Malodorous taper emanations and bankruptcies are a toxic mix for munis
By standards of previous generations, the middle class has been stripmined of income, assets and purchasing power. So what does it take to be middle class nowadays? A recent paper used Census data to discuss what sort of income it takes to qualify as middle class but income is not the only the metric - indeed, it can be argued that 12 other factors are more telling measures of middle class membership than income.
Ignoring the facts won't help us address the insolvency of pay-as-you-go social programs.
America is not the ‘rich’ country that people think it is. And there ain’t a hell of lot that can be done about that.
This is a topic that has been on our radar screen for a while, but one that very few Americans seem to be paying attention to despite the egregious revelations concerning NSA spying that have emerged recently.The latest push for tracking devices in cars is being sold as necessary in order to raise funds to pay for the nation’s decayed highway infrastructure. For example: As America’s road planners struggle to find the cash to mend a crumbling highway system, many are beginning to see a solution in a little black box that fits neatly by the dashboard of your car. This is simply idiotic. There is already a tax per gallon on gasoline, so people are already being taxed based on how much they drive. Only a control-freak, moronic government bureaucrat would come to the conclusion that the solution to this problem is to install Orwellian tracking devices in people’s cars.
The chart shows dollars spent on entitlements for every dollar spent on non-defense discretionary spending (NDDS). This latter category includes education, infrastructure, energy R&D, law enforcement and a wide range of other things that affect the productivity and the general well-being of the US economy (see table), not just today but into the future. The entitlements-to-NDDS ratio is already at an all-time high, and is headed for the stratosphere during the next few years according to CBO projections.
Over-burdensome regulation and massive liability exposure is stifling business and creativity, slowing the flow of capital globally and stagnating economic growth.
- Al-Qaeda Links Cloud Syria as U.S. Seeks Clarity on Rebels (BBG)
- Administration Tells Lawmakers of Evidence Linking Assad to Attack (WSJ)
- Director of National Intelligence James R. Clapper to publish numbers of secret spying orders (CBS)
- U.S., Switzerland strike bank deal over tax evasion (Reuters)
- Another Budget Deal Bites the Dust (WSJ)
- Contemplating Summers Drives Investors to Seek Beltway Expertise (BBG)
- Austerity Test Looms in Australia as Abbott Pledges Cuts (BBG)
- Gay Spouses in All States Now Married Under U.S. Tax Law (BBG)
- Shadow banks face limits to securities trading (FT)
- EU's Rehn sees European recovery strengthening in 2014 (Reuters) ... or 2015... or 2022... or never?
In the final section of this five-part series (Part 1, Part 2, Part 3, and Part 4) on the dismal reality behind the non-recovery, David Stockman explains what lies ahead. He details in his new book 'The Great Deformation', that the mainstream notion that there is a choice between fiscal austerity and fiscal stimulus is wishful thinking. It does not recognize that owing to the triumph of crony capitalism and printing-press money America has become a failed state fiscally. What lies ahead is a continuous, mad-cap cycling back and forth - virtually on an odd-even day basis - between deficit cutting and fiscal stimulus to the GDP. As Stockman notes, the proximate cause of this recession waiting to happen is the federal government’s unfolding encounter with Peak Debt. The latter is not a magical statistical point such as a federal debt ratio of 100 percent of GDP, but a condition of permanent crisis - "no viable economy can survive on chronic fiscal deficits nor can it fail to save at a sufficient rate to fund a healthy level of investment in productive capital assets. The blithe assumption to the contrary which animates current policy rests on self-serving clichés such as “deficits don’t matter” and the Chinese savings glut." So the American economy faces a long twilight of no growth, rising taxes, and brutally intensifying fiscal conflict. These are the wages of five decades of Keynesian sin - the price of abandoning financial discipline.
With the meaningless focus on such distracting noise as daily POMOs, will/won't the Fed taper, how many shorts will the Fed's Markets desk squeeze today, and how massive will the second Fed housing bubble be, it is easy to lose sight of the big picture, namely just where is the debt juggernaut that is the US, heading? Conveniently, the US debt clock has a "time machine" function that extrapolates, at current rates of change, what the key metrics behind the US economic facade will look like.
There is no way the pensions and benefits promised in an era of financialized abundance can be paid once the wheels of financialization fall off. During the past 30 years of financialized abundance, the benefits and pensions promised to public employees were increased substantially. Public unions are a powerful political force in many states, and in eras of rising tax revenues, it's an easy political decision to increase public employee benefits and pension payouts. The rising stock and bond markets generated huge profits for the public-employee pension funds, enabling them to grow without taxpayer contributions. Alas, the 8+% annual growth rate of the boom era is now structurally unrealistic. The New Normal is bond yields of 2% or 3% at best, and equities markets that are increasingly at risk of significant sell-offs. The endgame of promises made in an era of illusory, financialized abundance will be hurried along by a collapse in the equities and bond markets.
There's never enough information to be absolutely safe. I know you're going to help us protect America, because I already know you so well. Thank you for your cooperation.
In the 15th century, the highest standard of living in the world belonged to China. Places like Nanjing had reached the pinnacle of civilization with incredibly modern infrastructure, robust economies, substantial international trade, great healthcare, and a rising middle class. If you had told a Chinese merchant at the time that, over the course of the next several hundred years, global primacy would shift to Europe (and a relatively unknown American continent), you would have been laughed at. It was simply unthinkable given how advanced China was over the west. And yet, it happened. Ironically, the tables are turning yet again; in total objectivity, the patient is beyond cure at this point… and the math is quite simple. Nations typically enter this vicious cycle once they start having to borrow money just to pay interest on what they already owe. The US is already way past this point.
Confused why AAPL is opting for the dividend recap route (as we predicted it would in January )? Simple: as the first chart below reminds us, as of December 31, nearly 70% of the company's total cash, which has grown to a record $145 billion in the current quarter, was held offshore. This means that if AAPL wanted to repatriate this $100 billion or so in cash, it would have to pay Federal tax on it, amounting to dozens of billions in remittances to Uncle Sam as this is cash which AAPL does not have full access to for US based operations. Hence: it has opted to raise cash by issuing debt instead of repatriating its cash.