No Bonds For You
I think this constitutes bona fide evidence that there’s a credit crisis in this country: “Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.”
This kind of thing is making me increasingly baffled by the manner in which this plan was initially unveiled. If ten days ago statements from utterly or partially discredited Bush administration officials had been bolstered by concrete examples of popular mayors and governors talking about this stuff to their constituents, you might have been able to stem the initial tide of popular anger that derailed the legislative process. Since when has the Bush White House been so uncreative about selling their legislative initiatives to the public?
63 Responses to “No Bonds For You”
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October 1st, 2008 at 9:16 am
What’s happening with local and state government lending is equally compatible with the idea that banks are holding out–refusing to lend in order to blackmail the Congress into a favorable bailout package.
October 1st, 2008 at 9:24 am
If ten days ago statements from utterly or partially discredited Bush administration officials had been bolstered by concrete examples of popular mayors and governors talking about this stuff to their constituents
It’s hard to verbalize the exact concepts, but the American public is assumed to be A) incredibly adverse numbers or numeric details of any sort and B) incredibly adverse to anything that might be construed as bad news.Thus, any policies must always be presented in the most abstract and neutral terms possible.
Allowing the word “bailout” to be used was probably what killed the deal. If they’d called it the Financial Recapitalization Act it probably wouldn’t have even made the news.
October 1st, 2008 at 9:27 am
Since when has the Bush White House been so uncreative about selling their legislative initiatives to the public?
It never occurred to them to try telling the truth.
October 1st, 2008 at 9:32 am
The conspiracy nuts are really out on this one. People seem to forget that the credit crisis has been going on for a year, not just last week, even if they weren’t paying attention.
I think, Matt, that you’re getting this backwards. The bailout is a solution to a crisis. Maybe it will work, maybe not. But the goal isn’t the bailout, the goal is solving the crisis. To that end, the idea of causing the hysteria plaguing the financial industry (right now it’s basically mass terror) to start plaguing the nation as a whole, is simply foolish, even if it does generate political support for a bailout.
October 1st, 2008 at 9:33 am
Since when has the Bush White House been so uncreative about selling their legislative initiatives to the public?
Since forever. Remember Social Security? Immigration? Whenever the Bush Administration has faced serious public opposition to one of its proposals, it has proven completely inept at handling that opposition.
October 1st, 2008 at 9:37 am
So, now the problem with this package is that it wasn’t presented correctly, it wasn’t sold correctly, and it presented the wrong seller?
Therefore if the White House had rolled out a much more PR-friendly campaign for the same ‘plan’ (plan = give $700 billion to Hank Paulson and SHUT UP), then all would be okay?
October 1st, 2008 at 9:43 am
The CIA needs to load a plane full of dead Arabs and plow it into a couple of iconic Wall Street buildings. The public would fork over a trillion$$$, their oldest son, the family dog and all their cell phone and banking records once the Marauding Muslim Horde was fingered in the dirty deed.
October 1st, 2008 at 9:48 am
It’s important to note that Hank Paulson thought, when he first unveiled the plan, that he was preventing the market from hitting a free fall, with multiple banks going under all at once. Who knows whether this was actually going to happen, but it was striking how more than 10 banks were under speculative pressure before this bailout was announced. He thought he didn’t have the time to consult local mayors or bring along prominent business groups.
October 1st, 2008 at 9:50 am
The linked article has a major error, just FYI. 10.5% is not the effect interest rate for city taxpayers; there are two separate markets, for taxable and tax-exempt bonds, but inasmuch as you generate taxable-equivalent yields (which they do on the buy side), it’s the federal government that takes up the slack, not city taxpayers.
October 1st, 2008 at 9:50 am
Have you guys gotten a load of the abomination that is the senate plan? Passage of it would end my last shreds of attachment to the Democratic party; I would never vote for a Dem again. I would even vote third party this year for president (and I live in CO), even though I think McCain is a devil who most likely will start WW III.
October 1st, 2008 at 9:55 am
Rich: The idea that banks were making it difficult to borrow money two or so weeks ago because they wanted a bail out is not supported by the circumstances. There was no talk about bail out at that time.
Matt: As Led said: The Bush administrations could not sell the package because it has no mechanism for putting out the truth. It knows how to lie but gets confused in doing something new like telling the truth.
October 1st, 2008 at 9:55 am
Shorter LarryM: I am an irrational fool and proud of it.
October 1st, 2008 at 9:57 am
LarryM – can you provide a link to the Senate plan.
October 1st, 2008 at 9:58 am
The problem is that the Bush administration has been hyping intelligence and inventing the truth for so long to get its way (on Iraq, Social Security, whatever) that it didn’t know what to do when it actually had the facts on its side.
October 1st, 2008 at 10:00 am
Shorter Matt Conn Lee: I have no problem at all with the Democratic party constantly taking it up the ass from the worst elements of the GOP.
October 1st, 2008 at 10:01 am
Oops, sorry, that was short noalboyd. My apologies.
October 1st, 2008 at 10:01 am
Since when has the Bush White House been so uncreative about selling their legislative initiatives to the public?
Just as a practical matter, we’re talking about a Republican administration just a few months from leaving office. Who really wants to be there at the end? Start with a natural bias that more than half of the people that want to work in government are Democrats, and when you get to the end of an 8 year Republican administration, you just don’t have very smart people doing the leg work.
David Brooks was right. There aren’t enough people to populate a McCain administration.
October 1st, 2008 at 10:03 am
If it is really true that “Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks” then WHY ???
are 2 year municipal bonds trading at rates of 2.74, 2.98 and 3.05 percent for AAA, AA , and A rated cities respectively?
See http://finance.yahoo.com/bonds/composite_bond_rates
October 1st, 2008 at 10:07 am
It’s like Bill Fleckenstein said. Whatever we do, it will be wrong.
October 1st, 2008 at 10:11 am
“To live outside the law you must be honest.”
There’s already reports of scoundrels like Giuliani (and I’m sure he’s not alone) trying to position their guys to make lots of money off this crisis.
The government is asking for incredible leeway which demands utter scrupulosity from the government. And they’re not going to get it. This is being treated by the sharpies as simply another in a series of venues in which to vacuum out the pockets of the suckers.
October 1st, 2008 at 10:14 am
This has always been the administration of “the Decider.”
The whole concept of taking counsel from the bottom up is alien to Dubya and the people around him; it would mean having to take other people seriously.
October 1st, 2008 at 10:19 am
Imagine this:
Imagine that Bush hires the CEO of Exxon to be his energy manager.
And imagine that this energy manager announces that there’s a crisis.
Somehow some of the oil companies have made bad decisions, and somehow the effects of thier bad decisions have spread to the whole US oil industry and beyond.
The basic problem is that somehow some of the oil reserves are actually water, and somehow a lot of the oil they trade back and forth is actually water, and when you buy oil you never know whether you’ll get water instead. Some companies that everybody thinks own oil have so much water they’d be bankrupt if people knew.
And so the solution is for the government to buy up the water until oil companies trust each other again. It might not cost all that much — some of what we buy might turn out to be oil after all.
Unless the oil companies get a whole lot of money from the government, no oil can be imported into the USA, and no domestic oil can be sold. Or possibly some other bad result will happen, it isn’t clear what will happen but it will be bad for all americans.
The money — maybe around half a trillion to a trillion dollars, we don’t how much — will be managed by the energy manager. He promises that he will put the money where it’s needed and will not favor Exxon or any of his friends, independent of his hundreds of millions of dollars in Exxon stock.
He won’t just give away the money, he will get nonbinding assurances from the companies that they will give something back someday if they can.
Would you support that bailout?
I say no. I say, trillions for defense but not one red cent for tribute.
Can you actually imagine that situation happening? It seems so utterly absurd. But how different is it from what we actually face?
October 1st, 2008 at 10:23 am
Matt, you should read your comments. I’m a state finance manager and I told you this in your comments ten days ago Matt. But I share your frustration that reports of this have not been making the mainstream media but then the muni markets are used to being ignored.
Don, the reason local governments can’t issue bonds is because there are now institutional buyers out there. The bonds funds are keeping everything in cash or short-term bonds. The rates you see are based on the secondary market not new issuance which is very small and mostly retail investors. In order to issue a bond you have to have institutional partcipation as well as purchases from insurance companies. Right now, neither are in the mood to trade their cash for bonds no matter the credit quality of the issuer.
Also, short-term rates in the muni-market are between 4-6% (6-9% taxable equivalent) so muni investors are happy to stay in those bonds rather than invest in long bonds.
October 1st, 2008 at 10:31 am
The Article you linked to is by the New York Times. If you read further down, they modify their initial claim and acknowledge that the problem is merely that some municipal areas think the interest rates are too high or that they don’t want to raise taxes on their residents.
Boo hoo. Look at the market — 3 percent is not high.
In my opinion, the New York Times is disseminating a great deal of DECEIT about this situation. If you try to post comments on their sites with information contrary to what they are publishing , they won’t put your comment up.
Given that the fortunes of the whoring Times are directly tied to the fate of Wall Street, One can see why they scam their readers. By refusing to note the personal cost to the middle class taxpayer. By refusing a full discussion of alternatives. Most of all, by publishing a lot of vague, alarmist, misleading gibberish.
October 1st, 2008 at 10:35 am
Pace, my point above, which was:
The Krug-Man has this to say:
I plead fully guilty to the latter, but that’s in part largely based on the fact that Paulson presented no ‘plan’ whatsoever, just a demand for $X billion dollars with absolute discretion — and then I, like a lot of people, added the accurate background in as to who these people are, what they’ve done, and what they ALWAYS do.
I mean, it’s not like we were wrong in identifying these as the people who sold the Iraq War by a bunch of lies about secret information, or that they weren’t the same people who utterly and callously dismissed their regulatory responsibilities for the past few years, with typical Democratic enabling.
Nevertheless:
In the end the Krug-Man returns to his central endorsement.
He didn’t address it, though, but I’d add that even if the somewhat modified Paulson ‘plan’ goes through now, it has been robbed of the planned screw-over the Republicans thought they were going to get away with to run in a fake populist right-wing against Bush and the Democrats.
Paulson bailout advocates from the Democratic side should be thankful that the Democrats stuck to their number of votes and let the GOP kill it, as I don’t think that trick will work twice, even if the same thing (with a few more idiotic Republican sops) passes this week.
And Krugman’s happy assuming that this will cost taxpayers nothing, because obviously the Bush administration will happily follow the incredibly flimsy ’safeguards’ placed in the bill and they would never, ever, think of doing with that money what Krugman wouldn’t do in their position.
Right? After all, if the Bush administration says ‘this is what we’re going to do with this money,’ and they have to issue reports to Congress with various oversight committees, there’s no way they could do anything else.
October 1st, 2008 at 10:49 am
Don, first of all, if you want to compare municipal rates to other bond rates you have to adjust for the tax-exemption, i.e. divide the rate by 1-marginal tax rate, so the taxable equivalent rate of a 3% tax-exempt yield is .03/.67 or 4.48%.
That said, those rates are bullshit because there has been no new issuance in the market so those are based on very light trading of already-issued bonds. The rate states had to pay for a 1-week bond was 7.96% last week, the taxable equivalent of which is almost 12%. And thats for one week!
But the real problem is that there are not enough buyers for municipal bonds out there for a bond issue to happen.
October 1st, 2008 at 10:51 am
Don, you keep bringing up the cost of this package to the “middle-class taxpayer.” And in other threads you’ve kept saying that this package is going to cost the average Americans $31,000. Where are you getting this number, and why do you think this package is going to cost middle-class taxpayers very much at all?
October 1st, 2008 at 10:51 am
I think the administration has genuine contempt for the ability of the average American to understand the need for or ramifications of their plan. If the public was gullible enough to think that Saddam Hussein had WMDs and was behind 9/11 then they should be content with a pat on the head and an assertion that some action is needed. Unfortunately, the rule is fool me once, shame on you, fool me twice, you shouldn’t get fooled again.
October 1st, 2008 at 11:08 am
Re K Williams’s comment “Don, you keep bringing up the cost of this package to the “middle-class taxpayer.” And in other threads you’ve kept saying that this package is going to cost the average Americans $31,000. Where are you getting this number, and why do you think this package is going to cost middle-class taxpayers very much at all?”
————
1) Because I think the claim that the government will eventually extract some value out of the toxic waste is bullshit.
We’ve been down this road before –the 1989 Savings and Loan crisis. Cost the taxpayer at least $160 billion — $296 Billion in today’s dollars. And the real estate market was a lot smaller back then and we were spared some of Wall Street’s more recent “innovations”.
2) The whole reason for the bailout is that the gamblers can NOT pay for their mistakes, the investors know it, and so the only way the firms can avoid bankruptcy is for the taxpayers to take the loss.
3) Paulson and Bush have already spent $700 Billion –on Bear,Fannie, Freddie, AIG, $200 Billion in Emergency Loans, etc.
The Bailout Bill is to give them ANOTHER $700 Billion. Paulson split the bailout up into tranches so he could mislead the voters by only talking about a $700 Billion bailout instead of the real cost: $1.5 Trillion.
If you look , the federal debt limit is being increased by $1.5 Trillion –to $11.3 Trillion.
4) Add in the Interest Cost to Finance this $1.5 Trillion over the next 5 years — another $500 Billion. Total is $2 Trillion.
That assumes Paulson doesn’t issue a THIRD Tranche before Bush leave office. I.e, demand that taxpayers give him yet a THIRD $700 Billion. After all, Why give the suckers a break?
5) There are roughly 116 million US households. But about 50 million of those households have an income less than $40,000 a year and can’t pay for this bailout. That leaves 65 Million — the vast majority of which are middle class, split roughly evenly between Democrats and Republicans.
6) $2 Trillion divided by 65 Million gives about $31,000 per household.
October 1st, 2008 at 11:16 am
Re djslippyb’s comment “Don, first of all, if you want to compare municipal rates to other bond rates you have to adjust for the tax-exemption, ”
————-
Why? — how does your tax-exempt status cost you anything?
October 1st, 2008 at 11:23 am
Re djslippyb’s comment “the real problem is that there are not enough buyers for municipal bonds out there for a bond issue to happen.”
————-
WHY is that –given that Treasury rates and municipal secondary market rates are so low?
Your credit is secured by your power to collect local taxes and many local governments’ finances are a hell of a lot better than the US government’s.
If your customary buyers holding back cash because of their own debts, why can’t you find other buyers?
October 1st, 2008 at 11:26 am
To djslippyb: Why can’t the US government buy your municipal bonds?? — they are a hell of a lot better investment than the toxic garbage that Paulson’s planning to buy.
Also, have you tried selling on Ebay? heh heh
October 1st, 2008 at 11:30 am
Okay, so you’re just inventing numbers that have nothing to do with this package that we’re actually talking about. Whatever money has already been spent on Bear Stearns, AIG, etc. is already spent — and it doesn’t total anywhere near $700 billion in any case. (The AIG deal, for instance, was a loan at 12% interest, and no one thinks we’re not going to get that money back.)
So let’s set aside the imaginary $700 billion + interest that you think has already been spent and talk about the actual $700 billion + interest (which will be around $150 billion over five years, not $250 billion). Let’s call it $900 billion. Let’s assume that all of this money is simply lost, burned up — that all of the securities the government buys turn out to be worthless. I think this is an absurd assumption, but I’ll accept it for the sake of argument. Even if you assume this, I still don’t see how this bailout is going to be incredibly onerous for middle-class taxpayers.
What you’ve done, with your $31,000 number, is exactly what Republicans do when they divide the total value of tax cuts by the number of taxpayers, even though the vast majority of tax cuts in dollar terms will be going to the wealthy, or what they do when they talk about increases in national income, where the massive gains of the rich make up for the declines in income for everyone else. Essentially, you’re taking the cost of the bailout and asserting that all taxpayers are going to be equally responsible for paying for it.
This is, as you know, complete nonsense. 87% of all federal income taxes are paid for by the top 25% of earners — 70% are paid by just the top 10%. And yes, payroll taxes, etc., change the composition of that some, but nowhere near enough to justify saying that every American taxpayer is going to be on the hook for tens of thousands of dollars for this bailout. The reality is that this bailout is going to be paid for mostly by wealthy Americans. Now, that may be as it should be, since you believe only they are going to benefit from it. But your constant invocation of the $31K the average American owes (or $15K, if you leave out the imaginary $700 billion you think we’ve already spent) is a complete lie. You should stop repeating it.
October 1st, 2008 at 11:38 am
Don, the tax-exemption does not cost us anything. I only meant that if you wanted to see what investors were demanding for holding municipal bonds relative to treasuries or corporate bonds, you need to do the conversion. But you are right, in real dollar costs.
But again those rates posted on yahoo are useless. The new issuance market is closed because large institutional buyers (i.e. vanguard, fidelity, etc…) are too freaked out to let go of their cash and purchase long bonds.
As to your point about the federal government buying the bonds, it is only a matter of time before local governments start going there for relief.
October 1st, 2008 at 11:40 am
To djslippyb:
OH, NOW I see.
Your monoline insurers have stepped in DEEP shit — THEY are on the hook for a LOT of this toxic subprime shit.
JESUS CHRIST.
October 1st, 2008 at 12:03 pm
Re K Williams comment “This is, as you know, complete nonsense. 87% of all federal income taxes are paid for by the top 25% of earners — 70% are paid by just the top 10%. And yes, payroll taxes, etc., change the composition of that some, but nowhere near enough to justify saying that every American taxpayer is going to be on the hook for tens of thousands of dollars for this bailout. The reality is that this bailout is going to be paid for mostly by wealthy Americans ”
—————
And I think the past 8 years shows that is bullshit. The wealthy got most of Bush’s $2 Trillion Tax Cut.
In contrast, blue collar workers had roughly $3 Trillion of their payroll taxes stolen to pay for the Rich’s Tax Cut and for Iraq. They are just too ignorant to realize it yet.
They think their money is sitting in a bank account somewhere waiting for their retirement. They think that because the Bush Administration sends them Social Security statements telling them so.
Who gets stuck with the $11.3 Trillion debt is up in the air. Any tax increase on the Rich will be filibustered by Mitch McConnell and the Republicans — and supported by enough corrupt Democratic Senators to make it stand. Democrats like Zell Miller and the other 11 who voted for the 2001 Tax Cut. That’s the design of US campaign finance.
In contrast, there are $Trillions in Before Tax deposits in middle class IRAs and 401Ks that are just sitting there. That money is locked up, can’t be withdrawn without major penalty and , most importantly, is fully documented in government databases.
Unlike the Superrich’s Wealth, the 401Ks and IRAs are NOT protected from government “taking” by the Fifth Amendment. They can be taxed as high as the government wants — at 70 percent if need be. THEY are the primary thing backing Ronald Reagan, George H Bush and George W Bush’s IOUS.
Oh, but the voters wouldn’t stand for it? The voters are currently getting a $2 Trillion broken beer bottle shoved up their butts –solely the benefit of the richest, most contemptible life forms on this planet. What are the voters doing about it?
What do you think the Department of Homeland Security is for?
October 1st, 2008 at 12:19 pm
To djslippyb:
Why can’t the US Government replace the Monoline insurers?
That would be a far better investment for the taxpayers — many local governments are reasonably sound. Some locations ,e.g, in California , are in difficulty because of past stupidity and because the property on which they collect taxes is declining in value, but those places probably should not be borrowing money anyway. And if they need it, the Government can assess a higher fee for insuring them.
Also, is insurance of your bonds even needed? Hasn’t events in past year convinced bond buyers that both the credit rating outfits and the monoline insurers are corrupt dumbshits?
October 1st, 2008 at 12:26 pm
To djslippyb:
I still don’t understand why you seem to favor this bailout. There is a huge flight to safety which could benefit munis. Sounds like the problem is you don’t want to revise your SOPs. Get creative. If the market is short-term, why go long? Figure out how to sell a muni equivalent to a T-Bill. If your old customers are tapped out, look for new ones.
October 1st, 2008 at 12:38 pm
In order to issue a bond you have to have institutional partcipation as well as purchases from insurance companies. Right now, neither are in the mood to trade their cash for bonds no matter the credit quality of the issuer.
That makes sense.
Bailout or not, there’s every reason to expect a whole lot of inflation. Why would they want to own long-term bonds at low fixed rates?
So it doesn’t say anything about how much trouble the lenders are in. It just says that they expect trouble.
In that context, municipalities etc need to try to be flexible. If possible, make their OODA loop quicker. Look for ways to economise, and look for ways to issue bonds when there’s an opening for it.
I don’t know what kind of opening might show up. You could get a bigger tax break. I don’t know. But it will be hard to issue bonds in the short run, and they might come with high interest rates, and *something* will be done in the next 4 months to 1 year to improve things somewhat.
So if you can arrange the flexibility, put off the bonds until the right time and then sell them. Have suppliers etc lined up on a contingent basis ready to do the work if the money comes. It sounds hard, but worthwhile if it can work.
October 1st, 2008 at 12:59 pm
Don,
If you think the Federal Government should replace the monolines, I suggest you write your Congressperson.
The failure of the monolines is what blew up the market back in February. At this point most issuers are not purchasing insurance for their bonds. The monolines served the purpose of making it easy to market and sell municipal bonds because investors didn’t need to worry about underlying credit, you could just look at the insurer and know it was AAA. Well, as you see that hasn’t quite worked out because the monolines went from insuring super safe municipal bonds to insuring mortgage-backed collateralized debt obligations.
That is not the problem now. The problem now is that since the Prime Reserve Fund broke the buck and that sent a panic through the investment community now everyone just wants to be in cash or the shortest term funds possible. As I said the short term bonds are paying in the 6% range so they are happy to stay there for now.
All that said, you can be sure that issuers are looking for new investors and some are issuing bonds directly to retail investors (i.e.,high net worth individuals with brokerage accounts) but that market had only contributed to 30% of the buyers historically, so it will take some time.
October 1st, 2008 at 1:22 pm
Re J Thomas’s comment “Bailout or not, there’s every reason to expect a whole lot of inflation. Why would they want to own long-term bonds at low fixed rates? ”
————-
Because the US government can’t print paper money fast enough?
The inflation threat also hits 30 year Treasuries –yet those are selling at a yield of only 4.18 percent. People want to park their money into an instrument that is safe and highly liquid. They don’t plan to hold a 30 year Treasury to maturity — they are reasonably sure of being able to sell it later. Possibly at a discount if yield have risen to 6 percent or so.
That’s is why I would think safe municipals from solid local governments would be more in demand — the tax break is sweet for high income people.
October 1st, 2008 at 1:29 pm
Emma, if I were managing your tax dollars how creative would you want me to get? Snarkiness aside, it is not reasonable to think that a municipal budget could pay back all the principal they are trying to borrow for a project short-term (i.e., one to three years). If that were the case, then why not just pay-as-you go to build the school or highway? And so far the flight to safety has not benefitted munis. Treasury rates have fallen and muni rates have gone the opposite direction.
I can only speak for myself but we are trying to figure out what to do but the bankers have basically told us for the last two weeks to wait and see. My support for the rescue package was that I thought it would restore some confidence to the market. Now I’m not so sure.
I actually don’t think inflation is the concern because it sure looks like we’re heading into an economic slowdown. It’s just the bond funds are scared that investors will take a run at them and they don’t want to be caught without sufficient liquidity. Anyway, issuers are lining up to go to market when it opens which it eventually will. Had the bailout passed last week, this would have come sooner rather than later in my belief. Right now over $10 billion of issuance is backed up.
Also, this does not just affect governments but also hospitals, non-profits, and colleges.
October 1st, 2008 at 1:31 pm
Don writes: “In contrast, there are $Trillions in Before Tax deposits in middle class IRAs and 401Ks that are just sitting there. That money is locked up, can’t be withdrawn without major penalty and , most importantly, is fully documented in government databases. ”
Don, just yesterday you insisted that the stock market’s tumble after the bailout failed didn’t matter to most Americans, because they didn’t have all that much money in the stock market. Now you’re saying they have trillions in retirement money. Which is it?
You’re like McCain — in your manic attacks, you’re just throwing out crazy ideas left and right. I’ve been trying to respond to you as if you were a rational person, but it’s increasingly clear that you’re a Ron Paul of the left. I leave you to bake in your own insanity and populist outrage.
October 1st, 2008 at 1:58 pm
djslippyb: Emma, if I were managing your tax dollars how creative would you want me to get?
Believe it or not I’ve asked a variation of that question of someone I once worked for.:-)
In this atmosphere, I really don’t see how you can avoid shorter-terms if you want money in the foreseeable future. You really should try to find some way to capitalize on the cash flight to safety.
Have you considered offering lower denominations direct to investors a la TreasuryDirect? Residents of your state might appreciate another place to save than their through their bank or brokers, especially now. Ever thought about setting up something like the Alaska Permanent Fund? You may not have oil but there are wealth funds based on other forms of revenue.
Opportunity is knocking.
“Life is a series of great opportunities brillantly disguised as impossible situations.”
October 1st, 2008 at 1:59 pm
Re K Williams comment “You’re like McCain — in your manic attacks, you’re just throwing out crazy ideas left and right”
————
My “crazy idea” is that the POSSIBLE decline in most middle class portfolios from what the economy does is LESS than the CERTAIN loss they will suffer in the future as the government takes their money to pay for this Bailout for the Rich.
If you have your IRA or 401K in Treasury bonds or FDIC-insured CDs you suffer nothing from the stock index declines. If you buy depressed stocks, you may even gain two or three years hence.
But if the government taxes your 401K or IRA at 70 percent, you’re screwed no matter what you’re invested in.
Yes, I’ve noted that the Superrich have most of the Wealth. But the point I noted above is that the Fifth Amendment protects much of that Wealth from Government taking/taxation. That’s why Republican puppets push for time windows of low tax rates — so the Superrich can convert their capital gains/ income stores into After Tax Wealth.
The US government can NOT go out, for example, and grab whatever you have in your checking account.
The PART of the National Wealth that is vulnerable to high government taxation to pay for this Bailout is the part belonging to the Middle Class. The IRA/401Ks that –oh so conveniently — are denominated in Before Tax dollars that can be taxed at 99 percent rates if the government wants.
I don’t see what’s so hard to understand about the government robbing the Middle-Class Pot to Dump Money into the SuperRich Pot — we’ve seen it happening the last 8 years. We’re seeing it now.
October 1st, 2008 at 2:08 pm
There IS an indirect way that by which the Government can take a small part of the Superrich’s wealth — the Jimmy Carter Policy:
Jack inflation up to 20 percent a year and tax the capital gains.
But we know what happened to Jimmy, don’t we?
That also screws the elderly by greatly reducing the real value of government obligations to them. But some consider that a feature, not a bug.
October 1st, 2008 at 2:14 pm
Well, right now municipalities are at much higher risk of defaulting on their bonds. Why should lenders lend until that changes?
I hope this stays until munis rethink their project priorities, personally.
When they get off the road maintenance treadmill, reverse school consolidation, and make other such adjustments to our predicament, then it will be time to buy their bonds.
October 1st, 2008 at 3:47 pm
I see I’m ‘way too late to add much to the discussion, except to suggest that the Administration wanted to hold off dealing with the credit situation until the General.
As events unfolded, that wasn’t going to work, so they fu’ed the bailout sales job. It doesn’t surprise me that a package they’ve had months to work on is so half-assed, considering how well the early days of the Iraq occupation were “planned”.
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