Man Based Global Warming....

reportonbusiness.com: globeinvestor.com - World economy stabilizing, Krugman says

 

Scientists propose helping wildlife relocate due to climate change

 

Under a deflationary scenario, holding debt, not assets, is the problem. If you have assets, declining prices will work in your favor as you can exchange / buy more goods with those same assets. If you have debt, you will be paying off that debt with dollars that are harder to come by.

Home prices, by the way, are deflating because they were at unrealistic levels, pumped up by the Fed that has embraced loose monetary policy for far too long. You can expect that Obama's irresponsible fiscal policies will create additional perceived (if not real) risk for holding US government securities. This will require that interest rates on those securities be raised in order to compensate for the increased risk. The result will be rising mortgage interest rates. All else being equal, housing prices will have to fall in order to maintain an equivalent level of affordability. So it is likely that housing prices will fall. But this is not truly deflationary since houses will be no more affordable at this lower selling price, because the higher interest rates will offset the savings in selling price -- just as lower interest rates offset the rise in home prices the first half of this decade. Yes, you would get a lower price if you sell your house, but then again, when you buy a replacement you will pay less as well.

By the way, what do think is going to happen to our national debt service when interest rates double, or triple? You think we have tough fiscal problems now.

 

Consumer electronics have the most rapidly declining prices of any consumer good. Yet year after year they always have among the highest demand of any discretionary good on the market. So I don't see that falling prices necessarily equate to a "waiting to buy" downward spiral.

But again, deflation is highly unlikely given the irresponsible actions of the Fed, Obama, and Bush II. Inflation will be the problem.

Again - and I say this with all sincerity - not to be argumentative - please consider taking steps to protect yourself / your assets. If you won't and you think government is going to save you, I wish you well.

 

Spoke by one of the asset holding class.

Do you realize that the Average American ~50 years old has a net worth, including equity in their home and retirement "plan" of ~$50,000? (This was a number from ~3 years ago,,, I don't know what it is now).

So yea,, of you are rich, hold on to your assets, if you are average your used to holding on to your asses as the Republicans have tried to perfect trickle up economics. Seems to have worked well since the days of Reagan,,, as the wealthy now control an even bigger share of the wealth than they did in 1980.

The asset class ha perfected the art of picking the working person's pocket under the guise of "free market capitalism" or "empowering the worker have a "choice" in his/her retirement investments" all the while "stealing" the money,, both the return and the principal, with hidden fees that often reach 50% of return (or more in the case of gross mismanagement) with the real proceeds going into the pockets of wall street bankers who get paid 6 figure "salaries" and then get 7 figure bonus's based on driving the shareholders, or the mutual fund holders equity off a cliff! Over the last two decades,, the returns on "mutual funds" net/net have been just enough to keep people buying into the notion that they are "investing" in their own retirement,, when in reality they are investing in lining the pockets of those that are way better off than they are. And these are the "legit" funds,,, not the "crooked" ones,, or the Enron's or WorldCom theft rings!

So, one could argue that one needs to be more proactive and be better educated when it comes to what stocks and bonds to buy. The sad fact is that this too is most often stacked against the little guy. Large transaction fees, disclosure forms that are convoluted in the extreme,, not to mention interlocking boards of directors who vote their own self interests over those of the small shareholder,, greenmail,,hostile take overs, leveraged buyouts,,, it is ALL stacked against the little guy.

So yes,, go ahead and protect your assets,, and don't have a second thought about those that have been ripped off for a couple of generations,,, and for sure don't support anything that would fundamentally change things to make them more equitable,,, maybe even more fair.

Why for example should Warren Buffet pay a smaller percentage of tax on income than his secretary? Why should capital gains tax be 15% while the maximum tax rate on working wages/salaries is almost double that? Why was it that we had pretty good prosperity in the 1950's (in spite of cold war spending on the military/industrial complex!) with growing wages and salaries,, good pension benefits, better health care at lower cost (in some relative sense!) all the while we had top tax rates that were near 90%? Perhaps was it an age when people understood services come at some cost,, and that cost is fairly paid by all based on their ability to pay. Perhaps we hadn't been sold the bill of goods that "government was the enemy" or that "free market capitalism" was the answer to everything?

I am not naive to think that all was rosy,,, but I think that we would be wise to look carefully at our tax policy and realize that we have to pay for our bills.

Mr. Bikes,,, you rail against the coming economic collapse,,, and in some sense I agree with you,, but this can be changed by political will,, and the will to change tax policy such that there is a better equality in the way we pay for things,,, including paying off our national debt.

Icarus

 

Ha - you really are mis-informed. It is very likely that Buffett's secretary pays no income tax. Nearly half of all working Americans don't. I will get back to your other points later. But at least we can agree - things are likely to be tough sledding. Where we disagree is why and what to do about it.

 

That only works if you plan to buy in the same local market. If you try to move somewhere that has a more robust economy, possibly out of the country, you will find your purchasing power is considerably less. So much less that you're probably stuck, which is why I suggested deflation is a problem if you hold assets.

 

Mr Bikes,

I am only quoting (paraphrasing really) Warren Buffet himself,, who said the very same thing recently,,, "Why should I pay a smaller percentage of my income in taxes than my secretary?" His quote,, not mine.

Additionally,, income taxes are but one aspect. You are correct (and Joe the Plumber incorrect I might add) that huge numbers of Americans pay no INCOME tax. What they do pay however is a huge number of essentially hidden taxes and the relevant fact is that the lower your income,,, the HIGHER your net percentage of income,, not to mention net worth goes to total federal tax burden. I restate my point,, a point that folks like you may know and indeed be comfortable with is that the concentration of wealth has lead to the rich getting richer, the middle class getting squeezed out and the poor forgotten since the Reagan "revolution"

And please don't give me the line that the top 10% (Or what ever the real number is) of tax payers pay 50% of all the taxes. While that may be factually correct,,, it omits the also factually correct fact that the same 10% controls better than 90% of the wealth.

What is needed is a tax structure that meets the income needs of the government,, (and no not all government is wasteful,,, I sort of want clean air, clean water, safe food, safe airplanes,,, ad infinitum and I am willing to pay for them!) while spreading the tax burden in a fairer way. Notice I didn't say fair,,, fair is a relative concept,,, but what is clear is that the current structure is anything but fair,, unless you are an elite. (read Warren Buffet vs his secretary)



As for you argument about deflation in electronics. While that is true on it's face,, the reality is a bit different. (Does anyone else notice how you like to cherry pick facts?) Electronic prices have gone down,, but what also has happened is that new features keep coming alone with an ever faster cycle to keep demand up. Many of these features are unasked for and largely unwanted and unused but the inherent built in obsolescence drives demand. Ever try to run a Windows 98 machine,, or buy new hardware to run on it? The fact is I have been forced to buy new electronics only because they are no longer compatible with the latest and greatest.

So the reality is that the only reason that electronics manufactures sell anything is because of the latest and greatest. (No, I am not a luddite,, some of this innovation has been good,,, but not all that needed) So as long as consumers were able to continue to come up with the money they could continue the cycle. Funny thing happened about a year ago,,, all of a sudden people couldn't get access to cheap money (largely because they have lost equity in their houses,,,deflation!) and demand has gone through the floor.

While the electronics manufacturers have survived the last decade they certainly haven't thrived. (See also, Sony, Nokia, Motorola etc) Clearly there has been no winners in electronics retailing. How many electronic chains have failed in the last few years? I can think of many,, Future Shop in the US, The Good Guys, Circuit City,,,I don't believe that Best Buy is doing very well either.

So once again,,, you look at the world through your own rose coloured glasses.

Icarus

 

Well, I wish you luck with your thinking Icarus. I agree there are many problems - too little saving for one. But I'm not sure how higher taxes are going to "save the little guy". For those in the top brackets, they are the ones starting companies and creating jobs. Yes, they should pay their fair share. But if by "fair" it is your intent to punish them for their success, then you will only hurt the "little guy" more. The wealthy guy will always have an easy way to avoid taxes - stop working and live off their saved wealth. How many jobs do you think that will create.

It doesn't seem much use to debate with you further. You are going to see things your way and I mine.

I do sincerely wish the best to you however. I hope you will consider what steps you may need to put in place to protect yourself from the consequences of profligate government spending though. Please don't count on Obama (or any other politician) to save you though.

Cheers!

 

Just a side comment. Since when did the insane-rich have the wealth determined by their active "work"? Bill Gates' worth is determined by the stock market and not how much he works....or even if he works.

I'm just thinking this through without taking one side or the other. On one side is the government taking away wealth that someone has achieved by legit means with intense taxes. On the other side is a system that intensely concentrates wealth in a very few (of many that contributed the same amount of time and effort).

Let me take Microsoft as an example. How many people contributed extremely long hours and hard work in a successful product (e.g. Excel) yet the majority of the wealth showed up in the pockets of those at the top of the pyramid. At that point they did nothing other than being at the top of the corporation as the money flowed?

I'm not sure that the government taxing that is all that far out of line. (Small businesses are a completely different situation.)

 

Did business people stop working when tax rates were higher? I don't think so. Being fair doesn't punish one for success especially if the opportunity comes as a result of subsidized, education,,the facility was financed with tax breaks both state and federal, or if the employees are get subsidized health care because the employer won't pay insurance for employees (see Wallmart).

As for evading taxes,, yes it happens,, but if we had a fair(er) more transparent tax system, and we closed as many loop holes as possible then perhaps we can begin to fix the system.

What I do know is that they system we have now is skewed greatly in favour or the wealthy.

Icarus

 

Not to be argumentative, but I'm just trying to follow the logic of your argument and I don't think your example works...

Let's say I own and "average" home and live in a market where the "average" home price is $100,000. Now there is deflation of 10% - I will have $90k when I sell my house. Now I move to a "more robust" market where say, the average home price is $250k. But it has dropped say, 5% because of deflation (less deflation than my original market since it is a "more robust" city). So now that average home is $12,500 less than it was. Although I got $10k less for my old home, the house in the "more robust" market is now $2500 more affordable (net). So my purchasing power has increased.

So as economists say - "it depends". It is really not cut and dried that I am worse off under a deflationary scenario. And again, unless I am holding a large amount of debt, I am probably better off since I can purchase more with the same dollar.

 

I agree completely.

However, I don't agree that income taxes are "skewed toward the wealthy". Yes, maybe there are a few "super rich" who can find offshore tax havens, but that is not exactly legal. For the person making $150k+ they are paying proportionately more in income tax than persons making less than that because:

1) they are in a higher marginal tax bracket so each marginal dollar earned is taxed at a higher rate
2) because they are paying at higher marginal rates, their effective tax rate (average tax rate) ends up being higher
3) at a higher income level, there is a loss of a great many deductions, again, boosting their effective tax rate
4) higher income earners are more likely subject to AMT - so again, to the extent they get hit by AMT they effectively lose their deductions, which results in a higher effective tax rate than someone at a lower income level who is not subject to AMT

Why do you assume that the system is skewed in favor of the rich? Why do you assume that people earning this level of income and above are paying less in taxes as a % of their income than people making under this figure? What is your evidence for that?

 

The latest stat I heard,,, and I can't cite where, was that the upper 10% of net worth paid 50% of all taxes. 90% of all wealth is in the hands of less than 10% of the people. Draw your own conclusions.

Icarus

 

No, of course not. You? Never!

Your example only works because you've cherry picked a scenario to fit. If you've got a $100,000 house that declines in value by 10%, you've just lost ten grand. Same thing if the value of your country's currency drops 10%.

 

My point is you can pick an example either way. That's why I said it depends...but I suspect that the example I picked is more likely than not. In fact, it is probably true that recent price declines on real estate in "robust" job markets have been just as high (if not higher) as those in "non-robust" job markets. Under an equivalent decline scenario in two different markets, you would always be better off under the deflation scenario you suggested (selling in a low priced market and buying in a higher priced market).

In any case, I haven't felt deflation for any of the common goods and services I purchase (except gas - and that is rising again). Have you? Now if you want to define deflation differently than using a market basket / CPI, then you would need to state what the definition is.

 

You are talking about wealth vs. income. 2 different things.

In any case, how could it be that the top 10% of earners is paying a smaller proportion of income in taxes than the lowest 10% of income earners when the lowest 10% pays no income taxes?

So again, what is the evidence for your statement? There is none, really. I too believed what you are saying - that the rich pay little in taxes - because I heard so many people say it. Until I became a bit more aware of the tax code.

The rich who aren't paying taxes are either not generating any current income or they are tax cheats. If they are earning income, they are likely in the 35% marginal bracket. This is set to return to 39.6% after 2010. That is a pretty high rate - particularly when you consider state income tax as well.

Here is the share of aggregate income tax paid at each income level:

Income Group: Tax Share
Top 1 percent: 33.7 percent
Top 5 percent: 53.8 percent
Top 10 percent: 65.7 percent
Top 25 percent: 83.9 percent
Top 50 percent: 96.5 percent​

And the effective tax rates paid at each income level:

Income Group: Tax Rate
Top 1 percent: 27.25 percent
Top 5 percent: 22.95 percent
Top 10 percent: 20.51 percent
Top 25 percent: 16.99 percent
Top 50 percent: 14.66 percent
Bottom 50 percent: 3.21 percent​

 

:focus:

Greenland ice melt may cause dramatic change of northeast coasts | Green Tech - CNET News

 

From the Center for Naval Analysis (y'know all those retired Generals and Admirals) - their latest report:

National Security and the Threat of Climate Change - Report

http://securityandclimate.cna.org/report/CNA_NatlSecurityAndTheThreatOfClimateChange.pdf

 

TimBikes,,,

As you state :
"In any case, how could it be that the top 10% of earners is paying a smaller proportion of income in taxes than the lowest 10% of income earners when the lowest 10% pays no income taxes? "

Once again you cherry pick the information to bolster your argument to obfuscate the truth. As I stated earlier,, we are not talking just INCOME taxes,, but percentage of all taxes. If you use the real numbers,,, the poor pay a greater percentage of their income to ALL TAXES!!!! The reality is just taking in SS taxes the poor pay ~7.5% on EVERY $$ earned,, while those making over ~$125,000 pay 7.5% only on the first $125k. Poor(er) people tend to spend every cent they take in,, and each cent is taxed in a multitude of ways. Higher income, richer folks don't always spend every cent every year,, even if they buy second or third or seventh houses!

As for net worth,,, the statistic is true ~90% of all wealth in the US is in the hands of ~10% of the people,,, and these people only contribute ~50% of the tax burden.

So continue to believe that fairy tale that the rich are paying their share,,,,

Icarus