet Yellen chaired her first Fed meeting this past week. Afterwards she announced Fed policy going forward regarding her baby, quantitative easing. She helped construct QE at the height of the economic downturn several years ago, a topic written about repeatedly on this website. Yellen announced that QE will continue to taper down at a rate of $10 billion per month until the end of the year.

That is good, QE needs to end, the sooner the better. The problem is the economy has become somewhat dependant on it. The markets took a small but sudden dive at just the announcement about anything QE related. Yellen also said that QE coming to a total end will depend partially on unemployment numbers.

If you haven’t noticed the unemployment problem is a deeper wound in the economy and in the country not seen since the Great Depression. Not only are a huge number of people out of work, but even more are underemployed and wages have been stagnant for over a decade. When the  markets react negatively to even the mention of QE ending, which it does every time there is an official announcement on the subject, employment numbers are likely to take a hit.

Why? Because the 1% who employ the other 99 have their assets all up in the casino stock market. So if/when those numbers go down unemployment goes up, underemployment goes up, wages stay stagnant or go down. So tying QE to the employment numbers is an out to keep QE going indefinitely since the unemployment crisis could be indefinite. What will the effect of a possible government mandated rise of the minimum wage? All these moving parts will affect whether QE ultimately comes to an end.

The minimum wage debate will be the subject of the next Excess and Algorithms article.

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by @anarchyroll
3/5/2014

A lot has been written about student loan debt, but apparently not a lot of research has been done into the subject. The Department of Education releases default rates once a year, but that is just about it. Are you surprised at this? So was the New York State Federal Reserve Bank. Two analysts working their essentially had to do a bulk of the research that is now often cited by the media and protest groups.

They found that the percentage of 25-year-old college graduates with student loan debts essentially doubled while the average loan balance increased 91% from 2003 to 2012.

Economists are looking at education borrowing as the next bubble that could burst and drag down the US economy along with it. Much like the housing bubble, there are a lot of government backed loans being given away with a rubber stamp to large amounts of people who are unable to immediately if ever repay. Government officials are openly comparing student borrowing to the mortgage-backed security crisis of 2008. And remember, this article opened with the fact that there has been little study and even less data available on the subject.

Mortgage backed securities, credit default swaps, and derivatives trading are all complicated things. Let’s keep the education bubble concept simple.

Student loan debt in America = $1.2 trillion (with a T) more than any other form of consumer debt.

Much like the series of articles written about quantitative easing (QE), there will be multiple articles written about student loan debt as well as the debate over raising the minimum wage. These are the three economic issues I feel most passionately about and wish to shine light upon. Let those numbers listed above wash over you for a bit. Do you know anyone dealing with student loan debt? How are they doing? What is their quality of life?

It’s not just the loan or the interest, it is the unemployment, underemployment, or complete non-existence of careers in the fields thousands if not millions of students are graduating with each year. It’s not just the monthly payment on the loan(s). It’s the monthly payment on the loan plus rent, utilities, food, transportation, etc.

The Education Bubble and the student loan debt crisis are one and the same. They are intertwined, they are two terms describing essentially the same thing.

How is higher education a bubble akin to the dot-com, real estate bubbles, and other asset bubbles? We’ll cover that in part 2…

eanda logoajclogo2by @anarchyroll
2/27/2014

There are very few things that can actually change the American and/or global economy. The reason there are few things is because each one is not just big but gigantic in scope, nature, and application apparatus. A overhaul of the US tax code has been proposed by Michigan Republican David Camp of Michigan.

The banks hate it, retailers love it, Democrats say it’s dead on arrival, and Republicans aren’t really saying anything since it involves raising taxes on top earners. But it is a start, it is a physical, tangible bill, put on the table. The White House has acknowledged at least that much.

Many tax exemptions and tax breaks would be eliminated. Taxes would go down for individuals but go up for companies and corporations that earn X number of dollars. Income earned from investments would be taxed more which is very important. But there are multiple aspects that will prevent it from going anywhere, but it’s a start.

979 pages, which is the length of the bill, doesn’t exactly scream…simplified. But there must be a starting point on this issue, there must. The tax code in the United States is ridiculous and causes more problems than it solves. It favors the rich and hurts the poor. Too much money is hidden, sheltered, and shipped offshore, all of which must end.

Warren Buffet has famously said he should not pay a lower marginal tax rate than his secretary. The fact that is currently the norm, tells you all you need to know about the current tax code and tax policy in the United States. David Camps starting point is truly nothing more than a starting point but you can’t walk before you crawl. Camp’s bill begins the crawl forward, and forward is always the way to go.

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2/20/2014

What is money velocity? It is the speed at which the M2 money supply moves from one transaction to another.  What is the M2 money supply? It is all the liquid cash assets in the country from cash, savings accounts, mutual funds, certificate of deposits (CDs), checking deposits, or basically any kind of money stored in any kind of account, or mattress if you’re old and senile.

How can money velocity be used to gauge economic strength? Because money velocity ends up being the ratio of the size of a country’s economy to the size of the money supply. So there shouldn’t be more cash than there is gross domestic product (GDP) or less than. If there is more/less, then inflation/deflation occurs as a market correction.

I may sound very smart with the above explanation, but a recent article in Bloomberg Businessweek did all the heavy lifting for me. The article is short, quick, to the point, and keeps everything in plain language, as I try to do with this blog.

The concept of money velocity fascinated me because; I had never even heard or come across the term before, was unaware it is a relatively accurate economic indicator, and was surprised that the slower money moves the safer we are from inflation or another recession. Why is that? Hasn’t the Fed been flooding the markets with freshly printed money for over three years? They have, but people and businesses aren’t spending it, they’re saving it. Which is good for now because inflation could stop the economic recovery in its tracks.

But the money will have to start flowing sooner than later. Especially as QE gets tapered off over the next 18 months. Fading out QE and fading in inflation wouldn’t do much damage to the economy. It would be like getting autumn before winter or spring before summer, our bodies acclimate to the changing weather because of a gradual transition. This could be the case with money velocity. It was refreshing to learn that the low money velocity we are seeing now is historically normal, and has in the 60s and 80s preceded boom periods.

But those booms were just bubbles. We all must keep one eye on Wall Street to make sure that our country isn’t held hostage by a bursting bubble again. That is why they teach consumer ed in high schools folks, it’s not just to give an elective teacher a pay bump.

So now you know what money velocity and M2 money supply are. It’s used as an economic indicator because of its ratio to GDP. Lower velocity means lower prices and deflation while higher velocity means higher prices and inflation. Drop those in conversation at the cocktail lounge but not the night club, depending on how fast you want to move the cash in your wallet to keep the other parties interested…