Let us be grateful to people
who make us happy,
they are the charming gardeners
who make our souls blossom.
Marcel Proust
Yes, Virginia: There is a Santa Claus
Fed Easy Money Policy Is Growing the Economy
From the WSJ nearly 18 months back:
Combined, finance and insurance firms accounted for 8.4% of U.S. gross domestic product last year, according to the Commerce Department, eclipsing the peak it hit in 2006. In 1950, the financial sector accounted for just 2.8% of GDP.
New research by New York University economist Thomas Philippon suggests that the financial sector is enormously outsized. He finds that, despite all the advances in information technology since the 1980s, the financial sector has become steadily less efficient: The upshot, says Mr. Philippon, is that finance’s share of GDP really ought to be about two percentage points lower than it is now.And we have this tidbit from Businessweek in March:
Data point No. 1: Banks are back to hawking complex derivatives that magnify bets on corporate debt. Data point No. 2: For the first time since the financial crisis, JPMorgan Chase (JPM) is set to resume selling securities tied to home loans that aren’t backed by the government. Add a third development—the feverish revival of the U.S. housing market, with new home sales surging to levels not seen since August 2008—and a meltdown-minded observer could reasonably get to thinking, Here we go again.
The return of financial products that played a role in the 2008 credit bubble provides a measure of how far the economy has come since then—and how tempting it is for Wall Street and investors to return to old habits.Then there's this, despite deterioration in competing currencies and all that bond buying by the Fed: TBT, a short play on Treasuries, is up over 8% YTD, and this development:
Without a doubt, the yield has increased, shooting up in just a month to 3.27% from below 2.85%. Last time the yield on 30-year U.S. bonds increased by a similar amount, it took about three months, from mid-December 2012 to March of this year... What’s certain is that the short-term momentum is clearly headed towards selling, with investors running away from long-term U.S. bonds. Since mid-July of 2012, the 30-year U.S. bond prices have been declining and are in an apparent downtrend, making lower lows and lower highs; the price of a 30-year U.S. bond has declined from $153.00 to currently hovering close to $141.00.Methinks that ZIRP is leading to malinvestment not trickling down to the real economy. Heck of a job you're doing, Benny...
And Then Some Magic Happens: Is the End Near?
I have not read Williamson's new book yet, although I've referenced it in a handful of commentaries or video clips. The inference I've made is that Williamson is saying "We know about unfunded liabilities in social security, Medicare, government pensions, massive deficits, etc. I don't know the specifics, but the math is inescapable. Senior entitlements and debt service will eventually crowd out essential government services, resulting in a generational taxpayer revolt, and significant changes, if not not outright privatization, in relevant programs."
Of course, the devil is in the details. We have seen city bankruptcies (e.g., Stockton) in California, resulting in slashes to public safety budgets, one of the sacred cows in American politics; it's not something you're willing to do if you have political ambitions; public unions are in a state of denial, although the high-profile Scott Walker of Wisconsin and his ability to defeat a union-backed recall election may be a clarion call. Right now public sector unions are finally starting to see pushback, and we may soon see state constitutional reforms to deal with unsustainable pensions. I suspect even in California where unions beat back some Governator long-overdue reforms, they may find that their privileged status over the past decade may be eroding their support. From the Gray Lady a year ago:
Residents of San Diego and San Jose voted overwhelmingly to cut the pension benefits they give city workers. And they did so in a way governments traditionally avoid: moving to cut not just the benefits of future hires, but also those of current city workers, whose pensions generally have much stronger legal protections than those of private-sector workers.
Unions in both cities vowed to block the cuts in court, but the ease with which the measures passed is expected to embolden other financially strained cities and states to follow their lead.
It is not just Republicans seeking savings. Mayor Rahm Emanuel of Chicago, a Democrat, has been seeking to suspend the annual automatic cost-of-living adjustments for retirees.I guarantee even if the California courts threw out the pension cuts, the fact that only 1 in 3 voters rejected the cuts is not good news for the unions; it would likely result in a deterioration of union support and more Draconian reforms at the constitutional level. When, for instance, a cop in his 50's can retire at 90% of active-duty pay for life, while cities are having to cut active-duty officers to make those payments, public sentiment will not support a privileged class, as many, if not most taxpayers don't even have a private pension. I don't think current active-duty officers facing risks to their own jobs will necessarily back retirees making more than they do; my advice to the unions is to make significant short-term concessions now or face worse cuts imposed on them.
Still, I don't underestimate the difficulties in obtaining taxpayer justice. I don't understand how subsequent legislatures can be held hostage by unsustainable, unpaid for promises made by other legislatures. I think it violates the constitutional principle of equal protection. But I never underestimate the economic illiteracy of California judges. Then we have seen how modest retirement reforms in France were rolled back by the Socialist regime and how long-overdue and greatly exaggerated "austerity" measures in the EU have been fought tooth-and-nail every step of the way. Williamson is right in theory: there will be a day of reckoning. But when and how it unfolds I don't know. I suspect the decision will be forced, perhaps by a domestic economic crisis--I don't know, say the Fed having to raise rates in a slow-growth economy. I think the Fed has counted on fearful investors buying bonds.. But, just to give an example, what if the Fed has to sell bonds in a buyer's market to control for inflation? I would rather see us confront the problem sooner than later--and Williamson is right: it will be a wonderful world once we get these unsustainable burdens off our back.
While Leviathan Wants to Control Your Guns....
Expect Statist tax-and-spend apologists to feature stories like this:
Oregon Public Radio reports that an unidentified woman called 911 during a weekend in August 2012 while Michael Bellah was breaking into her place. Her call was forwarded to Oregon State Police because of lay-offs at the Josephine County Sheriff’s Office...
Oregon Public Radio reports that an unidentified woman called 911 during a weekend in August 2012 while Michael Bellah was breaking into her place. Her call was forwarded to Oregon State Police because of lay-offs at the Josephine County Sheriff’s Office only allows the department to be open Monday through Friday.
“Uh, I don’t have anybody to send out there,” the 911 dispatcher told the woman. “You know, obviously, if he comes inside the residence and assaults you, can you ask him to go away? Do you know if he’s intoxicated or anything?”Can we all agree that the dispatcher must be the most clueless person on the planet? Yeah, that'll work... A variation of Thumper's Law:: "If you can't say something useful,..." More excerpts:
Woman: "My ex-boyfriend is trying to break into my house. I’m not letting him in but he’s like, tried to break down the door and he’s tried to break into one of the windows."
Woman: "He put me in the hospital a few weeks ago and I have been trying to keep him away."
[The caller] tells the dispatcher there’s already a warrant out for Bellah’s arrest. The dispatcher tells the caller to try to hide in the house. And four times in total she says there isn’t anyone who can help.Yeah, the dispatcher showed why she's earning the big bucks with those "helpful" contributions. Post-incident:
Her ex, a man named Michael Bellah, eventually pleaded guilty to kidnapping, assault, and sex abuse for what he did when he got inside the house.Let's provide some context: The Feds have taken timberland, which was formerly privately-held, with relevant county taxes assessed. The Feds aren't subject to local taxes; they provided some interim funding, which is no longer available, leaving an economically stagnant area to cope with the funding gap. This is a problem caused by the government, and one obvious remedy would be to privatize related properties or at minimum expand related timber harvesting.
Notice also the failure of law enforcement over the weeks preceding the 911 calls to make the arrest. No doubt law enforcement unions have the answer: higher taxes for more personnel (which may or may not have responded in time). Statists never miss a chance to try to exploit something like national news coverage of a failed 911 call:
Today in Josephine County six sheriffs' deputies patrol an area with a population of 80,000. Their territory stretches from Grants Pass to the California border.
Voters there are considering a tax levy in next week's special election that would raise about $9.5 million to hire more deputies and fund the jail.And here are the results:
Voters in two Oregon timber counties Josephine and Curry counties rejected tax increases to restore deep cuts to law enforcement forced by the expiration of a longstanding federal subsidy.Here's a headline on the same page of the response to 2012 election results:
Because of tax levy defeat, Josephine County will release prisoners and cut its sheriff's department (2012 primary election)Does that sound familiar? Remember how DHS' knee-jerk response to sequestration was release of a number of unauthorized alien prisoners and relevant front-line personnel staffing? Progressives know that there is a lot more in any budget than front-line staff reductions or prisoner releases, but fear-mongering is the State public safety monopolist's way of manipulating voters into feeding the beast.
More on the
This euphemistically-named piece of legislative tyranny has the classic unintended consequences on small businesses which lack the resources that Big Business in scale has to comply and/or lobby lawmakers on their behalf. Think of being potentially subject to 46 junior IRS's and more than 9600 different taxing jurisdictions, all with differing nuances and changeable without notice. Drex Davis explains:
For example, in Wisconsin, U.S. flags and Wisconsin state flags are sold tax-free, while other flags are subject to sales tax. However, the rules are different when a flag is bundled with a flagpole. There are thousands of examples like this; each jurisdiction has its own idiosyncratic tax laws. A printout of the rates and exemptions for all jurisdictions is 811 pages long — four inches tall when stacked.
If the House passes the MFA, audits will commence. These audits will come from states where we have no physical presence, no political representation and no right to vote. Penalties for sales tax noncompliance tend to be onerous, and most states can hold a company’s “responsible person(s)” personally liable for any unpaid sales tax liabilities. A state can confiscate our personal possessions in order to collect unpaid sales tax owed by our companies. Unlike Wal-Mart, Amazon.com, Best Buy, Home Depot and other big retailers, we do not have armies of accountants and tax attorneys to deal with costly and time-consuming audits from every state. Yet, one innocent mistake could put us out of business and personally bankrupt us.
Proponents of the law say that without the MFA, Internet companies will put brick-and-mortar retailers out of business. Don’t be misled. The truth is that online sales are already dominated by brick-and-mortar businesses. According to James S. Gilmore III, the former chairman of the Congressional Advisory Commission on Electronic Commerce, 83% of all online sales are by big-box retailers, and their share of online sales is growing.For more from eMainStreet.org, see here.
I think from a business standpoint if this passes, we'll likely see the emergence of a e-middleman or consignment business model with less emphasis on direct vendor marketing to consumers. To a certain extent, Amazon has been working with an analogous reselling concept.
This blog has suggested what I thought were far more reasonable alternatives: a low flat national sales tax, with local/state revenue sharing, or vendor-specific local sales tax (e.g., if I bought a book on vacation in Texas, I pay local sales tax, not my current resident state's). But I'm not holding my breath that common sense will prevail.
Where does this taxing madness end? Let me give a short example: magazines offer flat subscription rates while selling issues at newsstands. Could the local newsstand operator argue that the magazine is competing '"unfairly" against him?
Political Cartoon
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| Courtesy of Steve Kelley and Townhall |
Simon and Garfunkel, "Homeward Bound". When their initial album flopped, the duo briefly split, and Simon spent some time living, traveling and performing in England., while his then girlfriend stayed behind in London. This wistful pining to go home to his girlfriend instead of traveling onto his next gig is behind this song.
