First time I’ve seen someone chart effective tax rates comparing them to top marginal rates. Interesting that the effective tax rate hasn’t much changed in the more recent decades.
Posts Tagged ‘Barry Ritholtz’
From Barry Ritholtz’s blogsite, the Big Picture.
Beezer here. Ritholtz recently made Inc.’s top ten market blogsites with the Big Picture, and he’s worth a read just about every day. But what does this chart portend? Most markets are down quite a bit. China is down more than 20% and supposedly sports annual growth rates north of 8%–a slow year for China. Yet the US broke even with projections of about 2% growth for 2012. Who knows? But if 2012 shows continued weakness in other markets, we’re not very constructive for the US market because all those other markets will be in Depression level declines. Can the US market make headway under such circumstances? I’m thinking no. On the other hand, if those markets begin to recover, then the US market will do well too. My bet is the latter possibility is more likely. It will no doubt be bumpy, but what else is new.
Over the past three decades or so, we’ve developed a form of government Barry Ritholtz of the Big Picture blog calls a ‘Corporate Monarchy.’ Call it a plutocracy, or an oligopoly–whatever–but the basic idea is that big monied interests control all three branches of government. To Ritholtz this evolution explains why the nation now suffers and why unemployment remains so high.
In America, we are too busy dropping the kids off at soccer, running around looking for sales and bargains, racing to keep our heads above water. We seem to forget to get outraged. Our control over our once Democracy — the one we had a revolution against a monarchy dictating decisions from afar — slips away from us. Not with a bang, not even with a whimper, but with a 1000s acts of gradual ceding of power to the new Monarch. We have given up hard won rights to a coordinated attack from all three branches of government; Our Congress has become the legislative branch of eBay — Congressmen are auctioned off to the highest bidder; they even have a Buy It Now button to get specific legislation passed. The executive branch has fallen under the sunk cost fallacy, afraid to prosecute banks because we spent so many billions bailing them out. It turns out that even our once venerable Supreme Court is just as corrupted, with lobbyists partying with Justices and backdooring ethics by hiring their wives.
A good example of how the ’Buy It Now button to get specific legislation passed..’ Ritholtz refers to actually works is detailed in a opinion piece in the New York Times regarding the wording in proposed school lunch program legislation that re-defines what’s a vegetable.
It’s Delicious. But Is It a Vegetable?By ANDREW ROSENTHAL
I’m finding it hard to figure out what, exactly, Republicans think about vegetables. Herman Cain, who as we know always chooses his words with the greatest of care, called vegetable pizza “sissy pizza” on Monday. But House Republicans are suggesting that pizza is itself a vegetable. So does that mean all pizza is for sissies?
As ridiculous as the preceding paragraph sounds, believe me, it is no more so than the final version of a spending bill released late Monday, which would nix USDA school lunch standards proposed earlier in 2011 and let pizza count as a vegetable. (The sissy addendum is not in there.)
The background is that federally subsidized lunches have to contain a certain number of vegetables. But what, exactly, is a vegetable?
To make things extra confusing, the bill doesn’t mention pizza but rather tomato paste. It specifies that “None of the funds made available by this Act may be used to implement an interim final or final rule regarding nutrition programs…that…require the crediting of tomato paste and puree based on volume.” According to the AP, this nonsense means that two tablespoons of paste are sufficient for vegetable-hood. As long as lunch ladies bake two tablespoons of paste into their pizza, it’s a vegetable.
I asked Verlyn Klinkenborg, who writes about agriculture and the environment for the editorial board, for his thoughts on the vegetal nature of pizza:
For me, the most interesting thing about this is how you turn language of the kind you find in the ag appropriations billinto “pizza” and “vegetables.” On the face of it, it’s almost impossible to tell what’s being said. But then, that’s part of the point. Rather than revealing what the real subject is—and who stands to lose or gain from it—we’re left with this truly indigestible wordstuff. Even ag experts (meaning, roughly, me) have a hard time moving from the text to the fact that this is really an industry move to feed school kids pizza. The thinking seems to be that anything that has once been a vegetable remains a vegetable, no matter what form it ultimately takes. And it has the unique property of turning anything it touches into a vegetable too.
No one in Congress seems to realize that tomatoes are, in fact, fruits, but that’s a separate issue.
Beezer here. This is how the public accepts manipulation with a whimper. The public has no idea how they are manipulated. The assault on our values and our liberties is not made frontally, but in a million tiny ropes weaved into laws and regulations. The New York Times article spears this subterfuge with the ‘tomatoe as a vegetable’ example that favors pizza being served to school children. No matter that the tomatoe is a fruit, not a vegetable. This is a main reason why the Occupy Wall Street protesters didn’t come with specific demands. When the big changes come from thousands of little manipulations, only a very few gain access to the kingdom’s keys. No one at OWS has access to the keys. It’s why we get two thousand page health care reform and similarly long and indecipherable financial reform legislation. The public may want reform, but the corporate monarchy won’t stand for reform so what’s produced is not real reform, but reams of complicated verbiage that buries understanding. This is how we’re managed. This is not Democracy. Nor is it Capitalism.
Most people don’t realize that six corporate behemoths own the so-called major media. From the Barry Ritholtz Big Picture blog.
These handful of giant corporations wield enormous power. Just think Rupert Murdoch.
The last thing they want is a candidate who will shake things up.
The people’s wishes? They are wholly irrelevant to these media behemoths. Indeed, these big companies have a vested interest in picking candidates who are good at acting like they care about the little guy, but who actually couldn’t care less about the average American, and have no problem picking his pocket at the first opportunity.
Beezer here. The list of six is at the blog Free Press: General Electric, Disney, News Corp, Time Warner, Viacom and CBS. We’re not sure GE would still be on this list because they sold their NBC franchise to Comcast, the mega cable provider. Basically these are Too Big To Fail (TBTF) media empires corresponding to the TBTF banks. And those who are censored come from both the far right (Ron Paul) to anyone who is liberal, such as economist James Gailbraith.
My understanding of a supply side shock deals with supply shortages. Prices rise due to a drop in supply. So if prices are not rising, and they currently aren’t, then there’s no supply side problem.
But what if there’s too much supply? Can that constitute a negative shock as much as too little supply? Consider this from an article by Dan Alpert, a founding Managing Partner of Westwood Capital, LLC and its affiliates which appears at investment advisor Barry Ritholtz’s Big Picture blogsite .
I feel more emboldened than ever (probably a good sign I should be rethinking my premise) to reiterate my general contextual theory that the developed world is experiencing the dual deflationary forces of a “supply shock” from the emerging markets, combined with a debt overhang remaining from the bubble period.
During the credit bubble the developed world (with the U.S. leading the way) attempted to neuter the supply shock with borrowed funds from our “suppliers.” Thus we plugged the yawning gap between domestic production and consumption….
Debt deflation is debt deflation, wherever the debt resides. Growth suffers either way. Adding the excess supply and productive capacity of the 3.5 billion people in the emerging markets overwhelmed aggregate global demand even before the developed world over-leveraged itself.
Beezer here. So this theory expands the normal concept of what constitutes a ‘supply side’ shock from one of supply shortages to one of supply excesses too–particularly when you look at Global supply and demand. In this construct the West was overwhelmed by supply, produced in the Far East primarily, and levered itself up too much in an attempt to grow demand to meet the excess supply. The north atlantic banking crisis revealed this over supply because demand, pumped up by too much borrowing (credit), suddenly collapsed. From the north atlantic this looked like a classical demand side shock and it was. But the supply side excesses, this author appears to argue, magnified the size of the demand plunge. This seems to be a plausible explanation for the debt overhang on personal balance sheets in particular: Cheap supply created its own credit driven demand. That wages were stagnant at the same time for most consumers didn’t help matters.
The problem, of course, is that there are no options left that seem viable within the political environment we now inhabit. Members of congress from the heartland and representatives of the burghers of Germany and Holland have reached, perhaps foolishly, the breaking point on both fiscal spending and central bank bloat – simultaneously.
We have long been unable – despite valiant efforts to make our currency unattractive (ZIRP, QE, etc.) – to devalue the dollar in order to re-inflate the economy. Our trading partners simply won’t let us in an environment of excess supply – everyone can’t devalue at once – and the curse of being the world’s reserve currency is that the dollar is also the flight currency in times of weakness. Protectionist measures – once again being grasped at by otherwise well-intentioned but desperate minds – are more frightening to the market than almost any other solution.
The markets have merely awakened to this fact as the previous measures have expired or been removed, the economies of the U.S. and Western Europe having reacted accordingly.
I have written at length on what to do about the situation in the U.S. – in short, QE3…bad; modest deflation in nominal wages, prices an asset values…needed; an ambitious public infrastructure rebuilding and re-employment program at modest wages…good; household and financial institution debt restructuring and hits to creditors…simply unavoidable.
But we can talk about all that after Labor Day. The markets, probably not incorrectly, have concluded that all of the above are not yet on the agenda of anyone with the power to implement and shepherd economic restructuring.
And that just means that the second and final items on the foregoing list off needed solutions will merely happen in a less controlled way. Needless to say – the markets don’t like that anymore than the hit to equity capital that will inevitably result from pursuing the necessary systemic repairs.
We can, of course, merely try to wait for the expansion of demand in the emerging nations. The events of recent weeks are what that waiting looks like. And it would be a very, very long wait.
Beezer again. Alpert recommends direct job creation building infrastructure, but he doesn’t explain what ‘modest wages’ are. Wages that are too modest make paying off private debt harder. We don’t know at what point ‘modest’ becomes unhelpful. He also flatly states that lenders are going to have to take a ‘haircut.’ But the lenders control government policy and it’s obvious that policy means lenders are not going to take a haircut, so Alpert is recommending something that’s not likely to happen–although we agree with Alpert this needs to happen. And he ends by saying that if we do nothing then we are stuck waiting for emerging economies to take up the demand slack, or soak up the over supply if you will. An interesting narrative at any rate.
This post is taken from Barry Ritholtz’s Big Picture blogsite. Ritholtz is a no nonsense investment advisor who pulls no punches when he thinks someone is playing fast and loose with the facts, or is essentially getting away with financial murder. The post is about Greece and its kleptocrats, but read it through and substitute the United States for Greece and the Federal Reserve for the European Central Bank (ECB).
Here is a quote from a first-person report (via Zero Hedge) titled The Ugly Truth:
What angers me and most hard working Greeks is that the common workers are bearing the brunt of the austerity measures while the rich get off scot free. In Greece, if you want to strike it rich, become a specialist dealing with critical life and death decisions, tax collector or a high profile minister in the government. The scandalous stories that are coming out now of doctors, tax collectors, and ministers with millions of euros in their bank accounts and villas in Santorini and Mykonos are no surprise to regular hard-working Greeks.
This is a classic description of a kleptocracy: a financial and political Elite which skims and concentrates the wealth of the nation via corruption and embezzlement while being protected by the winking complicity of their fellow plunderers who hold civil and financial authority.
Here’s the real dynamic in Greece: The Kleptocracy–broadly, the political and financial Elites of the nation–saw a stupendous opportunity to embezzle hundreds of billions of euros from greed-blinded European banks at super-low rates of interest.
Being kleptocrats, they sniffed out the basics of the bezzle right away, and have been playing it ever since: we’re not paying any of these loans back, so go get the money from the European Central Bank (ECB) and the German taxpayers, or declare bankruptcy. Your choice.
The Greek kleptocrats knew all along that the German, Dutch, French and Finnish taxpayers were easy marks, just as they knew the European Union Power Elites would fall all over themselves to “save the euro” which was the centerpiece of their “one Europe” strategy of domination.
Only the Greek kleptocrats just beat them at their own game. The entire game plan of the “one Europe” Elites depends on nation-states actually complying with non-enforceable codes of conduct and on European banks making prudent loans.
Neither condition held: Greece’s Elites reckoned they could game the system and string along the Eurocrats, if not forever, then certainly long enough to engorge their Swiss accounts with euros skimmed from the banks, and they’ve played that hand to perfection.
Their performance is truly a thing of beauty, a masterful display of the Big Con. Yes, we will agree to austerity, but of course that is only for “the little people.” Then, we’ll renege on that, and demand another bailout. The Eurocrats will of course comply, lest their own plans for domination crumble along with the euro and the Eurozone edifice.
Meanwhile, the European banks were playing a similiar bezzle. They knew Greece had a history of defaulting on a regular basis, and any employee of the bank who lived in Greece could have briefed them on the kleptocracy’s hold on that nation. But the banks knew they could play the Eurocrats and the ECB, too, as the Eurozone had what amounted to a “German Put”: if any bad bank loans to Greece ever threatened the Eurozone, the German-led European Central Bank would make them whole.
Once again, the Eurocrats responded as expected, quickly massing hundreds of billions of euros to backstop the impaired loans to Greece and promising that bondholders would not suffer any losses.
The banks and the Greek kleptocracy are like the wife and the mistress of a prominent conservative socialite who absolutely needs to preserve a facade of conventional propriety. The kleptocrats, like the mistress, know they can blow down the entire charade, and so when they demand some baubles (bailouts) from their “Sugar Daddy” European Central Bank, the bank whimpers and complains but forks over the cash, lest the whole shaky facade collapses in a heap, along with the ECB’s dominance.
The wife, meanwhile, also gets her demand met. Now that the European banks have leveraged themselves up to pre-implosion Lehman Brothers levels of 30-to-1, they need a bailout, too, and so they tell the ECB, don’t even think about saying “no” because massive bank insolvency would also shatter the Euroland’s thin veneer of permanence.
The euro system is already broken, but the ECB and its Eurocrats are desperate to maintain the facade. The game is untenable, however, because the Greek kleptocrats and the European banks have all the leverage and the ECB is the bleating mark trying to satisfy the dualing demands of its wife and mistress.
“But you promised.” Ah yes, Dearie, but I changed my mind.
It is almost laughable to see the Eurocrats desperately trying to get another “austerity deal” approved, even as everyone involved knows it’s as phony as passing off your mistress as your “private secretary.” The austerity plan will not actually be put in place, none of the line-in-the-sand fiscal targets will be met, and the Greek kleptocrats will be smirking as the frantic ECB marks scrounge up another bailout and another face-saving “austerity program.”
The wild card here is the oppressed Greek citizenry, who might just spoil the fun by overthrowing their corrupt Overlords. They could also spoil the game by simply refusing to play any more, as a General Strike of any length would quash the fantasy of rising taxes and all the rest of the absurd assumptions at the heart of the “austerity program.”
If the Eurocrats and the ECB really want to save the euro, then they should help the Greek citizenry evict their kleptocratic Elites. But that would take genuine courage and insight, and alas, the Eurocrats, like all bureaucrats seeking to protect their fiefdom at any cost, don’t really care about the oppressed Greeks. They just want to play for time, and hope that a miracle will occur. Even as their fat, sweaty fingers hold a jumble of worthless cards–not even a pair of deuces–they persist in a laughably transparent charade of holding four aces.
The game is over for the ECB, the Greek kleptocracy and the european banks. All that needs to happen now is for the players to reveal their miserable cards and fold. The losses will be stupendous, but they will only get more horrendous the longer the game is allowed to go on.
Beezer here. The con in the United States is exactly the same. Now, of course, in both the US and Greece the average citizen who had nothing to do with the problem is being forced to shoulder all the austerity responsibility.