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Tax Credit Confession
The Tax and Revenue Committee of the California Assembly will soon hear AB 927 authored by Assemblyman Al Muratsuchi. The measure allows various tax credits against the taxes imposed by the Personal Income Tax Law and the Corporation Tax Law:
This bill would, under both laws, for taxable years beginning on
or after January 1, 2014, allow a credit to a qualified employer, as
defined, in an amount equal to $3,000 for each net increase in
qualified full-time employee hired during the taxable year by a
qualified employer, and an additional $1,000 per qualified full-time
employee hired during the taxable year by a qualified employer if the
qualified full-time employee is a veteran or an additional $2,000
per qualified full-time employee hired during the taxable year by a
qualified employer if the qualified full-time employee is a
service-connected disabled veteran, as provided. This bill would
limit the total amount of credit allowed to a qualified employer to
an amount not to exceed $5,000,000 for all taxable years. This bill
would cap the total amount of credit which may be allowed under those
provisions for any calendar year to $35,000,000. This bill would take effect immediately as a tax levy.
At this writing there are no published analyses of the bill, and how it would work remains uncertain. Still, the measure does carry educational value. For example, the offer of a tax credit for companies to hire employees is a confession that employers are not currently doing much hiring. California’s unemployment rate is now 9.4 percent, the third-highest jobless rate in the country. The true rate is doubtless much higher.
In an attempt to boost hiring incentives, Assemblyman Muratsuchi offers a tax credit. So AB 927 could also be construed as a confession that California’s current corporate and income taxes are too high. As a result of Proposition 30, California is now the highest-tax state in the nation.
California also deploys a regulatory regime that has become more onerous under AB 32, the state’s Global Warming Solutions Act. AB 927 offers employers no regulatory relief of any kind. One notes that governor Jerry Brown wants to ease environmental regulations for the costly high-speed rail project he favors. But whether he would favor the tax credits of AB 927 remains uncertain.
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Other • Is this like 1931 and the Credit Anstaldt bankruptcy?
Cyprus decides to steal everything it can from depositors, is this like 1931 and the Credit Anstaldt bankruptcy?
Posted on 31 March 2013
Depositors in the beleaguered Bank of Cyprus are now facing losses of 60 per cent on deposits over 100,000 euros as the Cyprus Government seems to have woken up to the fact that this is its last chance to steal money off these mainly foreign depositors. It’s an absolute travesty and a red letter day for European Union banks.
Bank of Cyprus customers will have 37.5 per cent of their deposits above 100,000 euros converted into what are practically worthless shares, said the Nicosia-based central bank in an e-mailed statement seen by Bloomberg. A further 22.5 per cent of these deposits will be ‘temporarily withheld’ to ensure the lender meets the terms of its recapitalization.
ATM limits
Even smaller depositors are currently blocked from withdrawing more than 300 euro per day via ATM from their accounts under unprecdented capital controls. The European Union is supposed to safeguard the free movement of people, trade and capital as its raison d’etre.
These capital controls also mean that the remaining 40 per cent of Bank of Cyprus deposits above 100,000 euros that are not subject to the bail-in will also be ‘temporarily frozen to ensure the lender’s liquidity’, said the central bank, though it promised that this money, ‘which won’t be used to recapitalize the lender’, will receive interest at 10 per cent above current levels and be released ‘within a short time-frame’.
To any honest observer it is pretty obvious what has happened. The Cyprus Government is looking after its own people now, and realizing that the game is up as an offshore banking centre it is holding on to these deposits under any ruse for as long as possible.
How can this be happening inside the EU? Where are the competent EU authorities? How can they be participating in a bail-in that behaves like this? What message does this send to anybody with funds in an EU bank in one of its many heavily indebted member states?
Stealing from deposits
Money in EU bank accounts is clearly now up for grabs by any government that recapitalizes its banking sector. Moreover, the Cyprus precedent is going to cause a run on the weaker banks that will make this sort of recapitalization inevitable. Standby for a systemic banking crisis in the EU.
What the EU has done in Cyprus is the modern equivalent of the failure of the Credit Anstaldt in 1931 that brought on the Great Depression with thousands of banking falures around the world.
The ArabianMoney investment newsletter published today advocates a shift to non-euro cash deposits as financial markets face a 2008-style correction.
http://www.arabianmoney.net/us-dollar/2 … ankruptcy/
Statistics: Posted by yoda — Sun Mar 31, 2013 7:11 am
View full post on opinions.caduceusx.com
Other • Blackrock, Credit Suisse and Goldman Sachs line-up to push
Blackrock, Credit Suisse and Goldman Sachs line-up to push US stocks higher missing the Cypriot Black Swan
Posted on 21 March 2013
Cyprus is a pesky $10 billion molehill in the view of Blackrock CEO Larry Fink who sees another 20 per cent upside for US stocks. Those never-wrong experts from Credit Suisse and Goldman Sachs are speaking with the same voice.
Stocks of course will keep rising until they start going down. Betting on momentum is a bright thing to do unless something happens to change the game. What if Fink is wrong about Cyprus?
Black Swan?
Black Swan events are not only unexpect but unexpectedly disastrous. What looks like a $10 billion hole in some bank balance sheet a long way away can very quickly mushroom into a serious global financial problem, especially in the context of the delicate financial balance in the eurozone, the world’s largest financial bloc as large as China and the US put together.
Detonate a mine in the eurozone and the ripples reach far and wide. Bankruptcy and those that follow a Cypriot debt implosion would disturb the status quo in Europe, and lead to a fresh flight of capital from the periphery to the core nations. Greece could once again get into trouble. Spanish debt costs could soar again. The euro would weaken and the dollar gain, not a positive for US stocks.
Is Wall Street wrong to be so complacent? It made this mistake in 2008 with Lehman Brothers whose bankruptcy the consensus felt could be handled by the banking system. We all know what happened next.
Big hole
What we don’t know right now is the true extent of the losses that would be suffered and by whom if Cyprus goes belly up. The bill for Lehman was way higher than anybody thought possible and it may be Cyprus with its secretive banking system is far further under water.
You don’t know the unknowns until this is tested and the world of international finance may live to rue the day it pulled the plug on Cyprus. Then the giants of Wall Street will be left running for cover with their clients seriously out of pocket and they enjoy a profitable period of volatility.
Of course that assumes that they are not following their own trading advice in their proprietary activities, and they may be foolish enough to do just that!
http://www.arabianmoney.net/us-dollar/2 … lack-swan/
Statistics: Posted by yoda — Thu Mar 21, 2013 6:08 am
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Other • Cheap, Abundant Credit Creates a Low-Return, Bubble-Prone W
Cheap, Abundant Credit Creates a Low-Return, Bubble-Prone World
February 12, 2013
By bailing out banks and targeting equity prices, the central banks are exacerbating the misallocation of savings/financial capital to historically overvalued corporate equity.
What happens when central banks make credit cheap and abundant? All that cheap money chases scarce productive assets. The yields on assets drop, and speculative "risk-on" assets are boosted into bubbles.
Even as corporate profits have skyrocketed, equity valuations have risen apace, keeping yields at historically low levels.
Just to state the obvious: does that trajectory strike you as sustainable? Up almost 300% in less than four years? In a debt-burdened global economy, where are the next $1.75 trillion in corporate profits going to come from?
Anyone who claims "stocks are cheap" would do well to study these charts, which are courtesy of longtime correspondent B.C.:
Another measure of the S&P 500 yield using corporate bond yields (Baa):
In response to my observation that this looked like too much cheap credit chasing too few productive assets, B.C. added these explanatory comments:
This is characteristic of the liquidation/hoarding of a debt-deflationary Long-Wave Trough depression. The financial media and economists want us to believe that the Fed printing is "stimulus" when in fact it is part of the "liquidation" of Fed member banks’ balance sheets of bad assets.
With the 10-yr. avg. P/E of 22-23, a 10-yr. earnings yield of 4.5%, a dividend of 2% (0% in real terms before fees and taxes), average reported earnings growth since ’00 of 3-4%, the real yield on 10- and 30-year Treasuries of slightly negative to 1%, and real wage/salary growth of 0%, the imputed discount rate implies inferior returns to capital vs. continuing decline in returns to labor; these conditions are not conducive to private sector investment growth and employment.
Historically, the only "solution" was debt deflation and consumption of financial capital to the point that debt and asset prices fell to a level at which the imputed discount rate rose to encourage investment at rising returns to labor’s share of GDP, i.e., inflationary Long-Wave Upwave.
By bailing out banks and targeting equity prices, the central banks are exacerbating the misallocation of savings/financial capital to historically overvalued corporate equity of the Fortune 25-300 firms, resulting in low-velocity hoarding and worsening wealth and income concentration, unproductive rentier speculation, further declines in labor’s share of GDP, and contracting trend real GDP and gov’t receipts per capita.
Along with these conditions are the once-in-history effects of Peak Cheap Oil, falling oil exports per capita, deteriorating EROEI, population overshoot, and accelerating automation of labor and loss of income and purchasing power.
Consider that market cap-to-GDP today is 110%, ~100% above the historical average and 230% above the average of secular bear market lows. The differential $8-$12 trillion in market cap, primarily held by the top 0.1-1% to 10% of households in form of the equity of the Fortune 25-300 firms, is effectively captive current and future savings/investment/business, household, and gov’t consumption that otherwise would occur at the given ratio to wages, profits, and GDP.
George Brockway made the case in his book, The End of Economic Man: Principles of Any Future Economics (1995), that a stock bull market is a disaster, because bull markets coincide historically with growing wealth and income concentration and gross misallocation of savings/financial capital that encourages unproductive gambling and speculating, bank leverage, and bubbles that burst and cause mayhem.
However, we are conditioned by the dominant rentier zeitgeist that rising asset prices (debt-money proxy claims on wages, profits, and gov’t receipts in perpetuity by the top 0.1-1%) are an unambiguous sign of widespread prosperity.
http://www.oftwominds.com/blog.html
Statistics: Posted by yoda — Tue Feb 12, 2013 12:22 am
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Other • We’ve run out of speculative credit bubbles to exploit
Money Velocity Free-Fall and Federal Deficit Spending
January 18, 2013
The velocity of money is in free-fall, and borrowing, squandering and printing trillions of dollars to prop up a diminishing-return Status Quo won’t reverse that historic collapse.
Courtesy of Chartist Friend from Pittsburgh, here are three charts overlaying the velocity of money and the Federal surplus/deficit. The charts display the three common measures of money: M1, M2 and MZM. From the St. Louis Federal Reserve site:
M1 includes funds that are readily accessible for spending. M1 consists of: (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) traveler’s checks of nonbank issuers; (3) demand deposits; and (4) other checkable deposits (OCDs).
M2 includes a broader set of financial assets held principally by households. M2 consists of M1 plus: (1) savings deposits (which include money market deposit accounts, or MMDAs); (2) small-denomination time deposits (time deposits in amounts of less than $100,000); and (3) balances in retail money market mutual funds (MMMFs).
Money Zero Maturity (MZM) is M2 less small-denomination time deposits plus institutional money funds.
The correlation of deficit spending and money velocity is especially striking in the chart of M2 velocity.
Here is MZM velocity:
And M1 velocity:
Since correlation implies causation, ideologically unbiased observers will wonder: does declining money velocity lead to more deficit spending, or does deficit spending depress money velocity?
Alternatively, both declining money velocity and soaring deficits reflect a contracting, post-credit-bubble economy. It is interesting to compare when the various measures of money velocity bottomed and topped out:
– M1 velocity rose straight through the inflationary 1970s (no surprise there), chopped around the expansionary 1980s and then climbed along with the Bull market in stocks from 1994 to a peak in 2007, matching the peak in stocks and housing almost perfectly.
– M2 velocity first peaked during the height of inflation in 1981 (when interest rates also peaked), bottomed in 1987 and then tracked the stock market and economy higher, reaching a much higher peak in 1997, much earlier than M1 velocity. M2 fell substantially to a low in 2002 and then rebounded modestly to a lower peak in 2007, after which it collapsed.
– MZM velocity topped out in the inflationary surge of the early 1980s, like M2, but unlike the other measures, it did not ascend to new heights in the 1990s or 2000s; rather, it has fallen steadily for 30 years since its 1982 top.
The most striking feature of these charts is the complete collapse of money velocity. MZM and M2 have collapsed to historic lows, while M1 has fallen back to 1982 levels.
In this context, we can view unprecedented Federal deficit spending as a misguided attempt to compensate for the implosion of money velocity. I say "attempt" because the Treasury borrowing and blowing $6 trillion over the past five years and the Federal Reserve printing $2 trillion, backstopping the parasitic financial cartel with $16 trillion and buying over $1 trillion each of mortgage securities and Treasury bonds has only kept the economy stumbling along at essentially zero growth while real wages have declined by 7% to 9%.
This stupendous creation of money and unprecedented fiscal stimulus has had zero effect on money velocity. This conclusively shows that fiscal and monetary stimulus are not fixing what’s broken with money velocity.
Please see these entries for more on why this is so:
Misunderstanding Austerity, Stimulus and Demand (January 17, 2013)
Why Expansionist Central States Inevitably Implode (January 15, 2013)
The Neoliberal Financial Skim (January 14, 2013)
Why Austerity Is Triggering a Crisis (January 7, 2013)
The Dangerous Blindspots of Clueless Keynesians (January 2, 2013)
Keynesian stimulus policies (deficit spending and low-interest easy money) create speculative credit bubbles. As the above charts illustrate, post-bubble economies do not respond to additional stimulus because the economy is burdened by impaired debt and phantom collateral.
In sum, the U.S. economy is a neofeudal debt-serf wasteland with few opportunities for organic (non-Central Planning) expansion. As a result, the velocity of money is in free-fall, and borrowing, squandering and printing trillions of dollars to prop up a diminishing-return Status Quo won’t reverse that historic collapse.
Put another way: we’ve run out of speculative credit bubbles to exploit.
http://www.oftwominds.com/blog.html
Statistics: Posted by yoda — Fri Jan 18, 2013 12:06 am
View full post on opinions.caduceusx.com
Advertising, Credit Reporting, and ‘Anti-Objectification’
Jim Harper
You need a set of priors that I lack to stay interested in the forthcoming Suffolk University Law Review article, “Selling Consumers, Not Lists: The New World of Digital Decision-Making and the Role of the Fair Credit Reporting Act.” I think the thing animating authors Ed Mierzwinski and Jeff Chester is what I call “anti-objectification,” a desire at the outskirts of the privacy concept. It is bad, anti-objectifiers appear to believe, when a person is treated as a mere object of commerce, observed and communicated with on that basis alone.
Without anti-objectification, I can’t find much of anything wrong in their description of the emerging world of digital data collection and marketing. There is an impressive and complex array of techniques coming online to discover what people want, learn when they want it, and communicate with them in ways that will spur them to act on their desires.
Given the wrongs they perceive in these developments—which, again, I must guess at—Mierzwinski and Chester make a broad pitch to have online marketing drawn under the blanket of Fair Credit Reporting Act regulation. Not only the Federal Trade Commission, but the new, unconstrained Consumer Financial Protection Board, should look at bringing online advertising within the FCRA, they say.
Given the paucity of (apparent) harms to be rectified, one struggles to examine how broadening regulation of the information economy would improve things. But I don’t know why the Fair Credit Reporting Act would be a model anyway. In forty years, the FCRA has not cured the ills that Senator Proxmire (D-WI) recited when he introduced the law—to judge by the words of self-styled consumer advocates, at least. New challenges have emerged, and the FCRA has turned credit bureaus to the government’s use in financial surveillance. The FCRA preempted state common law—you can’t sustain a defamation action against a credit bureau, no matter how wrong its reporting is—replacing it with opaque and unwieldy bureaucratic procedures for those who believe their credit bureau records are inaccurate.
The FCRA already reduces consumer welfare by keeping new entrants out of the credit reporting business. When companies edge toward providing data that might be used for credit decisions, employment screening, housing, and the like, they quickly learn to eschew that market so they can avoid the FCRA’s obligations and regulator inquests. The result? Our economy is making less intelligent decisions about credit, employment, and housing. Efficiences that would lower costs to consumers across the board are not being found.
I drew lessons from the failure of the Fair Credit Reporting Act to fix things in my paper “Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.”
View full post on Cato @ Liberty
Advertising, Credit Reporting, and ‘Anti-Objectification’
By Jim Harper
You need a set of priors that I lack to stay interested in the forthcoming Suffolk University Law Review article, “Selling Consumers, Not Lists: The New World of Digital Decision-Making and the Role of the Fair Credit Reporting Act.” I think the thing animating authors Ed Mierzwinski and Jeff Chester is what I call “anti-objectification,” a desire at the outskirts of the privacy concept. It is bad, anti-objectifiers appear to believe, when a person is treated as a mere object of commerce, observed and communicated with on that basis alone.
Without anti-objectification, I can’t find much of anything wrong in their description of the emerging world of digital data collection and marketing. There is an impressive and complex array of techniques coming online to discover what people want, learn when they want it, and communicate with them in ways that will spur them to act on their desires.
Given the wrongs they perceive in these developments—which, again, I must guess at—Mierzwinski and Chester make a broad pitch to have online marketing drawn under the blanket of Fair Credit Reporting Act regulation. Not only the Federal Trade Commission, but the new, unconstrained Consumer Financial Protection Board, should look at bringing online advertising within the FCRA, they say.
Given the paucity of (apparent) harms to be rectified, one struggles to examine how broadening regulation of the information economy would improve things. But I don’t know why the Fair Credit Reporting Act would be a model anyway. In forty years, the FCRA has not cured the ills that Senator Proxmire (D-WI) recited when he introduced the law—to judge by the words of self-styled consumer advocates, at least. New challenges have emerged, and the FCRA has turned credit bureaus to the government’s use in financial surveillance. The FCRA preempted state common law—you can’t sustain a defamation action against a credit bureau, no matter how wrong its reporting is—replacing it with opaque and unwieldy bureaucratic procedures for those who believe their credit bureau records are inaccurate.
The FCRA already reduces consumer welfare by keeping new entrants out of the credit reporting business. When companies edge toward providing data that might be used for credit decisions, employment screening, housing, and the like, they quickly learn to eschew that market so they can avoid the FCRA’s obligations and regulator inquests. The result? Our economy is making less intelligent decisions about credit, employment, and housing. Efficiences that would lower costs to consumers across the board are not being found.
I drew lessons from the failure of the Fair Credit Reporting Act to fix things in my paper “Reputation under Regulation: The Fair Credit Reporting Act at 40 and Lessons for the Internet Privacy Debate.”
Advertising, Credit Reporting, and ‘Anti-Objectification’ is a post from Cato @ Liberty – Cato Institute Blog
View full post on Cato @ Liberty
American • More Credit Card Debt In US
US consumer borrowing rises to record $2.75T
US consumer borrowing rises to record $2.75T in October, helped by more credit card debt
By Martin Crutsinger, AP Economics Writer | Associated Press –
WASHINGTON (AP) — Americans swiped their credit cards more often in October and borrowed more to attend school and buy cars. The increases drove U.S. consumer debt to an all-time high.
The Federal Reserve said Friday that consumers increased their borrowing by $14.2 billion in October from September. Total borrowing rose to a record $2.75 trillion.
Borrowing in the category that covers autos and student loans increased by $10.8 billion. Borrowing on credit cards rose by $3.4 billion, only the second monthly increase in the past five months.
The strong rise in borrowing came in a month when Americans cut back on consumer spending, reflecting in part disruptions from Superstorm Sandy.
Many consumers may also have scaled back because of fears about the "fiscal cliff." That’s the name for automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration fail to strike a budget deal by then.
Consumer spending drives roughly 70 percent of economic activity.
Economists think that it could bounce back in November. But the underlying trend remains weak because with unemployment remaining high, households don’t have the incomes to spend.
Many consumers have been reluctant to build up credit card debt, which typically carries steeper interest rates than other loans.
Credit card usage has fallen sharply since the 2008 credit crisis. Four years ago, Americans had $1.03 trillion in credit card debt, an all-time high. In October, that figure was 17 percent lower.
During the same period, student loan debt has increased dramatically. The category that includes auto and student loans is 22 percent higher than in July 2008. That reflects in part the fact that many Americans who have lost jobs decided to go back to school to get training for new careers.
http://finance.yahoo.com/news/us-consum … MA–;_ylg=
Statistics: Posted by yoda — Sat Dec 08, 2012 10:20 am
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Fed Toys with Ratcheting Up the Credit Crunch
By Steve H. Hanke
When the Basel I accords, mandating higher capital-asset ratios for banks, were introduced in 1988, they were embraced by the administration of President George H.W. Bush. With higher capital-asset ratios came a sharp slowdown in the money supply growth rate and—unfortunately for President George H. W. Bush and his re-election campaign—a mild recession from July 1990 through March 1991.
Now, we have Basel III and its higher capital-asset ratio requirements being imposed on banks in the middle of a weak, drawn-out economic recovery. This is one of the major reasons why the recovery is so anemic.
How could this be? Well, banks produce bank money, which accounts for roughly 85% of the total U.S. money supply (M4). Mandated increases in bank capital requirements result in contractions in bank money, and thus in the total money supply.
Here’s how it works:
While the higher capital-asset ratios that are required by Basel III are intended to strengthen banks (and economies), these higher capital requirements destroy money. Under the Basel III regime, banks will have to increase their capital-asset ratios. They can do this by either boosting capital or shrinking assets. If banks shrink their assets, their deposit liabilities will decline. In consequence, money balances will be destroyed.
So, paradoxically, the drive to deleverage banks and shrink their balance sheets, in the name of making banks safer, destroys money balances. This, in turn, dents company liquidity and asset prices. It also reduces spending relative to where it would have been without higher capital-asset ratios.
The other way to increase a bank’s capital-asset ratio is by raising new capital. This, too, destroys money. When an investor purchases newly-issued bank equity, the investor exchanges funds from a bank account for new shares. This reduces deposit liabilities in the banking system and wipes out money.
We now learn that the Fed, using the cover of the Dodd-Frank legislation, is toying with the idea of forcing foreign banks that operate in the United States to hold billions of dollars of additional capital (read: increase their capital-asset ratios).
This will make the credit crunch “crunchier” and throw the U.S. economy into an even more vulnerable position. The last thing the Fed should be doing is squeezing the banks and tightening the screws on the production of bank money.
Fed Toys with Ratcheting Up the Credit Crunch is a post from Cato @ Liberty – Cato Institute Blog
View full post on Cato @ Liberty
Credit Where It’s Due: DOJ Changes Its Tune on FISA Transparency
By Julian Sanchez
Earlier this week, I complained that the Department of Justice seemed to be stonewalling a Freedom of Information Act request I’d filed seeking copies of mandatory semi-annual reports to Congress on the National Security Agency’s compliance with the procedures and civil liberties safeguards of the FISA Amendments Act—which the House voted yesterday to reauthorize for another five years. After sitting on the request for two months (the statutory deadline is 20 business days), DOJ had finally replied with a letter claiming they could “neither confirm or deny the existence” of reports that were required by federal law. I thought this was a little ridiculous. Fortunately, there were officials at the Justice Department who thought so too.
Having appealed the denial of my request, I got an impressively prompt reply on Tuesday evening from the director of the Office of Information Policy at DOJ, assuring me that she recognized the agency’s initial response had been “incorrect,” and that a new one would be forthcoming immediately. By Wednesday morning, their stance had changed entirely: They had found the reports I sought, and were forwarding them to the Office of the Director of National Intelligence (ODNI) for review to determine what would need to be redacted before release—with a request that ODNI seek to expedite its analysis to compensate for their own delay.
Now, to be sure, I’d rather have had this response a month ago, and the documents before the House vote, but at this point DOJ appears to be doing exactly what they’re supposed to and making a good faith effort to facilitate the redaction and release of these important assessments. So it seemed appropriate to follow up on my initial blog post to acknowledge that—and in particular Office of Information Policy director Melanie Pustay, who straightforwardly acknowledged the error and acted quickly to correct it. We’ll see soon enough whether a similar spirit of transparency reigns at ODNI.
Credit Where It’s Due: DOJ Changes Its Tune on FISA Transparency is a post from Cato @ Liberty – Cato Institute Blog
View full post on Cato @ Liberty