Now the fact that the US of A can no longer guarantee HOUSEHOLD DEBT, one can get rid of their gold. In other words, The US of A’s government can not rob from US of A’s taxpayers to payoff wealthy investors.
The Crash of 2011 at: http://news.yahoo.com/crash-2011-182858143.html
Did “WE” shot ourselves in the foot as implicated in article??? Here some interesting facts between 1929 - 1941 and now.
GDP : From BEA’s archive at http://www.bea.gov/newsreleases/archive/2000/gdp499f.htm
No inflation data. BLS’s CPI goes from 1994 at http://www.bls.gov/schedule/archives/cpi_nr.htm
Personal Income from BEA’s archive at: http://www.bea.gov/newsreleases/archive/2000/gdp499f.htm
1937 46.1 1958 43.0 from Table 2.2A Wages and Salary in billions
Government sub-sector 1937 7.5 1938 8.3
Note: If one had worked for the government one did not lose any pay. However, wage depression is still in place relative to 1929 (see below). This implies HOUSE DEBT can not be repaid at the original terms. Reminds one about the Union vs Wisconsin budget battle.
PCE from BEA’s archive:
Table 2.3.7 The change is too large to attribute the claim that DEBT HAWKS was the major cause, my opinion (-2.3 - 3.7 = - 6%) [1937-1938 PCE]
Unemployment rate for the 1929 can be found Compensation from before World War I through the Great Depression at:http://www.bls.gov/opub/cwc/cm20030124ar03p1.htm
However, need participation rate to compare apples to apples.
As I previously posted many times, the major problem is FRAUD. The user cost of capital is a controlling mechanism. Whether there are criminal charges is not relevant to the effects of fraud: MISREPRESENTATION can have a long lasting effect on an economy.
{I would not be surprise if something like the following happens: A Capone like figure stands trail for a Saint Valentines like massacre: Defense final arguments - “I state the fact that my client is a corporation and the US Supreme Court has ruled that corporation can not be forced into bankruptcy. Yes, I admit my client overreacted and acted stupidly but, he was protecting his shareholders. I remind the court the US Supreme Court has ruled that it is NOT a crime to be stupid. And this constant persecution by the Prosecutor has depressed my client‘s shareholder value. I demand an acquittal and an apology from this court. Defense rest your Honor.}
Fannie and Freddie expanded their portfolio while committing accounting fraud. Trillions of dollars worth of mortgages were not properly analysis for their risk. Yes, I know interest rate were low however, revaluing risk in the secondary mortgage market would have increased the after tax interest rate. You got to remember this fraud was going since 1997(??) or at least 2001. G.W. Bush’s claim that debt does not matter because Regan proved it affects both the lender and borrower.
WaMu’s property assessors’ misrepresentation effects the appraiser term of the user cost of capital. Debt such as home equity is based on the appraised value. Hence, other types of debt were infected. A few borrowers can affect the appraised value at a local level (property taxes are based on similar types of properties). However, national and international financial firms can expand this local effect to a nation crises and international banking collapses. Mortgage related securities and the over the counter credit market are the primary transmission of this fraud. Mortgage securities ratings effect the value in the secondary mortgage market hence, they effect the after tax interest rate.
The over the counter mechanism have two components: Capital requirements of the parties and the value of the contracts. Holders of mortgages and mortgage related securities use them for their capital requirements. Since trillions of dollars of mortgages were not properly analysis for risk, this collateral is decreasing in value. This decrease in value is NOT a LIQUIDITY problem but, a SOLVENCY ISSUE. The price paid for insuring this debt is also wrong. It is not a mystery why the credit market freezes when there is trouble in governments.
Recap: The back door to trillions of dollars worth of fraudulent mortgages was Fannie and Freddie. These fraudulent mortgages directly or indirectly affected other debt. These fraudulent mortgages can devastated whole neighborhoods and it blew through the over counter credit market like a “hot knife through butter”. Since Don Obama never fixed the national financial plumbing the national financial firms are still insolvent.
Let’s look at price controls like the one the Federal Reserve was doing, buying mortgage related securities. This policy was inflationary: The Federal Reserve coupled a decreasing commodity asset (mortgage related securities) to the value of the US Dollar. US Dollar’s value drops => Commodity price inflation.
Mechanism for Dollar Denominated Inflation: The US of A is globally integrated to the point in which China has become our factory floor and India has become our back office.
This is latest I could find:
U.S. Multinational Companies Operations in the United States and Abroad in 2008
By Kevin B. Barefoot and Raymond J. Mataloni Jr.
http://www.bea.gov/scb/pdf/2010/08%20August/0810_mncs.pdf
As previously posted (http://www.blogger.com/post-edit.g?blogID=11425703&postID=111208793021914098) there is no indication that the off shoring has stopped. Interesting note:
The worldwide current-dollar value added of U.S. MNCs—the combined value added of U.S. parent companies and their majority-owned foreign affiliates (hereafter, “foreign affiliates”)—decreased 1.8 percent; value added of U.S. parents decreased 6.5 percent, and value added of their foreign affiliates increased 9.1 percent (table 1). The worldwide employment of U.S. MNCs decreased 0.5 percent; employment of U.S. parents decreased 1.5 percent, and employment of foreign affiliates increased 1.9 percent.
In real terms, decreases in the value added of U.S. MNCs appear to have been widespread by area and by industry. In the United States, the real value added of U.S. parents probably declined faster than the 6.5 percent decrease in current dollars because average U.S. prices continued to rise in 2008. Abroad, the real value added of foreign affiliates in manufacturing decreased 4.8 percent.
Like I stated "Dollar Denominated Inflation".
We hate ourselves and we are losing the economic war. As previously posted (http://www.blogger.com/post-edit.g?blogID=11425703&postID=3116114290771204857) these national sovereign funds funds are a systemic risk. Slash and Burn is now evident.
Bulldoze: The New Way To Foreclose at: http://news.yahoo.com/bulldoze-way-foreclose-102000063.html
Banks have a new remedy to America's ailing housing market: Bulldozers.
There are nearly 1.7 million homes in the U.S. in some state of foreclosure. Banks already own some of these homes and will soon have repossessed many more. Many housing economists worry that near constant stream of home sales from banks could keep housing prices down for years to come. But what if some of those homes never hit the market.
Increasingly, it appears banks are turning to demolition teams instead of realtors to rid them of their least valuable repossessed homes.
US of A’s government did not save the banking system. Again, as previously posted (http://www.blogger.com/post-edit.g?blogID=11425703&postID=111208793021914098) housing was turned into a banking mechanism without the proper risk analysis and failure to comprehend the fact that housing is NOT a fractional banking system. Household wealth can not meet capital requirements of a bank. There is no “deposit” insurance associated with a house.
Recap: Fraud and globalization are the problems and The US of A’s government is NOT the solution but, another problem. This year’s Noble prize in economics indicates nations’ policies are in conflict. Remember, there are more than one national policy with respect toward global trade. Unions, unemployment insurance, etc… are only effective when there is “par” between trading partners. China is in violation of WTO rules. India is a natural barrier toward entry due to its low wage structure. China, India, Mexico and other low wage structured nations have low friction with respect toward the US of A. For all practical purpose, they are a labor monopoly. As indicated in this years prize, labor responds as an aggregate supply vs. aggregate demand curve. Hence, if one has a job in the US of A, one economic wage is the federal minimum wage. If one does not have a job, ones “rental wage” is closer to the equilibrium of the aggregate supply of labor vs. the aggregate demand of labor.
The above information makes me think the following is correct. Forget taxes, it’s wages that plague Americans at: http://blogs.reuters.com/david-cay-johnston/2011/08/06/forget-taxes-its-wages-that-plague-americans/
By David Cay Johnston
All opinions expressed are his own.
Here is how much economic progress America has made in the 21st Century: the average taxpayer’s 2009 income was at the same level as 1997.
Average 2009 income was $54,283, just $18 more than in 1997 when you adjust for inflation, not that anyone would notice a difference of $1.50 a month in their pocket.
And compared to 2007, the last peak year of the economy, average income fell a painful $8,588 or 13.7 percent in real terms. Having $716 less each month is something most people would notice.
These figures come from the newest tax return data issued by the Internal Revenue Service. You won’t find the numbers above at the IRS website, just raw numbers that I use to calculate changes in incomes, taxes paid and related information.
You also won’t find this data analyzed in most of the mainstream press because our major newspapers and broadcast outlets are too focused on what politicians stay instead of what they do and what the official measures of economic performance tell us.
When you hear politicians saying the cure for what ails our economy is to cut taxes, and that high-income Americans are the job creators who will stop creating jobs if their taxes are not cut more, think about what the data show.
While talking points are political statements, data from tax returns are solid numbers, verified by employers and others and submitted on statements signed under penalty of perjury. The data is not perfect – no set if large numbers is – but the IRS Statistics of Income data gives a reliable picture of incomes that can be compared year-to-year.
So here is what the latest data show, starting with the big picture:
The total income reported by all Americans in 2009 was 4 percent less than in 2000. Since the country’s population grew by more than 25 million people during those years that means not just a smaller pie, but thinner slices all around.
Nearly everyone is feeling the pain, including people at the top. Among taxpayers who make $1 million or more, average income in 2009 was slightly more than $3 million, compared to more than $4.2 million in 2000 and $3.9 million way back in 1997.
Average wages fell, too. Because a taxpayer can be one person or a married couple, the average wage per taxpayer is nearly a third higher than the average wage per worker. The new IRS data does not have details needed to calculate the median wage (half earn more, half less).
In 2009 the average wage per taxpayer was $48,917, lower by $273 in 1999. Indeed only once, in 2004, were average wages per taxpayer higher, and then by a mere $26.
Some other key facts I extracted from the new data, which like all figures in this analysis are in 2009 dollars: every 33rd household that had earned wages in 2007 went all of 2009 without earning a dollar for their labors.
Because a third of taxpayers are married couples this implies that more than 5 million people, and perhaps closer to 6 million, who had work in 2007 went all of 2009 without earning a buck.
The number of taxpayers collecting unemployment benefits soared from 7.6 million in 2007 to 11.3 million in 2009.
The average unemployment benefit was under $7,400, belying the claim that jobless benefits encourage people to lie about and not get a job.
Among taxpayers who earned $1 million or more, 1,450 taxpayers paid no income tax in 2009, up from 959 such taxpayers in 2007.
The reason our economy sits stuck in the doldrums is not taxes, which are much lower now than in 2007,pecially for the highest income Americans. Indeed, as a share of the economy the income tax is at its lowest level since Eisenhower was in his first term.
Individual income taxes in 2010, other data show, were one-third less per capita than in 2001, a recession year when the tax cuts sponsored by President Gorge W. Bush took effect. Total income taxes have never reached the amount collected in 2001 despite a growing population, a situation that contributes mightily to our federal debt and our failure to thrive economically in the 21st Century.
Changes in economic conditions and in policies set by our elected leaders in Washington and the state capitals are pushing down wages for most people and encouraging elimination of jobs, especially public sector jobs on which the economy relies to provide healthy, educated workers and otherwise grease the wheels of commerce.
Employers have plenty of money to invest. American corporations have roughly $2 trillion in cash, nearly $7,000 per American. They have so much idle cash that they cannot even invest at a high enough interest rate to keep pace with inflation.
Putting that money to work would mean more jobs, more income, more taxes and smaller deficits that could quickly turn into surpluses if our political leaders thought more about numbers than scoring political points.
And
http://www.reuters.com/article/2011/08/04/us-usa-economy-incomes-idUSTRE77302W20110804
Reuters) - U.S. incomes plummeted again in 2009, with total income down 15.2 percent in real terms since 2007, new tax data showed on Wednesday.
The data showed an alarming drop in the number of taxpayers reporting any earnings from a job -- down by nearly 4.2 million from 2007 -- meaning every 33rd household that had work in 2007 had no work in 2009.
Average income in 2009 fell to $54,283, down $3,516, or 6.1 percent in real terms compared with 2008, the first Internal Revenue Service analysis of 2009 tax returns showed. Compared with 2007, average income was down $8,588 or 13.7 percent.
Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009. The data come from annual Statistics of Income tables that were updated Wednesday.
The average tax rate was 11.4 percent, up from 10.5 percent in 2007, the Internal Revenue Service data showed.
No income tax was paid by 1,470 of the 235,413 taxpayers earning $1 million or more in 2009, compared with the 959 taxpayers with million-dollar-plus incomes who paid no income taxes in 2007.
Total adjusted gross income reported on tax returns, measured in 2009 dollars, was $7.626 trillion, down from $8.233 trillion in 2008 and $8.989 trillion in 2007.
Total adjusted gross income was up only slightly from the $7.475 trillion reported in 2001, when there were 10 million fewer taxpayers. Adjusted gross income is the amount on the last line of the front page of a Form 1040 tax return.
The data from tax returns showed a startling drop in the total number of taxpayers reporting any wages. A taxpayer, as defined by the IRS, can be an individual or a married couple. The data showed almost 4.2 million fewer taxpayers reported wages in 2009 than in 2007, with about 116.7 million taxpayers reporting wages and salaries in 2009 -- down from about 120.8 million in 2007.
Average wages fell, too, sliding $1,106 to $48,917 from $50,023 in 2007.
FEWER TAX RETURNS
The number of tax returns filed fell to 140.5 million, down almost 2 million compared with 2007, as millions of Americans went from working to having no earned income or so little that they did not have to file a tax return.
The number of Americans reporting incomes of $10 million or more also plunged even more than the steep drop in income for the population as a whole.
Just 8,274 taxpayers reported income of $10 million or more in 2009, down 55 percent from 18,394 in 2007. Compared with 2007, total real income of these top earners in 2009 fell 58.6 percent to $240.1 billion, but average income slipped just 8.1 percent to $29 million.
While the number of people who earned enough income to file a tax return fell, the share of those filing who paid no income tax rose to 41.7 percent of tax returns in 2009, up from 36.4 percent in 2008.
The average income of those filing but paying no tax was $14,483.
The share of households filing a tax return but paying no income tax results from two key factors:
* One is the drop in incomes because a married couple does not pay income tax until they make at least $18,300, and families with two children pay no income tax until they make more than $40,000 under policies started in 1997 and since expanded at the behest of Congressional Republicans, many of whom complain that too many households do not pay income taxes.
* The second reason was that in 2009, nearly all working taxpayers received the temporary Making Work Pay Tax Credit sponsored by President Obama, which saved as much as $400 ($800 for married couples) in federal income taxes in 2009. The credit continued in 2010, but then ended.
(This story is corrected in the 14th paragraph to make clear the years of taxpayer
comparisons.)
The US of A is in an Inflationary/Depression mechanism. US of A’s government is pretending the US of A’s banking system is solvent. In other words, wealth is transfer from everybody but the rich to the rich (investors). The wealth transfer mechanism is represented by price inflation. Wage depression has been reported. Healthcare is the last of G. W. Bush’s era bubble to pop. Housing prices are expected to decline.
The battle for US of A’s Oct budget is in progress. Odds are there is going to be vigorous price negotiations between US of A and the government’s suppliers. This will counter the Federal Reserve efforts toward price inflation => Job Losses at an unexpected rate (the mechanism will be the usual reason: profit margins need to be maintain) => Commodity price deflation. Once GDP tends toward zero, one needs to watch the commodity markets for decreasing prices. Go into cash once one is satisfied there is no inflation indications.
Another indication of price deflation will come from companies. They will do the usual: merge, go bankrupt, decrease the stock float and sell parts of themselves. Profit margin will tend toward reality once return of invested capital tends toward the global wage structure.
Let’s take a look at the user cost of capital. From Housing and the Monetary Transmission Mechanism (all terms are defined in the paper)
Fraud invalidates the after tax real interest rates. This went on for years. The problem comes in the form of appreciation/depreciation of house prices. One house sold can affect the asset price. The user cost of capital is a time series equation. The user cost at t + 1 is effected by the interest rate a time t (along with house appreciation/depreciation). Years of fraudulent behavior suppresses the after tax real interest rates which in turn feeds the ever increasing price/decrease of the housing market.
Years of National Saoverent Funds investment in both the GSEs and US Treasuries also supress after tax real interest rates.
In a global environment, firms have many labor sources. This allows the use of convolution theory.
Viva La Revolucion!!!!
