Financial topics

[Higgenbotham]

I got a phone call similar to that from a guy known to be the state governor's right hand man. Before I got the call, a colleague called and told me this guy had been out to a job site to ask him some questions about me, and he told me what was asked and what his responses were. This phone call from the right hand man started by him asking me if I had given certain information to EPA about a large polluter in the state. I told him no, which I hadn't, and asked if there would be a problem if I had. He said oh, no. Then he asked if I was married and had any kids. I don't remember any of the rest of the conversation.

My basic conclusion at the time was that I'd been threatened less in the streets by the top levels of a Chicago gang (for something I did do) than I had by the top levels of my own state government (for something I didn't do). And these incidents I have discussed here are not the only experiences forming the basis for that conclusion.

Having said that, I'm not optimistic about what may happen if America's cities collapse, transfer payments stop, and the power shifts in favor of the street gangs. I'm also not optimistic about what those who run our government may decide to do in that situation.

The times were not static. Loss of confidence in the guarantors of order opened the way to demands for change, and miseria gave force to the impulse. The oppressed were no longer enduring but rebelling, although, like the bourgeois who tried to compel reform, they were inadequate, unready, and unequipped for the task. Marcel could not impose good government, neither could the Good Parliament. The Jacques could not overthrow the nobles, the popolo minuto of Florence could not advance their status, the English peasants were betrayed by their King; every working-class insurrection was crushed.

[aedens]

http://www.youtube.com/watch?v=TvMS_ykiLiQ
I remember the men who knew that corn was burned for heat as the coal people went hungry
and not a finger was lifted. Locally we are doing what we can since it is what needs to be done.
We watch these arrogated people on a dialog on a fiscal cliff and we wonder how they can even
look at themselves in the mirror. I am not a democrat or republican given the mindset and
context of Dr. Carrol Quigley but I hope republican are extinct for a hundred years and liberty is more
than they can currently understand.

[OLD1953]

Well, that 47% bulk figure is one of those things that has to be broken down to make sense. Lumping in retirees with wealthy municipal bond coupon clippers and walmart workers makes for good political press, but not good for any kind of critical thinking.

The same Tax Policy Center folks that originated that 47% figure have a report out now that breaks it down to the fine levels. And they do say that figure has dropped to 46% this year.

http://www.taxpolicycenter.org/Uploaded ... me-Tax.pdf

The Center for Tax Justice also has a fairly revealing chart about national income levels and taxes. The Atlantic published that along with some other interesting charts.

http://www.theatlanticwire.com/politics ... -47/56965/

(Don't get too excited about the chart showing southern states having the most nonpayers, there's a lot of people who move South to retire and they don't pay much in the way of taxes after retirement.)

And that shows that the match to each quintiles share of income to taxes paid is close to perfect. The bottom three quintiles pay slightly less, the top two pay slightly more.

Now, if we really want to get more people on the tax rolls, there's a very fast and easy way to do it, let ALL the Bush tax cuts expire. That will immediately cut the number of nonpayers down by at least five to six percent, very likely below 40%, as it was before the child care credit and all the rest of the Bush cuts came about.

Chart in the middle of this article: http://www.washingtonpost.com/blogs/won ... in-charts/

In 2000, the number of non federal tax payers was only 34%, after the Bush tax cuts that number soared. Prior to the Reagan tax cuts, the number was only about 15%, varying up and down depending on the economy between 12% and 25%. The basic reasons for the number of people not paying federal income tax are three fold, the Bush tax cuts, the Reagan tax cuts and the Reagan program of a transition from welfare to work which included the UITC, the unearned income tax credit. I was against all the above when they happened, I'm still against them, and I'll be very happy to join with the Republican Party any day they'd like to suggest repealing the lot. Creating a non tax paying class that does not consist primarily of retirees is very bad public policy. It creates a class that feels no connection to the country they live in, and that leaves such a group open to all sorts of mischief.

[Higgenbotham]

The "47 percent plus" statement in that post was stated loosely and to define it in the context of dependency on government would be to say "those who take in more dollars of income and benefits from the government than what they pay out in dollars of taxes to the government". Anyone who pays no taxes is covered by that, but there are many more given the growing deficits, the growing income distribution, the growing transfer payments, and the formerly growing number of government jobs (but still large). Hence the "plus". They say people vote their pocketbooks and I think anyone who falls into the "47 percent plus" category at this time in history voted the status quo (Republican or Democrat) and felt no incentive to do something long term positive to disturb the status quo. If the benefits get cut and/or people can't make ends meet due to higher costs, then maybe that incentive will change. It seems we've gone too far down that road to make a change until change is forced.

Getting back to what that has to do with intelligence, the fact that the American population was not forward thinking enough to see that and change course 20 years ago, getting this deep into the doo-doo (as Perot termed it) I think has something to do with intelligence or the lack of it. It may also have something to do with moving further away in time from generational experiences that taught the right lessons (meaning further in time from the Revolutionary War and Civil War crises). From what I'm hearing, what was learned from the Great Depression was that "we can't have another Great Depression". But my opinion would still be that not being able to learn the right lesson demonstrates a lack of intelligence on the part of the individuals who believed that. There's nothing wrong with having a depression at the right time and there are reasons to think depressions are normal events and even beneficial in some ways. Having gone past the right time to have a depression, I don't see any answers for the predicament.

[OLD1953]

Sources of income are a tricky matter, and I'm a prime example of that. I work for the US military keeping advanced communications systems up and running, at least my section of it, and I sit pretty close to the top of that pyramid. But technically, I get no money from the government, I work for a contracting company and they get paid by the government for services, and I get paid out of their budget. So am I paid by government or do I work for a private company? My accountant says I work for the company and that's how my taxes are filed. But many of those things about government dependancy would put me in the class of government dependants. Just how far from the tree does this apple have to fall? In one sense of the matter, everyone who ever got a tax refund check is a government "dependant". Or everyone who ever drove an interstate and didn't pay tolls. Do we count tax breaks as income for these purposes? By that measure I got quite a bit from my mortgage last year.

How do we count unemployment on that score? And do we count by fiscal years or what?

This kind of thing is why I squawk about statistics all the time, because there should be no doubt about the meaning of exactly what you are examining. If we are talking exclusively about people whose primary source of income is government, excluding those supplying goods or services, then we could get a figure together. But that will be a much lower figure than 47%, probably in the range of 15 to 25% ish assuming you want to include social security receipients - and that's high historically because of the unemployment extensions. If we simply take everyone who gets any kind of money from some level of government, then that's a much higher figure than 47%, likely up in the 80's. But that includes a lot of small to medium business owners such as farmers, solar installers and so forth that would get highly offended at lumped in as part of the problem. For that matter, a few years back there was that tax refund sent to all taxpayers, so in that year we'd have hit up everyone that paid taxes. LOL.

So can I take it you want the figure of those whose primary income source is federal payments? And does that include or exclude Social Security and/or unemployment?

And yeah, experiences like that you describe are not unknown to me. Haven't happened to me personally, but to people I know. And that's why I distrust this "everything will be better if we let the states have it" reasoning, the states tend to be more corrupt than federal govt. It's a lot easier to monitor one group than fifty, so they get away with more. While thinking about taxes, what do we call a tax on real property of .0027%? That's the level KY used to charge for mine and mineral land that wasn't being worked. I never actually got into that argument, because there's good points on both sides - it costs a lot to put in a minehead. OTOH, it seems unfair when you are taxing homeowners at a rate 100's of times higher. Even general landowners. Just shows where the power was I'm thinking.

[Higgenbotham]

I think your last comment speaks to the issue, which is that we have a system in place where it is very difficult for the majority of the people to receive income that is not somehow derived principally from direct government transfer payments, government jobs, government contracts, or indirectly from sources of government funds. I couldn't even begin to guess what that percentage is, except to say thats it's very high, more than the 47% number that is being debated. There's a huge gray area at the edge. The following few sentences would give an example of that. A pool contractor in DC who installs swimming pools principally for government employees may fit into that category. The reason I'd say that is, while "getting things in line" would be a very good thing in the long run, how many years would it be before the contractor's income recovered to a higher level is the question that would be in his mind from a cost/benefit standpoint of maximizing lifetime income. The answer would probably be long enough that the status quo looks awfully good and "getting things in line" not so good. The older he gets, the better the status quo looks as his retirement age nears. When things were not so far out of line a few years ago (maybe even as late as 3 or 4 years ago), such a person may have felt more comfortable saying no to bailouts, let's get things back in line, and in a few years I'll be better off. There are a lot of people who are farther from the sources of printed money/deficit spending today who would thus feel no better option for themselves than to see more printed money/deficit spending. At the same time, there are many who are far away from the spigot, like the small business owners, who are feeling the pinch more. These people can no longer determine politics, but "Small-business owners' net hiring intentions for the next 12 months plunged to -4 in November, down from +10 in July and matching the previous record low recorded by the Wells Fargo/Small Business Index of -4 in November 2008," according to Gallup. http://www.gallup.com/poll/159098/small ... lunge.aspx Since small business is supposedly the real engine of long term economic and job growth, it looks like things may soon be back where they started 3 or 4 years ago, except with a whale of a lot more Federal debt and government dependency.

[Reality Check]

The question for me is, and has been, how will this go down?

In the Great Depression a decision was made to save the U.S. federal government at the expense of the middle class and near rich.

Thus banks that were insolvent, and all fractional reserve banks are insolvent by definition, were shutdown in a bank holiday. The federal government was able to "pick" the banks that were "insolvent", so the small and medium size local banks where the middle class kept their money were toast.

Gold certificates were honored for foreign holders of U.S. currency, but the U.S. citizen was banned from owning gold, or trading gold, so the gold certificates owned by U.S. citizens could not be cashed in for gold.

The U.S. government became the strongest government in the world, but the U.S. middle class nearly ceased to exist.

Will the elites try to save the U.S. government again in the same way?

Will the Trillions in Retirement accounts become worthless in the same way the bank accounts became worthless in the 1930s?

Will U.S. debt instruments, and the small number of U.S. dollars in circulation, still be honored, but the financial institutions that act as the trustees for all those retirement accounts become the fall guys, just like every banker, good or bad, became the excuse to make all bank accounts worthless in the 1930s ?

Remember there is only in the neighborhood of 1,100 Billion dollars in actual paper money in circulation world wide.

The Monetary Base, is sitting at about 2,600 Billion.

M3, which includes those Retirement accounts, with banks acting as trustees, is sitting at 15,000 Billion.

By Federal Law, banks and other financial institutions are so honest and trustworthy that they do not even have to be bonded to act as a trustee for a retirement account.

The one big difference between the 1930s and today, is the instruments of Debt of the U.S. Federal Government, has replaced Gold, as the asset that backs up the U.S. dollar.

So if things unfolded the way they did in the 1930s, U.S. citizens would lose the Trillions in their private retirement accounts and could no longer legally own. or more importantly trade/sell, U.S. debt instruments.

[Reality Check]

Dodd-Frank does things that are good for federal government executive branch power, but bad for the private property rights of people who have their money in "financial institutions", not just banks, but the Securities Brokers and Insurance companies that compete with banks to be the trustees of retirement money.

The most pressing "problem" Dodd-Frank was trying to fix was that the Federal government did not have enough power to "save the financial system" in 2007 and 2008.

The Dodd-Frank law, has, as it's primary goal solving that pressing problem experienced by the Bush and Obama administration in attempting to save the U.S. Financial System.

1. Problem One: Banks are now in the Security Brokers and Insurance business. Insurance companies and Security Brokers are now in the banking business.
Solution One: Give the Federal Government's Executive Branch the same power over all types of Financial Institutions as it wants over banks.

2. Problem Two: Allowing banks and other financial institution to fail was a messy, time consuming business where judges and lawyers got involved and insisted that laws be followed, contracts be enforced, and constitutional private property rights protected.
Solution Two: Allow the U.S. Federal Government executive branch, not the Bankruptcy courts, to decide when a financial institution has failed and needs to be liquidated. Also allow the U.S. Federal Government executive branch, not the Bankruptcy courts, to decide which creditors will be paid and which creditors will lose some or all of their property rights. In order to "save the U.S. financial system" the executive branch will have the power to ignore bankruptcy law, ignore contract terms and contract law, and the federal government executive branch "decision makers" will be able to substitute their own professional judgement as to what needs to happen for the good of the U.S. financial system.

3. Problem Three: Saving the Financial System is time critical work. It can not be allowed to drag on through the court system with appeal after appeal.
Solution Three: Make the Federal Government's Executive branch decisions on when a bank has failed and needs liquidated, and who the winners and losers will be, final and not subject to appeal in the courts. Keep the judges and lawyers out of it.

4. Problem Four: Even with all this power, it would take the Federal Government Executive branch many months to figure out who the winners and losers should be. Time that could not be wasted when a bank "needed liquidated immediately".
Solution Four: Make the executives of each bank ( or financial institution ) create a confidential plan to pick the winners and losers right now. Make the executives of each bank, insurance company, stock broker, and other financial institutions come up with a pre-packaged bankruptcy plan for their bank which the U.S. Federal Government executive branch can just pull off the shelf and execute it when the government decides it is time to save the financial system and "shut down" the financial institution that "needs liquidated" and pick the winners and losers. And finally get that bank back up and running immediately with new owners and no obligations to those pesky low priority creditors, such as the retirement account holders.

Blame for all of this would of course be squarely placed on the former owners of the bank, the bank stockholders, who caused all those people to lose all the money they "thought" they had in the bank or other financial institution. The government, on the other hand, would be the savior of the financial system. They had to do "something" or it would have been much worse.

[aedens]

It will be the absolute opposite of this. http://www.zerohedge.com/news/2012-12-0 ... cess-story
We noted the wasting process as earnihgs to the affordability spread to advancing demographics for the full measure.
Toss in ideology and theology to totaly confuse normal people who never had a chance to recover anyway.

http://www.bankers-anonymous.com/blog/s ... -loophole/

Nothing will happen since they are mid level management RC as you suggest.
If your here legal or illegal you pay taxes since skin in the game is manadatory or your outta here
is the only way to turn things around. The iceland model can be scaled as we note for actual
people. As noted here this sheduled looting has gone on for well over two decades top to bottom.

The sheep will eaten since they are owned by wolves who eat them at there liesure.
They deserve it.

[Reality Check]

The real sweat part of all this, is that Federal Law views all stock brokers, all insurance companies, all banks and all financial institutions regulated by the federal government as so trustworthy that no bond against illegal activity or incompetence is required if they act as trustee for a retirement account. A retirement account that most likely enjoys no federal government account insurance such as FDIC insurance on demand deposits in banks.

By contrast. any business or private party other than one of those government regulated "financial institutions" must be heavily bonded to act as a retirement trustee.

At the same time these trustworthy financial institutions are being commanded by the federal government to produce their own confidential pre-packaged bankruptcy plans.

There is vastly more money in retirement accounts in the U.S. than demand deposit accounts.

The sheep are being herded into the slaughter pens.