Category Archives: Current Affairs

Occupy Old People

2 Replies

Thanks to the "Occupy" movements there's been a lot of talk lately about the wealth disparity between the top 1% and the rest in the US.  Now comes some information about the growing wealth gap between the geezers and the greenhorns in our fair country:

The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday.

While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.

The analysis reflects the impact of the economic downturn, which has hit young adults particularly hard. More are pursuing college or advanced degrees, taking on debt as they wait for the job market to recover. Others are struggling to pay mortgage costs on homes now worth less than when they were bought in the housing boom.

 

When Morons Are in Charge

Leave a reply

I'm thinking there's a new reality series to be had here – When Morons Are In Charge:

At Wolcott High School one morning this week, an urgent announcement crackled over the intercom: a threatening intruder was in the building and students were told to immediately take refuge in classrooms.

Doors were locked and police, with dogs, moved in. Students stayed huddled in classrooms where they were told to stay away from the windows.

But what sounded like a frightening situation was just a search for narcotics. Drug-sniffing dogs combed the school while students stayed in locked classrooms, believing that an attacker was roaming the halls.

As the columist points out in the rest of the piece there are all kinds of problems with this operation, but I'd like to point out the most obvious – if there's ever a real intruder in the school in the future the kids are now more likely to not take it seriously and to think it's some kind of drill or just another drug sweep.  Have the administrators never heard of Chicken Little?

Congress Trying to Get More Efficient

Leave a reply

My fellow Americans I believe Congress might finally be endeavouring to become more efficient since they seem to be trying to kill two birds with merely one stone.

The reeling housing market has come to this: To shore it up, two Senators are preparing to introduce a bipartisan bill Thursday that would give residence visas to foreigners who spend at least $500,000 to buy houses in the U.S…

Foreigners have accounted for a growing share of home purchases in South Florida, Southern California, Arizona and other hard-hit markets. Chinese and Canadian buyers, among others, are taking advantage not only of big declines in U.S. home prices and reduced competition from Americans but also of favorable foreign exchange rates.

To fuel this demand, the proposed measure would offer visas to any foreigner making a cash investment of at least $500,000 on residential real-estate—a single-family house, condo or townhouse. Applicants can spend the entire amount on one house or spend as little as $250,000 on a residence and invest the rest in other residential real estate, which can be rented out…

International buyers accounted for around $82 billion in U.S. residential real-estate sales for the year ending in March, up from $66 billion during the previous year period, according to data from the National Association of Realtors. Foreign buyers accounted for at least 5.5% of all home sales in Miami and 4.3% of Phoenix home sales during the month of July, according to MDA DataQuick.

Housing crisis? Check. Immigration? Check. Gotta love efficiency.

WTF TBTF BAC?

1 Reply

This post by Fec about Bank of America put me off my breakfast:

So that’s $53T in unregulated derivatives being backstopped by $1T in customer deposits. And remember, those derivatives are largely contracts made with the other TBTF banks, so that if one goes down, they all go down. And there’s no way in hell the FDIC (the taxpayers) can cover those kind of losses.

At this point, I can’t imagine why anyone would leave their money, much less own stock, in a TBTF bank.

I remember the deregulation of the '90s. At the time it made sense to me that a bank could start offering their customers investment services since, you know, it let them do stuff with their money without having to inconvenience themselves with dealing with two (or more) different people.  Then again I didn't know jack about banks or the markets so it isn't a real surprise that I couldn't see the possible negatives in a deregulated environment.  In retrospect the deregulation doesn't seem like it was such a good idea, even to a financial fool like me.

**Update**- In a later post Fec provided a link to a good article explaining the Bank of America situation.

Matt Taibbi’s Advice to the Occupy Wall Street Folks

Leave a reply

Rolling Stone columnist Matt Taibbi, the guy who's had his teeth into Wall Street for a while now and just won't let go, has some advice for the Occupy Wall Street folks.  You definitely need to read the whole thing to see the point-by-point demands he recommends they make (Break Up the Monopolies, Pay for Your Own Bailouts, No Public Money for Private Lobbying, Tax Hedge-Fund Gamblers, Change the Way Bankers Get Paid), but I thought I'd share this paragraph because it struck a chord with me:

That, to me, speaks volumes about the primary challenge of opposing the 50-headed hydra of Wall Street corruption, which is that it's extremely difficult to explain the crimes of the modern financial elite in a simple visual. The essence of this particular sort of oligarchic power is its complexity and day-to-day invisibility: Its worst crimes, from bribery and insider trading and market manipulation, to backroom dominance of government and the usurping of the regulatory structure from within, simply can't be seen by the public or put on TV. There just isn't going to be an iconic "Running Girl" photo with Goldman Sachs, Citigroup or Bank of America – just 62 million Americans with zero or negative net worth, scratching their heads and wondering where the hell all their money went and why their votes seem to count less and less each and every year.

13% Ain’t So Bad

Leave a reply

So Gallup says that Congress' approval rating is at 13%, tied for an all-time low.  You might be tempted to think that this bodes ill for the current members of Congress, but I'd like to point out a few things that may help explain why low approval ratings probably won't translate into a lot of carnage for Congressional incumbents on Election Day 2012:

  • I bet if you did a separate poll for each member of Congress that asked his or her constituents how they were doing you'd get numbers showing a much higher approval rating.
  • I bet most of us think we do a fine job selecting our own Congresscritters, but the idiots in other parts of the country are TERRIBLE at selecting theirs.
  • The vast majority of incumbents will be facing off against people who are no great shakes themselves, and who are likely to be running poorly funded campaigns.  We tend to vote for the folks who spend the most to buy our love, so this doesn't bode well for challengers.

Sadly I don't have much hope for getting an improved Congress because I don't have a lot of confidence in the rest of us demanding one.

 

 

The Whining 1%

1 Reply

Paul Krugman's piece, Panic of the Plutocrats, highlights one distinction that I think many people have forgotten – there's a difference between business in the "Main Street" sense and business in the "Wall Street" sense:

What’s going on here? The answer, surely, is that Wall Street’s Masters of the Universe realize, deep down, how morally indefensible their position is. They’re not John Galt; they’re not even Steve Jobs. They’re people who got rich by peddling complex financial schemes that, far from delivering clear benefits to the American people, helped push us into a crisis whose aftereffects continue to blight the lives of tens of millions of their fellow citizens.

Yet they have paid no price. Their institutions were bailed out by taxpayers, with few strings attached. They continue to benefit from explicit and implicit federal guarantees — basically, they’re still in a game of heads they win, tails taxpayers lose. And they benefit from tax loopholes that in many cases have people with multimillion-dollar incomes paying lower rates than middle-class families.

Listen, I get it that we need finance. We need people who can provide capital to the Main Street businesses, and I think there are plenty of fine people working in the financial sector, but just like there are crooks and scam artists working on Main Street there are also crooks and scam artists working on Wall Street. Even if we didn't already have plenty of stories showing that the Wall Street scammers filled their personal vaults while barbequing our Golden Goose, I think the incessant screeching like that currently emanating from halls of power would cause us to say, "The lady (aka the Whining 1%) doth protest too much."

NC Senator Co-Sponsoring “Repatriation Holiday” Bill

Leave a reply

If you had to guess which North Carolina Senator, Republican Richard Burr or Democrat Kay Hagan, was co-sponsoring a bill with former Republican Presidential candidate John McCain that would provide a "tax holiday" for multinational firms which would you guess?  Of course it wouldn't be blog-worthy if it was Sen. Burr, so you'd be right if you guessed Sen. Hagan.  Over at Tax.com Christopher Bergin isn't too happy about it:

Why am I worked up? Because tomorrow two Senators, Democrat Kay Hagan and Republican John McCain plan to introduce a bill they will call the Foreign Earnings Reinvestment Act to provide a repatriation holiday. They should really call it the Outrageous Grab Under False Pretenses Act…

Why? In part because the U.S. economy stinks and they see an opening, neatly laid out in WIN America's mission statement: "We have an opportunity right now to make a significant investment in our struggling economy, boost U.S. businesses, and help put people back to work." They urge that "Congress should pass legislation to offer an immediate reduction of taxation on income earned overseas by innovative American businesses to allow that money to be brought home and invested in the United States." 

Trust me, there's nothing innovative or new here. The Heritage report correctly points out that this proposed “sequel to a similar 2004 holiday would, like its predecessor, have a minuscule effect on domestic investment and thus have a minuscule effect on the U.S. economy and job creation." So, the idea is that you line the pockets of large corporations at a time when regular taxpayers are struggling to hold onto their jobs, their houses and their way of life.

A Modern Day, Budweiser-Drinking Karl Marx

Leave a reply

If I were to paraphrase what PIMCO's Bill Gross wrote in his investment letter it would be, "Financiers of the world your ride on the backs of laborers is coming to an end. If you want to keep living in luxury you better find a way to make sure they feel justly rewarded and not like you're bending them over the rail…so to speak." Here's an excerpt of what he wrote:

Ultimately, however, both labor and capital suffer as a deleveraging household sector in the throes of a jobless recovery refuses – if only through fear and consumptive exhaustion – to play their historic role in the capitalistic system. This “labor trap” phenomenon – in which consumers stop spending out of fear of unemployment or perhaps negative real wages, shrinking home prices or an overall loss of faith in the American Dream – is what markets or “capital” should now begin to recognize. Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. Washington, London, Berlin and yes, even Beijing must accept this commonsensical reality alongside several other structural initiatives that seek to rebalance the global economy. The United States in particular requires an enhanced safety net of benefits for the unemployed unless and until it can produce enough jobs to return to our prior economic model which suggested opportunity for all who were willing to grab for the brass ring – a ring that is now tarnished if not unavailable for the grasping. Policies promoting “Buy American” goods and services – which in turn would employ more Americans – should also be reintroduced. China and Brazil do it. Why not us?
If structural solutions are not put in place, a six-pac market observer should look at both stocks and bonds as rather flabby knock-offs of their former selves; no resemblance at all to Jack LaLanne but more to a 55-year-old terminator grown fat and rendered out of shape by years of neglect and perhaps greed for short-term profits as opposed to long-term balance. There are no double-digit investment returns anywhere in sight for owners of financial assets. Bonds, stocks and real estate are in fact overvalued because of near zero percent interest rates and a developed world growth rate closer to 0 than the 3 – 4% historical norms. There is only a New Normal economy at best and a global recession at worst to look forward to in future years. A modern day, Budweiser-drinking Karl Marx might have put it this way: “Laborers of the world, unite – you have only your six-packs to lose.” He might also have added, “Investors/policymakers of the world wake up – you’re killing the proletariat goose that lays your golden eggs.”

H/T to Ed for the link.