On the BorderLine » Finances

Another Flawed Keynesian Approach

Henry Patrick — Wed, 24 Feb 2010 05:37:24 +0000

With the help of five Republicans in the US Senate, it appears the hurdle has been cleared for some form of a jobs bill to pass approval in Congress. Perhaps I am mistaken, but Congress already passed and the president signed a $750 billion spending bill to get people back to work. What is different about raiding an empty treasury of billions more this time to create jobs?

Architects of the legislation point to the tax credits available to businesses that increase their headcount. One idea is to give employers a tax-credit up to $5000 for each additional person hired. At first glance this may seem like a logical incentive. But as my economic students learn, two sides exist to transaction.

The tax credit will only reduce the marginal cost of a new employee for the first year. After the initial year the cost of the new hire will balloon by at least the amount of the tax credit. As any student passing a Principles of Economic realizes, cost is just one factor in the employment equation. The other side of the coin takes into account the revenue benefit that an employee brings to the table. Firms will retain or hire individuals as long as their additional benefit exceeds their additional cost. Without a significant pick up in demand, many firms will pass on expanding their payrolls.

Small business owners point to another flaw of the proposal in that tax-credits are realized at the end of the year. The cost of a new hire drains cash flow in the meantime. As one owner stated, cash flow is at the heart of staying in business. My creditors may not wait for the federal government to reimburse me.

It looks like another lesson in failed Keynesian economics.

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Got change for a trillion??

kilowatt — Wed, 08 Jul 2009 17:13:52 +0000

New currency coming out..

Never-Ending Government Lies About Markets

Chris — Fri, 15 May 2009 03:14:35 +0000

The purpose of government is for those who run it to plunder those who do not. Throughout history, governments have used violence, intimidation, coercion, and mass murder to enforce this system. But governments’ first line of “defense” is always a blizzard of lies about its own alleged benevolence, altruism, heroism, and greatness, along with equally big lies about the “evils” of the civil society, especially the free market.

See Article

Mr. Jefferson

Chris — Wed, 08 Apr 2009 18:32:45 +0000

Wall St. Threatens to Take Ball and Go Home

Chris — Wed, 25 Mar 2009 16:49:41 +0000

Pictorial Version of a Bailout

Chris — Sun, 22 Mar 2009 12:45:38 +0000

What have we here? Someones car was underwater and someone tried to bail them out. Look at each successive picture and see what happens time and time again.

Japanese and US Parallels

Chris — Mon, 23 Feb 2009 01:50:07 +0000

Here is what happened to the Japanese economy in the late 80’s-early 90’s that you see referenced around the news in many non mainstream outlets. Why we haven’t heard more about it is a subject for another post. Needless to say, in the Japanese crash, the government spent hundreds of billions supporting banks and businesses, buying U.S. Treasuries in an attempt to keep the yen cheap and so their manufacturing sector at work. As the economic morass dragged on, the government cut interest rates to zero, then eventually accelerated spending in a five-year experiment in “quantitative easing,” which involved funding all manner of public works projects and other targeted infusions of government spending into the economy.

Using the equity market as a proxy for the broader economy, the Nikkei fell from around 38,000 at the height of the bubble in the late 1980s, down to around 7,000. During the five-year period of quantitative easing, 2001 to 2006, the Nikkei rebounded by about 100%, moving back to the 14,000 neighborhood. Importantly, however, the minute the Japanese government stopped the spending, the stock market came tumbling back down to around 7,500, near where it hovers today. Note that at no point did it get anywhere near the bubble high of over 38,000.

Back here in the US, if history repeats itself the DOW will fall to somewhere around 3000 and recover to somewhere around current levels and then back down… how low no one knows.

Now We Know What Happened and How!

Our View — Fri, 20 Feb 2009 23:38:31 +0000

Will Grandma Have to Eat Cat Food? or Hand Me the Ammunition!

Chris — Fri, 13 Feb 2009 20:01:24 +0000

This morning I received a few calls from people who I didn’t know. They only knew me from the recent opinion submission I sent to the Hudson Star Observer this week. They called me to congratulate me on writing the letter. It was short, sweet, and right on for these times. One gentleman asked about joining the St. Croix GOP and I bluntly said that the GOP was part of the problem. I didn’t say I wouldn’t support them, just that we have far to many RINOs. Another gentlemen commented on the last line, “Revolution has occurred for far much less a reason.” In fact, it has. Last evening someone told me that there are now around 20 states that have or recently introduced resolutions meant to re-affirm the rights guaranteed to state governments in the Ninth and Tenth Amendment to the Constitution. So thank you for calling me. All I ask is for you too to get involved with educating everyone about the largest grab of liberty in the history in the modern world. This is not just the GOP against the Dems, it’s ALL government tyranny against the citizens and their rights afforded them in the United States Constitution.

The link is here and contents are below:

Government cant fix issue

To those of us who have fallen for the rapacious vagaries of the politician, the government economist and various soothsayers; why are we wondering why prices do nothing but steadily ascend, year after year, to the point of grandma having to eat cat food?

Whenever and wherever fiat money has been introduced, from France in the 1790s to America in 2008, a steadily debased currency and a steadily degraded economy follow. The degrading economy comes in the form of a rapidly escalating financial crisis which we here touted now, and then a severe depreciating currency. We are experiencing both today. The yield on a treasury note today is nearly zero percent.

Fiat money means that currencys usefulness is not a result of any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a governments order that it must be accepted as a means of payment.

This fundamentally collectivist approach promised that from nothing there would be something or as even Keynes would later put it, from stone there shall be bread. Where does everyone think the current bailout money is coming from? So far the obligations for the Treasury, the Federal Reserve, and other government agencies obligations or guarantees associated with the financial crisis stands at a staggering $8.3 trillion. This amount is equivalent to over 50 percent of the nations GDP.

Throw that on top of the $61 trillion Social Security and Medicare shortfalls and we have a liability of around $230,000 for every man, woman and child currently in the United States. Thats nearly a million dollars for a family of four. We need to wake up to this realization and rebel against the ideology that preaches that government can solve our financial crisis, let alone any other. Alas. Its too late. Far too many have been deceived into thinking that the government can take care of them forever.

Revolution has occurred for far much less a reason.

Our View

Our View — Fri, 30 Jan 2009 19:53:23 +0000

Dear Towncrier,

It is our view that we have a problem here! We commend you for the prompt attention you have given the case regarding very serious case of the Crimmins.

For some unknown reason, Ms. Crimmins feels it is her duty to spend millions upon millions of taxpayer dollars because some how she is an expert.

Sure, shell tell you about her extensive background in statistical analysis! Sure, shell tell you how to spend your money for you, acting as some kind of expert!

It is our view that Ms. Crimmins has publicly and privately demonstrated her inability to control her own finances while claiming to be able to dutifully spend our taxpayer money. We feel the only appropriate action now is to ask Ms. Crimmins to resign her post as taxpayer spend and build liaison because of her inability to control her own.

It is our view that what happened yesterday to Mr. Blago in Illinois is what should happen here. Trust is now gone in the eyes of us little taxpayers whom some actually think that somehow the school bored members were given a gift from God to handle finances.

It is our view that they cant! Thank You Towncrier for pointing that out for us!

Good riddens Ms. Crimmins and your twinkies too!

Bringing Wall Street Much Closer to Home

kilowatt — Wed, 21 Jan 2009 14:59:45 +0000

Making the headlines today at CNNMoney.com was this story.

Wisconsin school districts slammed by Wall Street meltdown

What makes one chuckle is the complaint from board members stating how, “They told us something different than what was put on paper.”

You’d think that if you were going to invest $200 million of taxpayer’s money you’d at least have a lawyer check the fine print. It would seem those running our educational system aren’t very educated themselves. And we wonder why we’re in the state we’re in.

Hare-Brained

Chris — Thu, 18 Dec 2008 02:04:43 +0000

Larry Summers, the man designated by President-Elect Obama to be head of the National Economic Council and, as such, according to The Times, his lead economic adviser inside the White House. (David Leonhardt, The Return of Larry Summers, November 26, 2008, p. B1.)

Although generally viewed as a prominent professional economist, his actual knowledge of the subject is minimal. This conclusion follows from the fact that the essential subject matter of economics is capitalism. And Summers’ ideas on redistribution reveal that he fails to understand the nature of the most essential feature of capitalism, namely, private ownership of the means of production and the indispensable role it plays in the standard of living of the average person.

His views may qualify him to be an economic advisor to Hugo Chavez of Venezuela or Robert Mugabe of Zimbabwe, but certainly not to be an economic advisor to the President of the United States.

Read Larry Summers: Heavyweight Centrist or Lightweight Leftist?

Early Indoctrination

Chris — Tue, 16 Dec 2008 12:45:16 +0000

(CNSNews.com) Children as young as three years old should be in public pre-school programs, according to Randi Weingarten, president of the American Federation of Teachers (AFT), the nations largest teachers union.

The AFT would love to see children from age three on attending these programs, Weingarten told CNSNews.com last week during a teleconference about preschool curricula. The research is completely conclusive of the issue that our brains develop faster between birth and five years old than they do pretty much at any other time.

Well we saw this coming a mile away. On top of having to train and license these new ~~babysitters~~ teachers we get to increase spending 8-10% higher. And our new social~~ist~~ class will get the ~~government~~ taxpayers to pay the tab and our children can learn about ~~religion~~ environmentalism, ~~democracy~~ socialism, and sex education at a much younger age.

See Teachers Union Chief Pushes Preschool for Three-Year-Olds

Bubbling Cauldron

Henry Patrick — Sun, 14 Dec 2008 01:56:21 +0000

Double, double toil and trouble; Fire burn and cauldron bubble -William Shakespeare-

Easy money credit policies of the Federal Reserve are the boiling broth in which financial frauds stew. The percolating liquid in the cauldron forms aromatic bubbles that cause individuals to seek fortunes where none exist.

As the bubble enlarges, money chases money at an increasing pace. The time it takes to profit from a real estate or stock transaction is measured in weeks. The allure of fantastic returns on the quick is an environment ripe for the con man.

The multi-billion dollar ponzi scheme hatched by Bernard Madoff a decade ago came to an end this week. Flush with a stream of money from those chasing the bubble, Madoff was able to play a cash merry-go-round with clients by taking new money and redistributing it as returns on investments.

Because of the financial uncertainty caused by the popping of the bubble, many who invested with hedge funds or other money managers have taken flight with their money. In Madoffs case, the withdrawals far outweighed the current trickle of new money. The merry-go-round came to an abrupt halt.

Bernard Madoff will certainly spend the remainder of his life in jail. Unfortunately, the accomplices in this thievery will continue to live comfortably spending hours writing books and giving speeches.

No excuse exists for Mr. Madoffs actions. But without the bubble created by Alan Greenspan and Ben Bernanke, the scheme may never have been launched or lasted so long.

A personal note: Several times during my career I had the chance to meet and work with the Madoffs. Back in the 1990s, they were at the forfront of electronic trading and competive executions that eventually led to the platforms we have today. On Friday. the investment community was in a state of shock over the revelations.

But this episode points to another fraud. How could a scheme like this last so long. How could accountants and regulators employed to shed light on the crooked have been left in the dark. Government laws and regulations dulled the need for personal due dilligence. Once again, government protection left behind a street full of victims.

Ponzi

Chris — Fri, 12 Dec 2008 18:33:47 +0000

Theres been an AP story this morning that Bernard L. Madoff, a former Nasdaq chairman, was arrested on fraud charges.

NEW YORK (AP) — A Wall Street powerbroker for nearly 50 years who built an influential firm has confessed to a massive fraud scheme that will cost investors at least $50 billion, federal authorities say.

Madoff told the employees he was “finished,” that he had “absolutely nothing,” that “it’s all just one big lie” and it was “basically, a giant Ponzi scheme,” according to the complaint filed in court.
The employees understood Madoff’s admission to mean that “he had for years been paying returns to certain investors out of the principal received from other, different, investors,” said the complaint, which did not identify the investors impacted by the scheme.

The OnBorderLine.net faithful know all to well the definition of a Ponzi scheme. Over the years we have reported on many cases where existing law is NO different than Mr. Madoff’s scheme. All we need do is replace the word Returns with Government Payments and Investors with Taxpayers and we have the definition of most government workers pension systems and the EXACT definition of Social Security!

Why is it that Bernard L. Madoff can be arrested, but the Congressmen, Senators, and politicians who created the Federal Ponzi schemes wont ? This is not only at the Federal level. What about our state and local levels? We find the same thing.

See some of our past posts outlining those exact Ponzi schemes:
Local:
The Pension Time-Bomb
Admins View

State:
By The Numbers

Federal:
You Cant Fix A Ponzi Scheme

You see folks, there is no difference between what Madoff did and what the government is currently doing, none.

On the BorderLine » Finances

Another Flawed Keynesian Approach

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