Tag Archives: economics

social security and basic reasoning

It appears both republicans and democrats would like to kill social security for those people willing to pay into the system. There is a continual move towards privatization of retirement accounts, while offering minimal retirement plans to people that are near welfare status.

There is a systemic reason why both republicans and democrats are attempting to kill social security for the middle class and above. When older able bodied people choose to retire, the labor supply diminishes. With a diminishing labor supply, the cost of labor goes up.

I doubt it is coincidental that in an era which the age requirement for social security has risen, the labor supply has been relatively abundant as opposed to the era before the age requirement was raised.

 WOW! It’s WebStory!

Carbon Tax & Oil

Can anyone say that oil may have been dropping due to California’s introduction of carbon tax?

Right or wrong, it may be a step in the right direction to help limit pollution and trash.  Will the nation be soon to follow?


Taxes and what is really going..?

Republicans shift stance on taxing wealthy, by James Politi, FT


Buoyed by his re-election, the president has said he is willing to compromise on fiscal policy but wants higher taxes on the rich as a condition of any deal. John Boehner, Republican speaker of the House of Representatives, has said he is willing to put “revenues” on the table, though he has not offered much detail on where those additional funds would come from.


I may be reading the lines too aggressively, but it seems that the Blues and Reds are really united to raise taxes. So far I’ve gathered that the Republicans are willing to eliminate deductions if Payroll tax is put back into place. In elastance, tax revenue is probably not where the true negotiations are occurring. The real negotiations have to be occurring on the spending side.

Personally I would like to see a cap on net-deductions, not the elimination of any specific deductions that could be biased against certain regions or states.

 WOW! It’s WebStory!

Investment grade yield

Corporate yields are extremely low considering 10 year treasuries are still hovering around 1.6%. This yield clearly shows an inverse relationship with American Equity values.

What does all this mean? The world investor clearly has faith in the American Dollar and Financial system. While it is one thing for Treasuries to have low yield, it is another when both treasuries and corporate bonds are low in unison. The balance sheet for both the treasury and corporations must be looking good.

There is one area of concern though. MBS loans have been gobbled up by the Feds. Thus leaving little room outside of treasuries and corporate bonds for fixed investments. In essence, the Fed’s purchases may continue to force investors to invest in risky assets such as Corporate debt as opposed to collateralized obligations.

 I love WebStory!

What caused Greece and Spain to be in their current scenario?

Loose lending standards of course.

Mish over at his blog continues to believe  that… “Big government and absurdly strong unions destroyed Greece and Spain.”  He then compares the mess to California.


Mish’s view on the cause is distorted.  Governments do not collect taxes based on services rendered, but they collect taxes based on a percentage of revenue.  As a result, they spend based on a percent of revenue.

If you follow the logic, loose lending standards help increase revenue… Once the lending standards were tightened, we saw a loss in revenue, which resulted in a serious belt tightening.  In essence, under our current financial system, lenders control the government spending.

While I do not hold big government spending totally unaccountable for the scenario they are in, it would naive to say they are to root of the evil that has created the scenario we see today.