Thursday, September 30, 2010

The Simplest Tax Plan

Watch this thing here, then ask what We should do. There have been multiple commentaries on my own specifics of potential Tax changes, and some have asked for the simplest Plan for Taxes which can be imagined. There are also stipulations most of the time for Tax plans which could possibly find passage. My irreverent Thought pattern suggests there is no possibility of Tax change unless the Wealth make Money from it. Still, we cannot let such an assessment inhibit Us in our quest for something better than this raft of S**t!

The first Step is to account all federal taxes, except Excise taxes, to be Tax payments. The second Step is to find the lowest Taxation demanded on the first $20,000 (I would have suggested $10k except then the Tax would equal 0). One cannot tell where legislators would set the Tax level at this point, but hopefully between $700 to $2300. We state for third Step that all Taxes are to be considered within the $20k segments, with Incomes falling within a segment following the first segment paying a percentage of tax equal to the percentage of Income earned within the segment. We stride forth and acclaim that Everyone must pay the same Income tax on every $20k segment, no matter what their Income happens to be. We slip in a few Odds and Ends, like doing away with all Tax breaks, Exemptions, and Deductions–this makes it a straight Tax. We study on the Issue somewhat, and state firmly that WE can see no difference in Income between Personal Income, Capital Gains, Corporate Income, Business Income, Partnership Income, or even Inheritance Income; it all seems to spend the same, be invested the same, etc. ad infinitum. Remember that this is no Straight Tax, but a modified Straight Tax–because not Tax Breaks, Deductions, or Exemptions are allowed. It is simply the least amount which legislators can seem to agree on at any given Moment.

Did I mention about the tax on Patent Rights and Royalties? I would allow these to remain low, but on second thought, I think not! None ever seems to wind up in my bank account anyway. Here We have the simplest Tax Plan: no favoritism possible, and Everyone after the least amount possible in tax payment. The Plan will not only generate Curses, but tax revenues. No one will be able to claim bias–except possible against me! lgl

Wednesday, September 29, 2010

And They call Me a Fool!

I will leave it to the Readers to guess how best to limit the looming deficits. There is no easy solutions, and no one will like any Outcomes. All programs had been developed as a form of Christmas Present, promising vast Savings to a strapped American. We cannot live up to the Promises, and everything keeps getting more expensive because We even try. Here are some of the hard choices I would recommend:

1) Combine Social Security, Unemployment Insurance, Medicare, and Medicaid. Set one flat payment per Week for every qualified Recipient of such Aid–one and only one payment per Week, no matter the combination of the Need. Here it does get Tricky–the flat payment never alters, One gets Security and Sustenance from the payment–or one failed to do so, and We are back to Charity.
2) Taxpayers must not only pay the Wage for Tax Preparers, but also for the Time involved of federal labor to review and accept the Tax filing. The Jury is still out on whether We should let Taxpayers deduct the Cost of either the Tax Preparers or Reviewers.
3) Assess a $50 Filing fee for every use of a special Tax Break or Deduction in Tax returns. You should pay some Charge, if the Tax Savings is in the Hundreds of Dollars.
4) Every federal employee must prove their use of Public Transport to come to Work, or pay $5 per Workday as Parking or Congestion Fee.
5) Every federal agency and Dept. must file a Income Tax Return, and a Special Tax Review Committee will review every such Return, and assess a Agency tax based upon the relevance of the Expenditures according to Congressional Audit Rules, which the Agency or Dept. must pay out of its future budget.

Does this sound sufficiently ‘Big Brother’ for you? The goal is to take the Graft out of Government, and grant the Citizenry what advantage they should have from their governance. Notice that the first programs have been turned into a pure ‘Shift of Wealth’ payments; the only type of Payments which really work. They are also the only type of payments which can be paid for! The middle initiatives would limit the gout of bloodletting from tax revenues caused by Congressional granting Tax Breaks for Votes. The last factor would establish a real supervisory organization to control excesses of Government Spending; it produced by real loss of budgetary funds. As Clint would say: "Go Ahead,. Make my Day!" lgl

Tuesday, September 28, 2010

Explaining the Inexiplicable

I first would like to apologize for my Post yesterday, where it seems that only I understood what I was talking about. There are many ways to figure medical costs, and lots of people estimate they are getting a good deal under the socialized system. What I was trying to describe was the fact that Americans before Medicare spent about 4% of their annual Income for medical services. Today after Medicare, most Americans pay their share of the deductible system, which adds up to about 4% of their annual Income. Many Americans will claim that they get Supplemental Insurance to handle the side Cost, which generally adds up to about 4% of the annual Income of the average American. Health Care Costs will generally rise more rapidly than the Operating Costs of the overall economy as long as the premiums for this Supplemental Insurance constitutes less than about 4% of the average annual Income. The interesting fact of the above data outlines the fact that the Government pays about 10% of the average American Income for health care Costs of only a limited membership of beneficiaries. This is the inflationary and artificial Price support system I was trying to describe.

Here is another direction for the Problem examined above. Americans are not optimistic about the economic future. No one believes it is going to get much worse, but no one thinks it will get any better. One of the very real dangers which will cripple the economic future of Us all comes from the misallocation of capital within the economy–consider the federal underwriting of the health care industry described above. We are talking about a misallocation which is equal to about 10% of annual GDP. Other well-meaning but adverse Government programs shift another 6% of total annual GDP to the wrong economic sectors in attempted Protection which is not accomplished. Economists will explain that any economic activity is better than no economic activity; even if it is Wrong in direction, and eventually shrinks the long-term growth of the economy. This entire Post is about What it does do, which has been described generally.

This is the Ocean of disaster on which the American economy floats. We must redirect that misplaced capital if We want the economy to grow. Will We be able to overcome the entrenched resistence in the political realm. I doubt it! Politicians have long ago learned you can sell even the worst policy, simply by convincing the Polity that they are gaining something from the Policy. It does not matter if the policy envisioned or in use is actually injurious to the Polity, if they can be made to believe that they gain from it. Politicians become quite adept at the practice of delusional expression, and Lobbyists possess even greater expertise at the flim-flam. The concept of the Judas Goat is alive and well, though the Herd may be dying. lgl

Monday, September 27, 2010

Bad Government

I specifically like this Post because it attempts to place Government within a evaluative context. Megan tries to present a basic argument for both sides on the value of Government. I would like to offer a third evaluation. My belief states that it is not Government itself, but the corruption of Government, which remains the Culprit which must be controlled. I will try to explain my thesis in the rest of my Post.

Legislators take a Concept, I will utilize Medicare, which can gain widespread Public support, and promise a universal End. Medicare thereby was passed to handle Senior Expenses for health care. Those who would profit from Government guarantees immediately spring into action. Various Groups immediately petition to be included within the Guarantee, even though they do not meet the passed Age stipulation–greet Medicade, aid to the Disabled, special consideration to Veterans, and expansion of all the covered services. There is a second very important Group, who are the Providers of such services demanding immediate increase of Pay and Profits from such provision. The profitability of providing medical services immediately begins to grow much more rapidly than the overall economy. Medical services, in Pricing, increased approximately at twice the rate of overall Pricing in the economy since the mid-1960s.

Government initially designed to assist its Populace becomes a Rattlesnake getting ready to Strike. I refer to Rattlesnake because you can plainly hear it coming long before the actual Injury. One can ask How much such previously-discussed Pricing can increase, but that Answer is easy: It will increase to fill what the Market will bear: until Individual paying a deductible percentage of the Cost is paying what they would have paid under the previous Pricing. The special Groups will beg for inclusion until such time that the Coverage is universal. Government activity–so well-meaning–simply support a inflationary Price Support system which actually causes Injury, because of the denuding of other necessary economic enterprises of Talent and Resource; which has deserted prior industry for the Price Support system with its higher Returns. This is basically what is wrong with Government, and the guilty Parties here are the Greedy who would work the system for their own benefit. lgl

Saturday, September 25, 2010

Posing as Common Sense

Paul Krugman stands as absolutely Right in this Post, but I, of course, would add a few Words. The first Concept I would express is that Americans have been living above their Means; and by this, I do not mean the acquisition of debt. They purchase $400k Homes, when they should be purchasing $200k Homes. They are buying two $40k cars, when they should be purchasing one $20k car. They are purchasing 10 pairs of $100 Jeans, when they need 5 pairs of $30 Jeans. They buy a dozen $80 Shirts, when they need 7 $20 Shirts. They stay in $200 a Night hotel accommodations, when they could quite acceptably stay in a $60 a Night room. Their Credit slips reflect this lifestyle choice, as due their end-of-the-month payments. Should We go out and eat Lobster tonight, even though We could stay home and eat Hamburger Steak?

It is not that Americans are in a massive amount of Consumer Debt. That is a Given, and relatively necessary for a functioning economy. There are Those who would contest this declaration, but they lack a replacement evaluation. There is the factor that if Everyone purchased the cheaper Products, these Products would rise in Price, while the Price of luxury would lower. That is simply an economic fact, and need not be contested. Buying properly does make being Poor far more sustaining, while making it easier to be Rich. There are Those who feel there is something Insulting within this Statement. Consider this Aspect: the Poor should be much more self-sustaining, and it should be easier to be Rich; Hint, this makes it easier for the Poor to eventually become Rich.

The real Problem with this over-rich Buying comes in the form of debt service to overall Income. Those bills take too much of a chunk out of monthly Income. They also rack up too much Interest on unpaid balances. One cannot buy High, and pay even Higher, on a structurally-limited Income. The later is where Income will not rise faster than the Inflation rate, and may even fall under the obstinance of Management. Every Income-Earner should have estimated the amount of monthly payment for debt they are capable of paying, and take active measures to stay at, or below, this level of expenditure. Economists would disagree with me on this, but I find this effort to be the most important element in economic recovery which is sustainable. lgl

Friday, September 24, 2010

Form of Government

I read this Posting, and ask myself where is the justification of Government. We have two forms of proposed Government activity, and a third Opinion. None get to the core issues of Government: what it should do, where it should do it, and when it should take effect. I see an entirely alternate direction for Government to take, but how do you explain it? The President has become nothing but a Hawker of Programs, when he must be an administrator. Congress has become a marketplace, going to the highest bidder, and not the bidder who even pays the most Taxes. The Judiciary responds only to Those who can afford the greatest legal Costs–supporting lawyers everywhere. We have government programs which did not make sense even when initiated, and long outdated. I think the scope of government must change, and would set efforts to make real change.

I will start off with Taxes. Now, individual taxpayers can shop for Tax Breaks, anywhere and everywhere; all at the behest and for the gain of Congressional members to increase both their power and their political contributions. I will dredge up the ancient Concept of Tax Farming. I would allow any group of Taxpayers to set up their own Collection agency, which would determine How and When their membership will be taxed; the kicker here being that Congress will determine the magnitude of tax revenue which must be delivered, and all membership of chosen must commit to pay their determined level of payment. Any membership can change to alternate representation of Tax Agency after any given Tax year, and the Taxing agency can lobby Congress in total load determination of Tax, but the total of tax revenues must be paid every year; the alternative being all delinquents–agency personnel or membership–will be jailed until the tax assessment has been paid. Congress will also be limited within their periphery of action; they will face a reduction in Wage to the exact percentage that they did not balance the budget each year, and such accumulations will be permanent and addictive.

Government provision of services–whether Retirement, Unemployment Insurance, medical assistance, Work Training, or Welfare will be set by Congress each year as a specific Dollar amount; after which expenditure, further Aid to the Individual by Government will be suspended for the rest of the year. Education will be altered by enactment of this legislation–granting a Government-sponsored Tuition per Student unit which is identical from Pre-School through Graduate college programs. All Schools will be prohibited from assessing further Tuition, and must rely on Patrons and other Contributors. The entirety of the program system will state that All do not necessarily draw substance from government, but that the level of that financial substance is limited in amount. Business will itself be constrained in financial Gifts from the Government, as will legal charities, Partnerships, Corporations, and all other Associations. Insurance companies will be legally committed to paying at least a monetary amount of 30% of all claims made against their Insurance in order to maintain their license to sell Insurance; unless and until that they can prove in a Court that the claims are fraudulent; the Insured by legal mandate represented by the local District Attorney–whether County, State, or Federal–determined by the placement of claim of dispute by the Insurer. I have not covered an incredible range of necessary action–but it is a Start. lgl

Thursday, September 23, 2010

Someone Need Listen

Study this Post including the Comment, and ask for a bit of Reality. The Republican pledge will do nothing new or different, and the amount of Government Spending will go on. The Democrats propose every asinine idea ever dreamed up since the Great Society, and these will be defeated for the reasons that they were originally defeated. Both Democrats and Republicans are setting up the platforms to get Nothing Done for the next legislative period. The real factor which is not discussed remains the fact that Government–not Business or Banking–must spend Us out of the Recession which is not a Recession; remember that all Sides are using the Inflation which is supposedly not there to get Us the numbers denying the Recession.

No one, except myself, presents any program to actually transfer funds to the Households, which are necessary to impel the Consumer Demand needed. Dozens of different Work programs can be designed to generate Jobs, but absolutely None are discussed. The ugly humor from all this lies in the much cheaper expenditures for such programs, much less that either of the political party proposals. I have suggested increasing the national Military Reserves by one million Troops. Housing, Maintenance, Food Provision, and Training personnel would push the total Jobs created to almost two million. The Cost would likely be less than the continuance of the Bush Tax Cuts. I advocated a federal program to renovate substandard Housing, Capital infrastructure, and Recreational facilities–almost certainly less than the Fed program to artificially inflate the Markets and suppressing Lending because of low Interest rates. Such a renewal program could be supervised by Local Maintenance, and potentially employ up to 6 million. I herein call for a new federal program, a law stating all federal employees must be paid for two hours per Week in Good Time–not Cash; all saved funds to go specifically to employ replacement labor for the added Leave time taken by mandate; this added about 1 day of Leave for every month of employment.

I don’t know what it is, but the political spectrum seems dedicated to stalemate. No one wants to adopt anything genuinely New, though everyone knows that the old ways have failed. Our Bones are hardening, and arthritis is setting in. We are being caught by Countries around the World, who can produce More somewhat better, and a lot cheaper. We are letting the Problems swamp Us when there is no need. It is time for Change, but real Change, not the wildcatting idiocy of Days Gone By. lgl

Wednesday, September 22, 2010

Hitting Harder

A pattern begins to develop within economic and financial circles: Those who believe that further monetary action will produce Results; and Those who believe that all structural changes must originate elsewhere than in the financial world. I belong to the latter Camp. I think that Bernanke has dug the Fed into a Hole, and intends to widen it into a Grave. The Fed already has too many illiquid assets on its books, an no ability to alter course without impacting the Dollar adversely; something which will not improve Trade in the current environment. What I worry about the most consists of the fact that the Fed loses elasticity with such involvement in the economy; losing its ability to be a floating fund in case of need for Recession reversal. It remains especially troubling as I expect that the Fed can initiate no action at this time which could improve business conditions. It all calls for Government action, not financial action.

Readers will probably want to understand what and why monetary policy could not have much effect. Read through this Post all links, which will give some better understanding of the issue. I do not agree with the author’s summation that the Fed should take action, but it stands clearly that such Fed action would be marginalized at best. What becomes the rationale for more Cash on Hand, if Business will not expend the Cash? Business does not want to expand into Hiring, even if they could be enticed into capital investment. We cannot get the Consumer Demand without further Hiring, and the Fed spreading more Cash will not do the Trick.

Readers will Now want some Answers of what will work to restart the Economy. They should read my Post of yesterday, and I will follow with the Statement that Government must enter the old CCC mentality, though mostly affixed to the local area and conditions. I would pass a Junk Removal Act, run by local area Maintenance, where Labor will be employed for Minimum Wage with health care under local supervision; all in order to remove Eyesores and other elements. These Crews will tear down older structures, clean Lots, and tear out unwanted capital investment for limited Cost to Property ownership. This Act would be directed at unemployed Youth, but also Any whose Unemployment benefits have run out. Local participation can be obtained by a Fine system for untended Property after a certain date. The Act should also include free Labor for elderly low Income individuals which does not include health care provision. There are other endeavors which can be utilized, and it is time to use them. lgl

Tuesday, September 21, 2010

This will likely offend even God

Here is an individual with the correct ideation, but the wrong expectations. He remains correct about the behavior, and the mechanisms, of the players in the market. His solution set, though, will not alter the matrix of the Equilibria. Nick suggests that there are sticky expectations which there are; but then, he outlines How to pay the participants for their sticky play. What is needed is reward for abandoning the Status Quo. Translation: you make it costly to stay in a static position. I would revoke the advantages of the Bush Tax Cuts by elimination of the Tax Cuts entirely, and then feed them a Carrot; like a Tax Credit of some magnitude if they can prove they contracted losses by lowering Prices below Production Costs within the United States, in order to clear the markets of backed-up surplus.

View my Statement and ask What is all means. First, there must be a backed-up surplus to gain access to the Tax Credit; business managers must maintain Production in order to establish the surplus–Inventories must grow–inciting Employment. Second, they must lower their Product Prices to a point where they have the capacity to simulate Dumping procedure. Third, their Prices must be sufficiently low that it both adds Consumer Demand and higher Sales, and where they can at least pretend that they are losing Money. Fourth, Consumers will quickly assimilate the ideation that they are entering a Buyers’ market, where early Consumption will more profitable than later Purchase. Fifth, due to the nature of the Tax Credit passage, business will be eligible for such assistance only for a short Period–the expectation is less than 2 years of taxable Income.

Business will only gain the advantage of such Tax Credit with immediate entrance into the program. I would call for a Sunset on such provision of two tax years! I would stay within the operational boundaries of the economy, and define eligibility to rest only upon Price reductions between 8-40%. The Minima would draw out all Inflationary pressure, the Maxima not forcing undue Deflation; cheaper Temporary Products inciting the greatest reduction, Intermediate and Long-term Goods of insufficient Turnover to incite Profits from Sales more than 14% lower than within the current economic markets. It is obvious such mechanisms can hardly be maintained more than once, and I would suggest a Credit arena of Loss plus 16% of Loss as the Tax Credit. The End-Goal here is to get Business to reduce their Profit per Product, with the Government replacing the Profit plus Advantage from other business Profits of the businesses involved. I do not believe than final Cost to the Government will equal the previous passed Stimulus package, and may actually increase tax revenues with repeal of the Bush Tax Cuts. lgl

Monday, September 20, 2010

How to be an Ass without really trying

I rarely agree with this stuff, and not much has changed. The basic Issue devolves into We Should have Spotted This much Earlier!! The first element which must be understood consists of the fact that such overabundance of data flow continually churns, real factors of definition cannot be found prior to the economic event. Every new progression must be analyzed for its effect on subsequent events prior to those economic events–a sheer impossibility. The Second impossibility establishes no specific set of circumstances will ever be agreed as fundamental for economic Recovery or Failure (Boom or Bust). The Third stands as Speculation that economic forces suffer from Stress throughout the system, and forestalling the function of Stress in certain areas will only transfer that Stress elsewhere. I like to think of operation in the economy as Expansion and Consolidation. This makes it easy to understand that economic forces can only withstand a limited Period of Openness or Expansion, before the totally natural urge to take Profits comes to the fore. No one has studied the economic data, but there is remarkable similarity to new economic leadership attempting to secure their financial position.

I would not lay claim to Paul Krugman being Right or Wrong! I will point in an entirely different direction on the issue. There is a nescient economic element which is never preached to the affluent. This states that when the Poor have greater Income, they Spend more, and the overall wealth of the Affluent increases from the added Profitability. What impedes the knowledge transferring to the Affluent comes from two things: one is a delay of about 28 months from the period of added Income for the Poor, and the rise in Profitability for the Rich; the Second being current Management practice which freezes the Affluent from this added Profit by refusal to disperse such Profits from Stock ownership. The Affluent would do infinitely better in chastising Corporate Management from withholding such Profits, than in getting the Poor and Middle Incomes to pay more in Taxes; a situation which actually reduces the magnitude of their own Income.

I should be in the book-writing mode, and develop a Volume on Why Taxation can be the best stimulus under some circumstances. It could be written, but I am too old and lazy for such endeavor. The reality is that Taxation can establish or crack any order of Comfort quite easily, and what no economy can withstand is any significant segment standing Pat on their current revenue streams: they must either be striving to improve their revenue stream, or acceptant of declining revenue stream. Any other position is inconsistent with economic growth or advancement. Government Taxation and Welfare programs are the best method to destabilize peoples’ acceptance of current revenue streams. This disintegration of revenue stream plans leads to capitulation or enhanced effort to regain the revenue streams. Government needs to utilize this Discomfort through Tax measures and Welfare programs, if it finally expects to possess an economic policy which is effective. lgl

Sunday, September 19, 2010

The Great Blame Game

I like this article, basically because of what it does not do. All political language and some economic terminology changes with the regime change. Opposition parties become deficit hawks unless the passed legislation is of direct benefit to themselves. Administration parties proclaim a Brave New World, and announce great new political slush funds. No one expects the slightest change to occur, and get almost manic when any does. Yet everyone would react with horror if We ever returned to the fabled reduced Government of our Great-Grandfathers. Politics make such strange bedfellows as well: Ben Bernanke would adopt the tight monetary policy of some of his predecessors who he had spent much of his life castigating, while at the same time trying to make people think he is spending like Johnson’s Great Leap Forward–wait, that was Great Society–they mix metaphors while I mix Countries. Tyler Cowen obviously perceives the irony in all this hype, knowing Monday morning will be Business As Usual.

I disagree with James Hamilton’s position on Unemployment, but his Post is too intrinsically sound to avoid. Labor Turnover has become a national and international fact, ever since Business turned to Project Hiring. It was Business, and not Labor, which turned away from career employment. Business wanted to cut Operational Costs like contributions to health care and retirement funds. They wanted a Shift to limited liability towards their Workers, and insisted that Labor absorb all the natural Costs of unemployment. Do not think their claims of paying excess Taxation for Unemployment Insurance has validity in fact; the truth being that they cause the ordinary Taxpayer to absorb such Cost–through Taxation, raised Pricing of their own Product, and shoving all placement Costs of new employment off on the Worker. James does not differentiate between Taxes and Tax reportage, which he should because the Tax reportage Costs equally with Safety Reportage is so high in Price; remember, that if Business lobbyists would allow revision of the Tax Code for simplicity and clarity, then such Costs of all types could be cut probably 70%. Study the Chart listed, and one can find that most of the delivered Cost could be avoided by regular Business compliance with law and regulation.

My basic Statement on the above issue stands that Business loses its cherished Profits early from a lack of Consumer Demand, and would blame everyone but themselves. Consumer access to Credit has become so convoluted that Demand had to drop; this intricacy all coming from Business trying to draw the same Profits from a smaller financial pool. Business is dropping their Labor the second their Work is done, without any attempt to shift Labor elsewhere and be as relatively effective; this continual Job loss drain accrued assets from Households. Business could avoid much of their Tax compliance Costs, if they chose to forego the complexity of available and obscure Tax breaks which they insist remain on the Books. Safety Compliance Costs could be equally reduced, if they simply devoted as much Capital to renovation as the Regulations call forth. Business always finds someone to blame, but they create their own troubles. lgl

Friday, September 17, 2010

Odd Observations from an odd Mind

I will give my Readers this link to pursue, though I am not totally in conformance with most of the ideation utilized. One has to ask How effective economic theory remains when it has generated two huge Bubbles within one decade. I have long questioned the economic authority which insists that Inflation is a mandatory element, and Deflation is a demon which must be forestalled by every means available. Japan endured a long Period of deflation, and homeland prices seem better adjusted for that drag. Japan might be an Exhibit of How an economy must endure a round of deflation in order to firmly implant a standard of living for participants in the economy on a sound-value platform. I do know that American Price values are disorganized, and China’s Prices are following the whipsaw swings of the Americans. The EU seems to be pushing much of the inflationary distortion between Product prices from their economies with their economic policy; which is sharply critiqued in this Country.

I forward this link to get my Readers to think about the value of a continually upbeat Look at life. My slant is different from the Post, in that I would ask where this places the value of Publicity and Propaganda. We can act like an Economist and examine past uses of both to determine the long-term gain or loss from their usage. Most Publications will probably be found to be long-term counterproductive to effective activity, this because of the misapprehensions that are created from the ideation. It also leads to the question of examination of the Expiration Dates from all Public issuances, where they eventually do turn counterproductive; there are Those who will say that good ideation never fails–but they are the true Optimists.

I think that Arnold is trying to turn Empirical into theoretical, though I may be far off the Mark. I think he is trying to get people to operate like myself, and guess a lot. Arnold uses the example of Phoenix and Detroit. I would advise Students to find the difference in average yearly Temperature between the two Cities, before entering into extensive comparisons. Where the comparisons must be entered, try to define the monthly operating Costs of maintaining small firms within both areas. I personally think that Arnold is on to something with his Recalculation theory with its focus on future performance, but most people can define trends; what is necessary remains How to define what people will need in the future. This stands as the Need of both the Businessman and Economist. lgl

Thursday, September 16, 2010

Argumentative and Sour

I must always provide access to Arnold Kling because his arguments are so cogent, even when I disagree with him; as I do in this context. I work hard to get my Readers to study both sides of any argument, even if the process is rather boring most often. At least Arnold is never boring. Here Arnold alleges that Sales are a poor vehicle for understanding the stability of small business; this being an argument hard to deny. It is Why I always try to assess planned Production schedules in relationship to past Production schedules for the firms. Arnold will relate if asked that this is an amazing hard thing to assess as well, as most small business remains young business without substantial history. The fact remains that We have to start somewhere in attempt to understand the economy. I wish that Economists relied more on physical volume of Product–numbers of units–rather than dollar translations.

Calculated Risk sees sunshine on the economic horizon. Nouriel Roubini resembles Arnold Kling, at least in the fact that he is too intelligent to be ignored; his analysis of the economy reminds of my present condition where the Operation was successful, though with no real Return to Normal as yet. Here it is a question of old economic activities fulfilling their duties, but without any real growth structure–a lack of robustness. One of the major problems he and I discern stands as no real replacement of goals organization. One hears business management discussing capital investment, new Product lines, and Profit ratios coupled with declarations of desired Product to be sold. No one discusses the widening problem of lack of Consumer Demand, and Shortfalls in Consumer Credit extension. Everyone awaits discussion of How the Consumer is supposed to pay for the extended Sales. By the way, I disagree with Roubini as well in How you generate Consumer Demand; it will not grow by simply throwing more Cash into the economy. What is needed is Jobs, but no one is seriously discussing Job Creation.

I will finish with this Post from David Beckworth, from whom I stole the previous link. I do this because David summarizes far better than Nouriel, giving a glimpse of What will actually happen in the future. Of course, I also disagree with David’s assessment of dropping Treasury yields, finding the greater amount of Treasuries on the market will kept the yields high. No one in truth wants to loan to the Treasury, and do so merely because of the guaranteed yield. The more Paper that exists, though, will insist on greater yield; something which neither Governments or central banks can alter, a greater supply of Product makes it less profitable to invest within. I simply hope David does not get his Christmas Wish, at least not in the form he desires. lgl

Tuesday, September 14, 2010

A new Poll

I feel the desire to turn Mean and Nasty when I read this article. I will instead turn to the venues of Economics and Polls to handle the situation; though, of course, I will not do the work itself, simply call for it. Some hardworking people must contact a multitude of business managers, and ask a serious Questionnaire. The aftereffect must be to publish their findings, and do so before the Elections. Here are some components of the effort which should be asked:

1) What are your plans for expansion within the near term?
2) How much would you increase your Productivity if the Stimulus was passed?
3) How much would you increase your Productivity if the Bush Tax Cuts are kept?
4) How would either the Stimulus or Tax Cuts affect your Hiring practice?
5) What is your forward-looking employment policy–how many Workers will you hire or fire in the future, and will passage of one or the other, or both, of the above policies affect that current decision?

The Poll should be extensive, so the Poll should be kept short. This means that 80% of all Employers hiring over 3 individuals should be contacted. I doubt that any Funding for such a Poll could be found among Anyone concerned with the political debate; they simply want the benefit of the Stimulus or Tax Cuts without Concern for its material effect. I call upon all graduate Economic students to devise their own local Polls, and publish their Results on the Internet. American Taxpayers should be aware of the likely effects of any political economic policy prior to the Election, and able to contribute to the political fight after the Election concerning these Issues. I know that I will get a groundswell of good-natured support for the effort–Right! lgl

Monday, September 13, 2010

Vicious Remarks

I side with El-Erian and Stiglitz on this one. Here is the Problem: Current officialdom–both Government and Banking leadership–passed the buck, insisting such regulation would apply only after their own tenure. This means that they will be fully empowered to continue doing business as usual, while placing the onus of failure upon their replacements. These replacements will find a much greater need to raise capital to maintain loan levels, and at a lower Profits rate per issuance. It might have been the only way to gain agreement for Basel III, but no one expects their successors to be genuinely in love with the restrictions; and there will be a Basel IV before Basel III is implemented. One can study the implications of Basel III here.

David Leonhardt may be a very smart young individual, but sometimes even the wisdom of age cannot cull the essential information. David claims that Inflation is nonexistent, and has not been present for almost two years. The hidden aspect behind this datum comes in the formation of the basket of Goods used to determine Inflation, and How that basket is used. I call this the Lux Rule, basically because I don’t think anyone else contemplated it. No Good should be used to balance the basket of Goods–not included in the Averaging of Prices–if over 20% of its Consumer Demand has dissipated through lack of Sales since the height of the last Boom. The Rule insists that the Good must still be within the Basket based upon Consumer Preference. A drop in Consumer Demand for a Good thereby cannot be accounted to be Deflation. Such a Drop from the basket is quite acceptable, because such Consumer Demand loss does not incite Inflation, but straightens the considerations in determining the Inflation in necessary Products which the Consumer cannot avoid.

I will finish Today with a rant against the Geithner plan to stimulate small business. Granting small business Tax advantages and loan guarantees will not increase Consumer Demand in any way. It will only result in higher business failures with a loss of equity for All concerned. Current successful business will splinter to meet the requirements for small business ventures with resultant loss of current management skills which have led to success. We need a reorganization of the Tax Code, not further confusion. The one thing we absolutely need to avoid is further Tax exemptions, deductions, and/or Tax Credits. The more you split the Taxpayer polity, the worse are all aspects for both business and Government. lgl

Sunday, September 12, 2010

Choice of Weapons

Some will say that they finally pinned me down. One cannot be sure, as I am pretty slippery. The real bias of overconfidence remains the Will to do great things, even if the scope of the endeavor remains way beyond the individual. Readers should understand One should not be held back by the simple proposition that you don’t know what the hell you are talking about, but at the same time; the first 50 Answers which you get are probably wrong. A good View on all this is probably Study of business practice at the base level, where two basic models are existent: the business owner either starves for the first decade, or is on his third business attempt before success. No one would ever start anything if they had any statistical understanding of the level of their own ignorance. Trial and Error goes way beyond Scientific Tests.

Here is another approach to the problem I am trying to discuss this morning. The Experts are almost always the precise group who finds dissemination of information dangerous to themselves. Such data can only convict them of collusion or failure, presenting them with a personal liability. Any unwillingness on the part of the Outsider to investigate will defeat any accurate analysis of information. It stands in the Interest of Society to allow the misinformed and uninformed access to almost all information, as in about 20% of such instances, a alteration of authoritative policy or position will be engaged. Enlightened personnel will and should aid the Whistle-Blowers; the amount of disaster from such spread of information will never equal the magnitude of danger coming from hidden error.

The above knowledge brings my certitude in discussing What I know nothing about. Authority which cannot sustain the slings and arrow of its own constituency must rest on such profound error that it should prima facie be replaced. Whenever you hear Statements of state privilege, you should ask What they are trying to hide this time. Does this seem like too loose a social structure for you?–It is likely you have a Past which you wish to remain discrete. Mao Tse-tung had the correct idea in the Cultural Revolution, the Red Guard had entirely the wrong idea in the Cultural Revolution; transgressions should be exposed, but Punishment should be without Violence, and consist mostly of separation from the power in which they hid their malefactions. The Answer always lies in getting the Best possible, not in ostracizing the failures. lgl

Saturday, September 11, 2010

Back in the Saddle

I really have some difficulty with the Krugman postulate. His model does not truly express any success except in the Short Run, and fairly fails in the Intermediate. I dislike a model which works only until the funds are exhausted, and then must be reloaded. There is no spring connected to that board. The banks did not go back to Lending, Business did not ramp up with no Consumer Demand in sight, and foreign trade did not better until the U.S. ramped up on Imports. China is also attempting the Krugman formula, and can’t seem to get the engine to restart. More of the same does not appear to be any form of rational policy.

I favor letting the Bush Tax Cuts run out for All. Make everyone work a little harder to bring the style of life which they prefer. The greatest element of this will entail Business altering their basic operational format. I am wary of a time where all major industries can continue to accumulate Profits while Production is in decline; there is simply too much liquidity in the mix. Investors would proclaim this is a prime policy because of immediate Profits, but there is not long-term capitalization and recapitalization. Labor will never present the long-range Consumption necessary for sustained Production if these conditions are maintained. The situation is not to Anyone’s benefit.

I am out of surgery with a good report, but it will be reflective of current conditions. It will cost more than the first go-round, and the actual Cost will have gone down; yet no one will witness a reduced Price for such work. It is useless to blame the Hospital or Doctor, and all Staff for well-trained and efficient. My recovery will probably be maximized. What We will find is that Insurance Costs will have gone up, and supportive services will have been minimized. The Question to be asked is How Much can the Services be pared, before the quality of Product drops. It will be an increasing issue of dispute in the coming decade. lgl

Wednesday, September 08, 2010


Here is the type of economic policy I dislike, simply because it is futile. I will present a vastly different strategy, and one which I am sure everyone will disagree with, until some economists begin to study the ramifications of the issue. This is reaching back way into the Middle Ages, and may freak a great number of people out. I would implement a modern Corvee Law, where every Citizen or Inhabitant is required by law to supply a set number of labor every year as Community Service. It could also be called the Physical Tax. Outrage? Claims of Slavery and Involuntary Servitude? Does Anyone feel the urge to get out the Tar and Feathers?

The Devil is in the details of course. Congress gets to set the number of Community Service hours required of the Individual. All individuals working Corvee service will be guaranteed a Congressionally-sanctioned hourly wage. The individuals doing the Work will receive the Wages. Individuals, though, can substitute for Others, with a prior agreement they have formed; this must be identified by a standard release form which Both have signed, and will be kept for the federal Employer. Citizen/Inhabitants under the Age of 14, or over the Age of 70 will be automatically released from Community Service; though all Others are subject including the Disabled. The Penalty for failure to meet your Community Service yearly will be $10,000 for every year found to be delinquent. The Statute of Limitation on the Penalties will be a standard 10 years, with a potential $100,000 Fine assessed for noncompliance.

Here We have mandatory taxation of a different sort with a huge Penalty for noncompliance. Congress will obviously not insist on a great amount of Corvee labor–probably 100 hours or less. Government will have to supply a great number of labor-intensive Jobs–all of the spectrum from hauling Trash, sorting Trash, to planting Trees. Labor is guaranteed a Wage which can be supplemented by assuming additional Corvee labor for a Price. Congress can set a Wage limit which will not bankrupt the Treasury, but will get Income directly into Households. The Community gets cleaner Parks, better taken care of Elderly, and even painted Street Signs.

Final Note: They are planning on cutting some on me Friday. I may or may not require some intricate surgical technique. I will either be back shortly, or not for a considerable period; they tell me no more than a Month. lgl

Sunday, September 05, 2010

The Riegn of Evil

I read this Piece, and think the Kids must understand more about the method of Taxation in this Country. We have a Step-system of Taxation, which means that people are charged only what others are charged in taxation until they reach the new Step rate. I do not know what the Tax rates are, and don’t care to learn; someone will think to put me to work at something with such knowledge. It is a decent order to examine the nature of this Tax thing, and consider real Tax revenues generated. Over the range of the first $200k, the upper bracket may pay some outside of $2000 more than their less well-off contemporaries; this is a complete Lie in its own way, as higher Income can always resort to special Credits and Exemptions. Here is the thing: the suppression of the maximum rate allows upper Incomes to save about $4000 per each additional $100k they earn. This means that Someone with $200k Income saves maybe $2000, with lesser Incomes saving much less in turns of the Bush Tax Cuts. Someone making $1 Million per year, though, can save the initial amount of the lower Incomes, plus about $36,000 more than that saved by the $200k Income. Incomes say in the $10 Million per year range save that probable $42000 of real Tax from the Bush Tax Cuts (remember they get to take off the tax cuts from the lower Income brackets), but get to add $360k in Tax break through the $10 Million.

Some state that these Tax Breaks aid the upper classes to accumulate Capital for Investment. No one but the multi-national corporations are stupid enough to bear the total Risk to their Capital. Everyone else acquire business mortgage and rotating operational funds. What I am getting at here remains that the economy does not need these additional finances for funding Investment. There are sufficient instruments for creating these Investment funds, and giving Tax breaks to the super-rich does not enhance this process. There is no need for the Rich to get richer, or improve the ease with which Entrepreneurs obtain Capital. The claim that any of the Bush Tax Cuts enhance the business formation machine is trash Talk (my Mommy would be so proud of my not calling it Horseshit–too bad she is no longer alive).

I have been against the Bush Tax Cuts since he put them in his political campaign in 2000. I could say I opposed such ideation ever since 1997. I feel that We had to endure three Bubble bursts since the original date, and was principally caused by those ridiculous Tax Cuts, and the regulatory debacle where approved legal regulation was not enforced. People do not understand that the troubles of People are caused by the People themselves, there being no one else to blame. When one witnesses economic distress, understand that you can actually blame Someone as the cause; this all due to the fact that it is true. Inflation is a state of Mind where economic leadership wants to increase their Income at the expense of Those who work for them. Bankers and Business always insist there must be some rate of Inflation, this being so they can meet their own Wage Demand increases while the actual Labor is left to stagnate. lgl

Saturday, September 04, 2010

The search for Normalcy

Everyone dealing with the area of finance should be able to understand this Post; if one does not, they need serious help. I am against naked credit default swaps simply because any spread of Risk beyond the initial Players can only threaten the greater economy. CDS in no way affects the actual rates of default in finance, and naked credit default swaps transplant the Risk to previously healthy sectors of the economy. It would not make a difference except that these Swaps alter the nature of the Risk as well, in fact increasing the structural overhang. Higher risk options are funded at greater Risk, with a higher rate of default because of the Risk; but with no corresponding increase in the Returns demanded, always and eventually leading to a greater loss of capital without a correcting Return. I may have even confused myself here, so I will simply say that the Recovery schedule of capital accumulation has not been strengthened though the Risk has been magnified. I will state for Those still confused that We have left entrepreneurial Risk, and have entered into economic Risk; meaning that capital replenishment can not be accommodated by normal Profits, but only by economic Profits.

The Reader may ask Why I think the previous paragraph ideation is such a big deal. Economic Profits must insist upon economic injury to other sectors of the economy, who cannot draft a repayment economic Profit from their own Production. Two Conditions are created: the first consisting of a reduction of normal Profits in associated sectors; the second being a collapse of the converted sector when the economic Profits are forestalled. Both Cases lead to a loss of Productivity in the long-term at a greater rate than normal operations. This is Why there should be a complete ban on naked credit default swaps, and even high restriction in covered credit default swaps. Borrowers should not be allowed to Buy or Sell such Swaps, and Lenders should be allowed to sell such covered Swaps only to financial institutions who loan within the sector of Production.

I am not claiming any great skill within the area, but it is also clear that relatively no one else is asserting such Authority. I am simply trying to cut Fire-breaks around the forest of such activity which will limit exposure to the specific sectors involved. The result will save Us all from the perpetual Risk which must descend upon the greater economy. This means normal Production will not be under continual pressure from all sides from the use of credit default swaps. Sectors may fail in sequence like they always have, but not with catastrophic failure as is now existent. lgl

Friday, September 03, 2010

Give me a honest Prostitute any day!

The Internet is full of Posts dealing with the Jobs Reports. It is the old ‘glass half full, half empty" paradigm, where going nowhere seems rosy to Some, bad to Others. The Business world needs about 5 Weeks to get most occupational New Hires up to competitive production. It is clear that Business expects no sudden new growth in Consumer Demand. Most in the Business world finally understand that a cheaper Dollar will not get massive new foreign Sales. Importers know that Consumer Demand is going down, and more so with declining value to the Dollar. The rigid Costs–Utilities, Transportation, and Property Taxes–are all destined to rise, and Consumer Discretionary Income is vaporizing. Consumer refusal to sell their Soul to the Credit Devil leaves Finance with a declining sector Profit. The economy may seem like a highly-tooled engine, but it truly lacks fuel.

This Post is exactly what I fear the Most. I am probably the sole advocate of raising Taxes to stimulate the economy. I will make the general overall Statement that Business Tax Cuts will not stimulate the economy in the face of declining Consumer Demand; it will simply provide Business a Profit when said Business needs to change its business format to acquire Profitability. Elimination of the Bush Tax Cuts and even the introduction of a Draft Tax on financial transactions would raise a immense amount of revenue, stop the Investment programs of Business into Treasuries, and create increased Demand for higher Wages. Business will engage in the practice of Hiring cheaper labor wherever possible, to conserve higher-priced labor while devoting such labor to the proficiencies for which they were hired and retained. Politicians, though, will bow to Business demands, and conditions will only worsen.

We are in the midst of a Capital misallocation recession. We are where We are because Business leadership entered in a finance and investment mode which was poorly devised, and artificially implemented; it was a bad business judgement call. Now Business insists on being paid a Profit from the bad business decisions, and Tax Cuts are the only venue that they can adopt for such a Business return. Both Business and Finance must be forced to adopt alternate strategies, which they will not do if Government will pay them for previous mal-alignment. It does not matter How Much Government gives to Business, nothing will improve until Business practice does change; it never will with the Politicians being such Whores. lgl

Thursday, September 02, 2010

Market Power

Here is a Question which every would-be analyst of markets must ask. Can a math model be compiled which will match market performance with sufficient statistical accuracy to provide fully adaptive investment policy? We have a random order market with individual elements acting in independent manner, only united in the goal to show a Profit. The success of Quants will reduce the success rate of other Traders, and thereby alter the direction of the market, unless herd movement adjusts to reduce the seminal advantage to success. No one doubts that Traders and Investors are getting more adept with sophisticated trading technology, but what does this do when it becomes uniform? This is the skew which Felix Salmon discusses.

My take on all this would state that Quants will blend into human trading behavior as the technology becomes more uniform. This means the place for human choice rises as the machine reaction of models lose their advantage over regular Traders; remember, in markets, Profits above the market average must be balanced by an equal constitution of Operations below the market average of Profits gain. The whole thing leaves the arena of a proposition to abandon model direction, to a proposition of When to abandon the models. We are back to a human Guess.

Now We come to the proposition of hazard Trading, where the models are ignored; to be replaced with a Gamblers’ Risk. Many will claim that Quants will have an advantage over hazard Trading, but no one has come up with a clear picture of such fact. One has to spend much less time on data input with hazard Trading, so more Trades can be achieved in the same Time frame. Statistical Odds will tell one that hazard trading will probably be Profitable some 50% of the Time, but incur Profit losses elsewhere. Hazard Trading, therefore, will meet the market average half the Time, fall below it half the Time. Spread of Risk sideways across greater numbers of different Stocks improve the lot, though hazard Traders are loath to sell Stock below what they paid for it; this reduces the amount of capital available for Spread of Risk. The humor of all this remains the fact that consistent performance with markets will cause the majority of Traders and Investors to leave the markets poorer than they entered; this due simply to the fact that markets grind up Profits in derivative payments to the market employees. Markets would be abandoned by Investors and Traders, except for the huge wealth which accumulates to that minority of Traders and Investors who prevail. lgl

Wednesday, September 01, 2010

The Boy crying "Sheep!"

I feel for Paul Krugman, though I do not think he is right. He states that he felt that the magnitude of the Stimulus was not large enough, while I suggest Stimulus would never have worked no matter it’s size. He would, like a Gambler, double down and go for broke. The Question to be asked is What to try next if such an effort failed; which it would. Here is where it will get tricky, and I will expect full hatred as We turn to an alternate Plan.

Government needs to spend Big, but We cannot collect those Treasuries. It means More, not Less, Taxation. The easiest mode here is to let the Bush Tax Cuts run out, which they truly should. They were a bad Bet from the Start, and enriched the wrong people. We did not need to turn the Rich into the Uber-Rich. Poor people got enough from the Bush Tax Cuts to pay for one month’s Utility bills. The Rich tripled their Wealth within a decade. Some people claim that this was the great American economy at Work; I claim it was the great American Criminal at Malfeasance. Either Case assures than great maladjustments occurred within the American economy. Elimination of the Bush Tax Cuts would help rectify the inequity of the current arrangement.

A greater source of Government revenue will be needed than simply asking the Rich to start paying some back taxes. I therefore propose the great Draft Tax, where every Check, Debit, or Credit transaction will be assessed $1 in Tax. This Tax will be assessed on Banks, financial institutions, and Card companies. It will be up to these institutions to raise their charges for the financial services. It is clearly an adjustable Tax for Households, who could probably limit their taxation to $30 or less per month. It will not be so easy for Business to avoid the taxation. Some repayment of said taxation could be possible to the Poor, but I would not advise it. There will be claims that the Tax will incite Consumers to return to Cash payment for Purchases, but such activities are limited in nature, and will be a benefit salvation for many Consumers; leading them to avoid adverse Credit rates from these financial institutions. I will at this time not go into Why I believe this approach to be the best venue for economic performance, except to say I know that it will unfreeze Wage demands among lower Incomes, and retard unwarranted gain for Those excessively paid at the Present. lgl