Tuesday, March 23, 2010

Be Kind amid the Slaughter

The Readers should truly read this Post to get a handle to what is happening to Us. The Recession is bad enough without the confusion as to the cause of it. The outstanding comment I would like to make consists of the idea that the percentage of the Whole which was bound to fail was discoverable from the outset within boundary parameters, and these boundaries were ignored by both authors and purchasers of the derivatives; to the point almost all exceeded the width of the parameters over development of the derivative. It is not that these things are bad, though they do stink a lot; it is the fact that idiots began using and trading in them. Combined with the almost total leverage utilized in the run-up to the Recession; it was bound to happen!

Mark Thoma presents a good article describing the various forms of Tax which may be instituted to pay for all the Government adventures into Spending. Taxes will have to increase, or Government expenditures will have to decrease; current US Treasuries are beginning to take on the form and nature of CDOs, as even the Governments start to leverage heavily. The element most hidden by all activity remains that the sheer amount of Credit is still on the Rise, though now it is simply being assumed by Governments. Taxes will come when the other Shoe drops on Someone’s toe. Know that the non-renewable mass of the debt has been growing from the Start of the excess Spending, mainly governed by the Age of the Purchasers, and the maturity of the businesses generating the initial funds to subscribe the debt. Ten-year securities which were purchased by Someone at Age 55, are now owned and cashed out by Retirees; if the funds cannot be replaced by Someone less than 45 now ten year hence, then We are in trouble. Business which did not need the Cash today, will find Need of the capital if there is viable expansion of the industry. The Concept of ready Subscribers for Government debt stands as an illusionary item.

Government could do with a necessary Uplift of peoples’ perception about Taxes. Americans think of Taxes as simply highway robbery, stealing the Profits from their hard labor. There need be direct presentation of the tax liability presented with every benefit granted to the individual citizen. Schools must have budgets which state the assumption of Property taxes which is required. Property taxes should be assessed with a base rate, and with a progressive tax based upon the Income gain deriving from the Property use. Medicaid and Medicare benefits should be presented with Statement of what percentage of total Taxes is required to pay for those benefits. Likewise, Unemployment benefits and Welfare benefits should be posted by percentage of total Taxes paid. The Average Cost per Employee for every level of Government should accompany every attempt to conscript Taxes. Government needs to explain How Much it costs to pay for Government to the Taxpayer, and hope his rage does not burn out the system. lgl

No comments: