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Archive for the ‘interest rates’ Category

The EU, US and UK Are Going Bankrupt, Not China | Culture of Life …

emsnews.wordpress.com11/17/11

But it didn't shift in the US favor, it shifted in favor of Asia! Now, Europe is seeing individual countries going bankrupt, one after another, in rapid succession. Greece already is bankrupt when they announced a 50% haircut on …

The Dollar Today Is Dead, The U.S. Bankrupt | Laitman.com

www.laitman.com10/30/11

Opinion: (Giulietto Chiesa, former Italian Politician and Member of the European Parliament): “We are at the beginning of the transition period, which has no.

You Don’t Believe The US Is Headed For Bankruptcy?

So Let’s put the debt into perspective!

And now take a look at President Barack Obama’s 2010 budget!

It shows a massive fiscal gap over the next seventy five years, the closure of which requires immediate tax increases, spending cuts, or some combination of both totaling 8% of gross domestic product, and to put 8% of America’s GDP in perspective, this year’s employee and employer payroll taxes for Social Security and Medicare will amount to just 5% of GDP.

And why are we only projecting seventy five years ahead? Probably because over the full long-term, we’ll need an extra 12%, not 8%, of GDP annually.

Seventy-five years might seem like a long enough time to plan ahead but it’s not, and if the Greenspan Commission, which “fixed” Social Security back in 1983, had focused on the true long term we wouldn’t be sitting here now with Social Security 26% under funded.

The Social Security trustees, at least learned a lesson and the 26% figure is now based on their infinite horizon fiscal-gap calculation.

And another reason we shouldn’t look just seventy five years ahead, is that the government’s cash flows, which are the difference between its annual taxes and non-interest spending, over any period of time, including the next seventy five years, aren’t well defined.

If you use different words to describe the receipts taken in and paid out each year by the government, you produce entirely different cash flows and an entirely different fiscal gap measured over any finite horizon.

Take this year’s payroll tax contributions.

Let’s call these transfers from workers to Uncle Sam “borrowing” by the government, rather than “payroll taxes”, since the money will be paid back as future benefits.

If the future payback isn’t in full however, meaning equal to principal plus interest, then we can call the difference a “retirement tax”.

And abracadabra!

With this change of words, our 2011 deficit of about 10% of GDP is boosted another five points to 15%.

The bottom line then, is that we need to look at the infinite-horizon fiscal gap not just for Social Security, but for the entire federal government and that analysis, based on the CBO’s (Congressional Budget Office’s) long-term alternative fiscal scenario, shows a mind numbing fiscal gap of $202 trillion!

And covering this gap requires coming up with the aforementioned 12% of GDP, forever.

But the Obama administration budget has seemingly fixed the problem!

The president’s 2012 budget, shows that most of our long- term fiscal problem has miraculously disappeared and the fiscal gap isn’t 12% of annual GDP or even 8%, it’s 1.8%.

How does it work?

In 2014 an Independent Payment Advisory Board will be established and will be charged with recommending cuts to Medicare and Medicaid providers when their costs grow too fast.

Hardly anyone expects the cuts to actually happen of course, because until now they’ve always been repealed, and Richard Foster, who is Medicare’s chief actuary certainly doesn’t believe they’ll happen.

Foster added this statement to the end of the report:

“The financial projections shown in this report for Medicare do not represent a reasonable expectation in either the short range, or the long range”.

I’m not sure whether censoring the fiscal gap is more dishonorable than fudging it, but what is sure, is that if nobody starts getting honest about it real soon, then it will be cheaper to light cigars with dollar bills than with matches.

Supply-Side Economics | The CERF Blog

www.clucerf.org1/10/12

As early as the 1950s, Mundell proposed an economic policy program of tight monetary policy to stabilize the value of the currency and low tax rates to stimulate economic activity. During the late … The Reagan Scenario included a sharp drop in inflation, a recession in 1982 due to tight monetary policy, passage of the Kemp Roth tax cuts and an economic boom starting in 1983. … Inflation and interest rates are much lower and tax rates are lower as well. While a high …

The hidden dangers of low interest rates | David Cay Johnston

blogs.reuters.com1/10/12

Low rates also come at a cost, cutting income to older Americans and to pension funds. This forces retirees to eat into principal, may put more pressure on welfare programs for the elderly, and … If rates return to, say, 6.64 percent, the level they were in 2000, one year's interest costs would equal the individual income taxes for all of 2011 plus the first few weeks of 2012. Last week , rates took a step in that direction. The yield on the 10-year bond, a benchmark for other …

President Obama’s recent claim to homeowners, that refinancing their mortgage loans at a lower rate, equates to a tax cut, doesn’t ring true for many tax experts.

Obama said at a recent press conference that the housing plan his administration had launched, had “already contributed to a spike in the number of homeowners who are refinancing their mortgages, which is the equivalent of another tax cut. The main message we want to send today is that there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates and that is money in their pocket”.

What Obama failed to mention however is that unlike the housing boom that led to the current financial crisis, this time, only borrowers with strong credit ratings and stable jobs will be able to save money if they refinance.

Obama’s announcement caused many tax analysts, including Gil Charney, who is an analyst for The Tax Institute at H&R Block to shout “foul”;

“While there could be overall savings by refinancing and lower monthly payments, there also could be reduced tax benefits as less interest is paid. Also refinancing could extend the period before the mortgage is fully paid off, so this might not be desirable for someone who wants to be mortgage-free. Therefore, someone about to make a financial decision should take their complete financial picture into account, not just their tax situation”.

In fairness to Obama, some analysts like Mark Steber, who is vice president of tax resources at Jackson Hewitt Tax Service did express a more supportive viewpoint, “While generally there is no tax advantage to refinancing at a lower rate, an individual can save on the total out of pocket costs each year over the life of the loan. Though a tax bill will actually increase after refinancing, the increase in taxes may be less than half of the total difference in interest paid, so the taxpayer may save more money than their taxes increase, therefore resulting in net savings”.