Posts Tagged ‘economy’

The #China Bubble

Posted: May 28, 2014 in Excess and Algorithms
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eanda logoby @anarchyroll
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.

No Black Bars for #WallStreet White Collars

Posted: May 23, 2014 in Excess and Algorithms
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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?

#QE Continues to Taper

Posted: March 23, 2014 in Excess and Algorithms
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eanda logoajclogo2

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.

Student Loan #Debt & The #Education Bubble

Posted: March 6, 2014 in Excess and Algorithms
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eanda logoajclogo2

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…

#TaxCode Changes Put on the Table

Posted: March 1, 2014 in Excess and Algorithms
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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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