Prices for corn and soybeans, five years from now
Stu Ellis, FarmGate blog | Updated: 05/10/2013
Although challenges to planting the 2013 crop may provide some degree of support to corn and soybean prices, they have quickly faded from the 2012 highs and are threatening to diminish further from the highs that began in 2007. When corn prices were pumped up from ethanol demand and soybean prices had to bid for acres, a new era of commodity prices was declared by economists. Since we are six years into that era and prices are settling down as predicted, how far down will they settle, anyway?
Iowa State University economists Dermot Hayes and Lisha Li leave little doubt they believe commodity prices are high now, but offer some long term projections which may be valuable for farmers to engage in some long term financial planning. After all, if commodity prices fade further, it may be hard to make the cash rent payment. The economists offer a formula for projecting corn and soybean prices out for five years, using the same type of calculations used by USDA’s Risk Management Agency for establishing revenue guarantees for crop insurance.
Their contention is that economic models designed to predict prices are not as good as the use of commodity futures prices, since traders are using information that helps establish prices. However, the more distant the contract the less the liquidity behind it and the less valuable it becomes as a predictor of prices into the future. Subsequently, the Iowa State economists have projected a six year price trend, based on the futures market, plus an implied volatility factor. But they are quick to qualify the accuracy of their projection, “Of course, any projected price level is subject to enormous uncertainty, and this uncertainty expands as one looks further and further into the future.”
Based on graphs that depict the price trend from their formula, they say corn futures will fall to a level just under $5 by December 2017. And soybean prices are expected to fall to about $11 per bushel by the same time frame. They say, “These prices suggest that futures traders expecting continued demand growth will hold prices at what can be considered historically high levels. However, the projected prices are substantially below current levels, indicating that traders expect world supply to expand to eliminate the current scarcity of corn and soybeans.”
While those would be considered average prices for corn and soybeans five years out from now, there is also the change those might not be achieved, and Hayes and Li offer a “worst case scenario” made up of the bottom 10 percent of potential prices. Any farmer who is creating a valid marketing plan should be aware of the potential for the worst-case-scenario.
The Iowa State economists say, “These extremely low prices levels are unlikely, but they do give one pause.”
Based on futures prices and their implied volatility, which are used for setting crop insurance revenue guarantees, it is also possible to project corn and soybean prices several years out. This will help farmers with cash flow projections.
Statistics: Posted by yoda — Fri May 10, 2013 9:49 am
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MEDIA BULLY FIVE GUYS ENTREPRENEUR FOR TELLING TRUTH ABOUT OBAMACARE
by LARRY O’CONNOR 13 Mar 2013, 5:16 AM PDT
When Mike Ruffer, an eight franchise owner of the Five Guys hamburger chain revealed this week that the economic impact of Obamacare would force him to raise the price of the popular burgers, he received national attention including a segment on The Rush Limbaugh Show.
Did you see the story, one of the franchise owners for that hamburger chain, Five Guys hamburger chain or whatever (paraphrasing), "We’re gonna have to get rid of a whole bunch of employees, get down to mostly part-timers. We can’t afford Obamacare. We can’t stay in business with it. The prices are gonna go up. The consumer’s are gonna pay for it. That’s the only way my employees can have health care, is if I raise the price of the food here and the customers pay for it." And he’s worried the customers aren’t gonna have any money, nobody is, because of the budget situation and the economy.
When a business owner sticks his neck out and criticizes big government policies like Obamacare, you can count on the media to try to bully him into silence.
Matt Yglesias at Slate.com called Ruffer a liar because, you know, Yglesias knows the hamburger business better than the North Carolina entrepreneur:
This is self-refuting nonsense. The only situation in which it would make sense for Ruffer to raise prices is if price increases will on net lead to higher revenue. And if price increases will lead to higher revenue (which they might) then it makes sense for Ruffer to raise prices no matter what happens with Obamacare.
Yglesias then negates his own argument for the sake of demonizing all corporations who dare to make profits with their businesses: (emphasis mine)
In fact, Ruffer himself articulates the truth later which is that Obamacare is going to reduce his profits by about one-eighth and he (and any investors in his business) will eat the loss. With corporate profits as a share of the economy at an all-time high, nobody’s going to cry for him either.
Center for American Progress, John Podesta’s team of bullies, basically called Ruffer a dead-beat for denying his employees "basic health care":
As the Examiner explicitly states, Ruffer is actively trying to “escape” the health reform law, and has had his mind made up about it for a while. That’s become an increasingly common position among large employers — particularly in the service industry, where large restaurant chains have been threatening to cut workers’ benefits by shifting costs onto them, cut back on wages, cut back on hours, or raise their products’ prices. Ruffer has, by his own admission, considered every single one of those options. But that isn’t a reflection of the reform law itself — it’s a reflection of companies’ desire to protect their own bottom line by having their low-wage employees go uninsured or obtain coverage through Medicaid, rather than provide them with basic benefits.
Center for American Progress goes on to claim that companies who have gone public with the problems implementing Obamacare suffer due to the bad publicity they receive. They point to Olive Garden as an example:
The negative press led the company to reverse course on its threat to shift employees to part-time status to avoid covering them under Obamacare. The latest report on Darden’s earnings prove that was a good move, since the restaurants did take a turn for the worse as a result of their bad publicity. Its net income fell 37 percent:
The claim that criticizing Obamacare hurts your bottom line due to bad publicity is a self-fulfilling prophesy, as Center for American Progress is one of the driving forces trying to drum up that bad publicity by trying to bully skittish CEOs who don’t want any bad publicity ever for anything.
The report on Olive Garden points to a Huffington Post article titled Darden Restaurants Profit Plunges 37 Percent After Bad Publicity Over Attempt To Skirt Obamacare. Ironically, Huffington Post also weighed in on the Five Guys story, thus showing the chain of information flow from liberal think tank to liberal media outlets and back again.
The clear lesson to businesses like Five Guys, or Olive Garden, or Papa John’s, or Wendy’s, or Whole Foods is obvious: If you dare criticize Obamacare, the media will out you, bully you and shame you into silence. Forget about the news. Forget about the truth. The White House can not be criticized.
Statistics: Posted by yoda — Wed Mar 13, 2013 11:49 am
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Biggest Silver ETF Adds 572 Tons in Largest Gain in Five Years
By Maria Kolesnikova – Jan 17, 2013 8:23 AM MT.
Assets in iShares Silver Trust, the biggest exchange-traded fund for the metal, climbed the most in five years as more investors are seeking an alternative to gold.
Holdings jumped 572 metric tons, or 5.9 percent, the biggest increase since December 2007, according to data on the iShares website today. BlackRock Inc. (BLK), the manager of the fund, confirmed the figures. The metal worth $579 million boosted assets to 10,735 tons, the most since May last year.
Global investment through all silver-backed exchange-traded products is a record 19,114 tons, or about nine months of mine output, according to data compiled by Bloomberg and Barclays Plc. Steps by policy makers from the U.S. to China and Europe to boost economies attracted investors to precious metals on bets that stimulus will stoke inflation.
“Some investors see poor man’s gold as a cheaper alternative to the yellow metal and are allocating to it,” Mark O’Byrne, executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores bullion coins and bars, said by e-mail today. “Allocations to silver remain very small which suggests that the holdings could go higher resulting in higher silver prices again in 2013.”
Silver will rise as much as 28 percent to $40.25 an ounce this year, based on the median of 49 analyst, trader and investor estimates compiled by Bloomberg in December. The metal for immediate delivery was at $31.3325 an ounce today in London.
Silver almost tripled since the end of 2008, and is up 2.9 percent this year compared with a 0.2 percent decline in gold and 9.4 percent jump in platinum.
To contact the reporter on this story: Maria Kolesnikova in London at firstname.lastname@example.org
Statistics: Posted by DIGGER DAN — Thu Jan 17, 2013 3:08 pm
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Thomson: Premier Redford’s spin doctors grow dizzy
BY GRAHAM THOMSON, CALGARY HERALD JANUARY 14, 2013 7:03 AM
Call it the Communications Clear Out.
Five members of Premier Alison Redford’s communications team are quitting. Given that all of them submitted their resignations in the space of a month, and that they represent more than half of Redford’s eight-member public-relations office, maybe we should be calling it the Spokespersons Stampede.
Never have we seen so many press secretaries/ communications specialists depart the premier’s office at once. Then again, never has a premier had as many press secretaries/communications specialists on the payroll.
After becoming premier, Redford nearly tripled the size of her communications staff.
But that, as we’ve seen the past year, hasn’t always meant better communications or better headlines.
And that in turn has led to the departure of so many of her staff, even those as loyal and as important as her communications director, Jay O’Neill, who has been with her since her very first day as a cabinet minister in 2008.
O’Neill, who announced his resignation last Wednesday, would only say that it was "time to move on."
He wouldn’t address speculation that he was leaving because, quite frankly, he was growing tired of chronic arguments with senior staff in Redford’s office who preferred to keep the premier away from the news media. Last fall, relations grew so strained between reporters and Redford over her elusiveness, that the legislature’s press gallery – of which I am a member – sent an official letter of complaint to her office.
Thus, O’Neill (and his fellow staff members) seemed to be constantly caught between reporters demanding a news conference with the premier over the latest headache to hit the government, and the premier’s political advisers, who thought she should have as much to do with reporters as does Prime Minister Stephen Harper with the Ottawa press corps. That is, very little, and very grudgingly.
In an email to government staff, though, O’Neill seemed to inadvertently drop hints about the reason for his departure. "As a group we have done tremendous work with tremendous success and I have no doubt that success will continue," O’Neill wrote, before adding, "And yes I do mean success."
It was a strangely defensive comment, one tacitly acknowledging that when it comes to the premier’s communications challenges, "success" is not a word that immediately pops to mind.
O’Neill has had to act as spokesman/troubleshooter/ adviser for the premier on a conveyor belt of troubles that deposited a fresh crisis on his doorstep almost daily. There are the investigations by the province’s ethics commissioner and the chief electoral officer into potential wrongdoing by the premier and the Progressive Conservative party. There’s the current deficit crisis and the looming budget crisis that threatens to balloon the deficit crisis even larger. And then there’s the daily attacks from the Wildrose. The neophyte official Opposition party has gotten so far under Redford’s skin, she should consider adding a dermatologist to her staff.
The government doesn’t seem to know how to handle the Wildrose. One school of thought is to simply ignore them and push forward with the government’s own policy agenda. That seems to be what O’Neill supported. The other school is apparently filled with Chicken Littles who see the sky falling whenever the Wildrose fires off another anti-government news release. Having senior staff getting in a flap over every Wildrose outburst was the surest way of exhausting the communications staff.
Nobody inside the premier’s office will admit there was ever any internal friction, but one source close to government said the office is in chaos and "nobody knows what the hell they’re doing."
As O’Neill said with inadvertent but masterful understatement in his email to colleagues: "When the Premier offered me this job I had no idea what it would entail."
What it entailed was shepherding Redford’s communications office through what is arguably the greatest change in Alberta politics in decades. Not only does Alberta now have a well-organized, and loud, official Opposition, it’s an opposition with lots of equally boisterous friends and defenders in the media – something that the Liberals, for example, didn’t have when they last formed a substantial opposition in 1993.
Graham Thomson is an Edmonton Journal columnist.
Statistics: Posted by yoda — Mon Jan 14, 2013 11:32 am
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For three years running now at the Washington Examiner, I’ve said good riddance to the Old Year with a whimsically malicious selection of the year’s worst opeds. Click here for 2012’s parade of horribles; here for last year’s winners, here for 2010’s.
We have New York World editor Herbert Bayard Swope to thank for first inflicting the oped genre upon the world in 1921. As Swope put it:
“It occurred to me that nothing is more interesting than opinion when opinion is interesting, so I devised a method of cleaning off the page opposite the editorial, which became the most important in America… and thereon I decided to print opinions, ignoring facts.”
So not much has changed over nine decades.
In selecting the 2013 winners, I once again looked for bad arguments and bad writing and awarded extra points for warped values. But a 600-word column is far too short to capture all the crackbrained commentary 2012 produced, so I’d like to use this space to note some worthy suggestions I received from my Cato colleagues and the Twitterverse at large while preparing the column.
Lee Doren sent me this monstrosity from the LA Times, “Does ‘Innocence of Muslims’ meet the free-speech test?” which suggests the whole wolrd’s one crowded theater, and disparaging someone’s religion is akin to shouting “Fire!” I ended up going with a similar entry by law professor Eric Posner: “The World Doesn’t Love the First Amendment,” Slate.com. And maybe they don’t, judging by this 2013 contender just sent to me by Michael Hamilton, “In praise of Vallaud-Belkacem, or why not to tolerate hate speech on Twitter.”
It irks me when conservatives brag about not reading the New York Times, but I have to admit it takes a certain masochism to take on the NYT oped page every day. This year, Grey Lady regulars took the Gold, Silver, and Bronze medals. Friedman earned the top spot with “Obama’s Nightmare,” one of those virtuoso performances by the Maestro of Mixed Metaphors that makes you half-suspect he’s having us all on in an elaborate, decades-long, Borat-style prank. Of course that wasn’t the only Friedman nomination: David Boaz suggested this one on the “pro-life” nanny state; Michael Cannon favored the column where Friedman nominates Education Secretary Arne Duncan as Secretary of State.
Other nominations from the NYT: Crime novelist Andrew Klavan recommended Paul Krugman’s “recent blithering inanity: the Twinkie manifesto. Barely comprehensible.” I got more than one “anything by Krugman” response from Twitter. And several folks recommended this just-under-the-wire submission from Sunday’s NYT: “Let’s Give Up on the Constitution.” An embarrassment of richness and vice-versa.
More “honorable mentions” from other sources after the jump:
There were several votes for this piece by Charlotte Allen: “Think of what Sandy Hook might have been like if a couple of male teachers who had played high-school football, or even some of the huskier 12-year-old boys, had converged on Lanza.”
Joey Coon offered “The Perils of Legalizing Pot” by David Frum (won’t somebody please think of the slackers?)
…and a hat tip to Radley Balko for cluing me in to this gem, “Don’t Be Nosy about Fast and Furious,” L.Z. Granderson, CNN.com. (Don’t. It’s rude.)
Apologies to anyone I forgot. Keep them coming this year!
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Gold beats all other assets over five years, now heading up again?
Posted on 12 August 2012
Mid-August and financial markets are quiet with the main players on holiday. But gold and silver prices are showing signs of renewed life after a long trek sideways since the highs of last year.
This time last summer we wrote excitedly about $2,000 as the autumn price target and then gold rushed ahead and crashed from a high of $1,923 on September 6th. Still it was a major up shift and could happen again. The flickers of life in the bullion pits could mean a repeat of the bullish seasonal autumn pattern.
August 9th was the fifth anniversary of the beginning of the global financial crisis. And what was the best investment since then? ArabianMoney readers can probably guess.
Gold and corn are up 144 per cent over five years. Silver follows at 122 per cent. Oil is up 61 per cent and US treasuries 38 per cent. Stocks have been volatile to say the least and the S&P 500 returned only eight per cent.
It is indeed hard to get the daily or monthly trends right in markets. Many day traders lose the lot to commissions over time. But get the long-term trends right and investments take care of themselves.
Is this the right time to buy gold and silver? Well, the odds on a short-term gain in the autumn are very good on past precedent. The money printing central banks could pre-empt market crashes this autumn with some big moves that would be precious metal positive.
There is the US presidential election in November, after all. Or gold and silver could rise sharply in a seasonal move and then tank with the rest of the markets as the reality of another global recession finally dawns on financial markets.
However, in the long-run we are convinced that the precious metals bull market is far from over and that its performance over the next five years could be even more spectacular, especially in a dramatic price spike that we just have not seen thus far.
For a commodity price to really breakdown you need to see a price spike, and we will eventually get one for both gold and silver. Until then it pays to be invested because you never can tell exactly what the future holds for trading and could easily miss the best days for gold and silver by trying to be too clever.
Statistics: Posted by yoda — Sun Aug 12, 2012 8:20 am
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Why isn’t the U.S. economy in a depression right now? The number one reason is because the federal government has stolen more than five trillion dollars from future generations since Barack Obama was elected and has used that money to pump up our grossly inflated standard of living. Whether the federal government spends money wisely or foolishly, the truth is that the vast majority of it still ends up in the pockets of the American people who then use it to buy the things they need for their daily lives. If the U.S. government had not borrowed and spent an extra five trillion dollars that we did not have over the past several years, we would be in the middle of a rip-roaring economic depression right now. So any talk that Barack Obama is “improving the economy” is a total farce. It is a five trillion dollar lie. The reality is that Barack Obama and the U.S. Congress have been stealing trillions of dollars from future generations in order to make things tolerable in the present. If the federal government adopted a balanced budget next year, the debt-fueled prosperity that we are currently enjoying would start disappearing very rapidly and all hell would break loose in America.
At this point, the U.S. national debt is over 15.7 trillion dollars.
When Ronald Reagan took office it was less than a trillion dollars.
If you were to divide the national debt up equally, it would come to more than $50,000 for every man, woman and child in the United States.
So the share of the national debt for an average family of four would be about $200,000.
When the government borrows and spends money that it does not have, that increases the amount of dollars in circulation and it causes GDP to go up.
That is one of the reasons why our politicians like to borrow and spend money that we do not have. It makes the economic statistics look good. They can point to those economic statistics as a reason to send them back for another term.
This is a major flaw in our system. Most of our politicians do not care about how they are raping future generations financially. Most of them just care about getting elected again.
If you will notice carefully, neither Mitt Romney nor Barack Obama are promising to balance the budget any time soon. Like so many politicians in the past, they promise to do it “eventually”, but “eventually” never arrives.
According to a recent article in the Washington Times, Mitt Romney declared during a recent campaign appearance that he has no plans to balance the federal budget in his first year….
“My job is to get America back on track to have a balanced budget. Now I’m not going to cut $1 trillion in the first year”
Why would he say that?
Why wouldn’t he want to balance the budget?
He went on to explain that….
“The reason,” he explained, “is taking a trillion dollars out of a $15 trillion economy would cause our economy to shrink [and] would put a lot of people out of work.”
Romney is right about this. Taking a trillion dollars out of a 15 trillion dollar economy would plunge us into an economic nightmare.
And that would make him look bad.
Of course if Obama wins the election we can just expect more of the same from him as well.
For example, just check out what White House Chief of Staff Jack Lew had to say about balancing the budget recently….
“The time for austerity is not today,” Lew told NBC News “Meet the Press.” “If we were to put in austerity measures right now, it would take the economy in the wrong way.”
Why is the time for austerity not today?
It is because the 2012 election is coming up and Obama wants the economic statistics to look good.
But can you blame our politicians for being cowardly?
Just look at what is happening in Greece. After several years of austerity they are in the midst of a full-blown economic depression and they still have not balanced their budget.
Do we want to end up like Greece?
Most Americans do not realize this, but the U.S. already has more government debt per capita than Greece, Portugal, Italy, Ireland or Spain.
So why haven’t we collapsed yet?
Well, because we continue to borrow larger and larger amounts of money.
It took from the founding of America until 1995 for the federal government to accumulate 5 trillion dollars of debt.
Under Obama, we have accumulated more than 5 trillion dollars of new debt in just over 3 years.
Amazingly, Obama has added more to the national debt than George W. Bush did during his entire 8 year term.
And let there be no mistake – George W. Bush was a wild spender. A fiscal conservative he most certainly was not.
But Barack Obama does not seem troubled by any of this.
Barack Obama is prancing about the countryside touting his great “economic plan”, but the truth is that the only reason the economy has not totally collapsed is because he is stealing 150 million dollars an hour from our children and our grandchildren.
Sadly, most Americans don’t understand that the current level of prosperity that we are enjoying is a grand illusion. Most Americans still expect things to return to the way that they used to be, and they are increasingly becoming angry that it is taking so long to get back there.
In fact, a whole host of recent surveys have shown that Americans are very dissatisfied with the direction the economy is heading in….
Four recent surveys have found that on average only 28% of Americans are satisfied with the condition of the country, while 70% are dissatisfied. Three recent surveys have found that between 69% and 83% of Americans believe that the country is still in recession (it isn’t), and only half believe that a recovery is under way.
What they don’t realize is that if we were not massively ripping off our kids and our grandkids things would be much, much worse.
Thomas Jefferson understood that government borrowing is essentially the same as theft from future generations.
He once made the following statement….
And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.
What we are doing to our children and our grandchildren is so immoral that it is hard to put into words.
We are running up trillions upon trillions of dollars of debt in their name just so that our lives can be more comfortable right now.
How could we be so selfish?
The sad thing is that even with all of this reckless spending our economy is still not in great shape.
-Today, approximately 48 percent of all Americans are currently either considered to be “low income” or are living in poverty.
-Back in 1960, social welfare benefits made up approximately 10 percent of all salaries and wages. In the year 2000, social welfare benefits made up approximately 21 percent of all salaries and wages. Today, social welfare benefits make up approximately 35 percent of all salaries and wages.
-The United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.
-Every year now, we see millions of Americans fall out of the middle class. In 2010, 2.6 million more Americans descended into poverty. That was the largest increase that we have seen since the U.S. government began keeping statistics on this back in 1959.
-At this point, approximately 22 percent of all American children are living in poverty.
-When Barack Obama took office, there were 32 million Americans on food stamps. Now, there are more than 46 million Americans on food stamps.
So how much worse would things be if a trillion dollars of federal spending was suddenly removed from the economy?
Are you starting to get the picture?
As bad as things are right now, they are about to get a whole lot worse.
So why can’t we just keep on borrowing and spending forever?
Well, just like Greece found out, debt always catches up with you eventually.
During fiscal 2011, the U.S. government spent over 454 billion dollars just on interest on the national debt.
But just like we are seeing in Europe, if confidence in U.S. government debt starts to disappear the U.S. government could end up facing much higher interest rates to borrow money.
If the average rate on U.S. government debt only rose to 7 percent (in the past it has actually been much higher than that), then the U.S. government would be spending about 1.1 trillion dollars a year just on interest on the national debt.
So if we were spending 1.1 trillion dollars just on interest, that would be close to half of all the revenue the federal government brings in.
Right now, the Federal Reserve is manipulating the system in a desperate attempt to keep interest rates down. During 2011, the Federal Reserve bought up approximately 61 percent of all government debt issued by the U.S. Treasury Department.
But most Americans have no idea how fragile our financial system is.
Most Americans just assume that we will always be the greatest economy on the planet and that there is nothing to be worried about.
Sadly, one way or another this debt bubble is going to burst and then our debt-fueled false prosperity is going to disappear.
Most Americans are not going to understand what is happening and they are going to go absolutely nuts.
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FIVE THINGS YOU NEED TO KNOW BEFORE FILING YOUR TAXES
by SIMON BLACK ·
March 22, 2012
If you’re a US taxpayer, you’ll want to heed the following before dropping off your 1040 this year.
You see, in 2010, Congress and President Obama passed a series of new rules known as the Foreign Account Tax Compliance Act, or FATCA. FATCA affects every US taxpayer who does anything overseas, as well as every single financial institution on the planet. It may be the most arrogant piece of legislation ever written.
Congress had the audacity to pass a law regulating foreign banks on foreign soil. It requires every ‘foreign financial institution’ on the planet (though that term is -very- loosely defined…) to enter into an information sharing agreement with the IRS, or else face steep consequences.
Banks that don’t jump into bed with the IRS risk getting locked out of the US financial system. This is a big deal.
If you’ve ever sent a foreign wire before, you probably know that almost every bank on the planet has a ‘corresponding’ account with one of the major banks in New York.
Banco General in Panama, for example, has corresponding accounts with both Chase and CitiBank. When someone wires US dollars to Banco General, the money first hits one of those corresponding accounts in New York. If Banco General gets shut out of those accounts, it risks being cut off from the global banking system.
Needless to say, this legislation is going to rapidly reduce the significance of the US banking sector in the long run as other countries seek new financial pathways that re-route funds around New York. Congratulations, Congress!
In addition, FATCA also requires new disclosures for US taxpayers with ‘foreign financial accounts’, and it starts this year. Before you file your taxes, here are five things you need to know:
[Editor's note: The following does not constitute tax advice, rather a friendly reminder of what the requirements are. Always consult with your tax advisor.]
1) If you had a ‘Foreign ‘Financial Asset’ in 2011, you may need to file form 8938 this year.
The term ‘Foreign Financial Asset’ covers a lot of ground and is ambiguously defined. They use terms like financial asset, financial account, and foreign financial institution to define each other.
It’s like saying, “What is dark? The opposite of light. So what is light? The opposite of dark.”
Ultimately, the onus is on the taxpayer to figure it out.
In general, foreign bank accounts and foreign brokerage accounts must be reported in Part I of the form.
In Part II of the form, taxpayers must also report interests in foreign entities that they own. For example, if you own 100% of a Cook Islands LLC, this would count as a foreign financial asset and must be reported in Part II.
*The exception here is if you are already reporting this company on form 5471 or 8865. This depends on if/how you elected to classify the entity on form 8832. For example, if you elect to classify a foreign entity as a corporation, you should report it on form 5471, not the FATCA form 8938.
2) GOLD is a bit tricky.
If you have an account with an organization like GoldMoney.com that takes in deposits from the banking system, this is akin to a financial institution and financial account. It must be reported on Part I of the form.
Perth Mint Certificates also count and should be reported as financial assets.
Physical gold stored in a safety deposit box overseas, however, is not a financial asset and does not need to be reported.
3) Foreign real estate does not need to be reported.
If you own foreign real estate -personally-, it does not count as a financial asset and does not need to be reported. If, however, you own shares of a foreign company which owns foreign real estate, you do need to report the company as a financial asset.
4) The 8938 does NOT replace the FBAR
You may already be accustomed to filing the Foreign Bank Account Reporting form TDF 90-22.1 each year to the US Treasury by June 30th. This new form 8938 does NOT replace the FBAR. You must file form 8938 in ADDITION to the FBAR.
5) There is a threshold for filing form 8938.
The two major stipulations are:
a) whether you are filing as a single taxpayer, or jointly with your spouse
b) whether you live in the United States or overseas
Then the IRS has two different thresholds– what the aggregate value of the financial assets were on the last day of 2011, and what the maximum aggregate value of the financial assets were at any time during the year.
The chart below summarizes the reporting thresholds. If you meet or exceed the threshold for your category, you’ll need to file form 8938 with your 1040 by April 18th this year.
Filling out the forms may be a pain, but it’s important to stay compliant. We can talk about the fraud of taxation and the lack of its moral or legal basis all day long… but the only way you’re going to legitimately get away with not paying US taxes is to give up your US citizenship.
Until you’re willing to take that step, you should stay compliant and keep filing the forms. Unless, of course, you have a panache for dayglow orange jumpsuits.
Statistics: Posted by yoda — Thu Mar 22, 2012 10:42 am
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How To Cripple the Real Estate Market in Five Easy Steps
March 19, 2012
Central Planning has crippled the real estate market to "save" their core constituency, the banks.
If you were head of Central Planning (howdy, Ben!) and were tasked with crippling the real estate market, here’s what you would recommend.
1. Choke the market and banking sector with zombie banks. Central Planning creates zombie banks in one easy step: it allows insolvent banks to mark their impaired "real estate owned" to fantasy rather than to market. This enables the banks to survive in a deathless state, propped up by free money from the Federal Reserve and lax regulations that enable fantasy accounting and all sorts of off-balance sheet trickery.
Zombie banks have no incentive to auction off their holdings of real estate with defaulted, underwater or otherwise impaired mortgages, for having the market discover the price of these properties would immediately reveal the insolvency of the bank as properties it held on its books at (say) $400,000 were actually only worth $200,000. Since the mortgage is (say) $350,000, then the bank would be forced to recognize a $150,000 loss (actually more with transaction fees, repair of the derelict property, etc.).
If the bank’s entire portfolio of phantom-value properties was auctioned off or its price discovered by the market, the bank would be declared insolvent and closed.
So instead the zombie banks’ impaired properties clog the market, unlisted, unsold, indefinitely held off the market until unicorns arrive and valuations return to bubblicious 2006 levels where the bank can unload them with no loss.
Since those valuations haven’t arrived, millions of properties are being held off the market. This "shadow inventory" is well-known (tens of thousands of people are living rent and mortgage-free in homes that the banks have yet to even put in the foreclosure pipeline), so no one has any confidence that "the bottom is in." Confidence cannot be restored until the market clears the inventory and a real bottom is established.
This destruction of confidence undermines the entire market. Zombie banks create zombie valuations. Who can say valuations won’t decline once the shadow inventory finally hits the market?
Keeping zombie banks alive via bogus valuations and shadow inventory of derelict and defaulted homes has another consequence: banks themselves cannot be confident that prices won’t decline further, so it makes no sense for them to put capital at risk by issuing mortgages on real estate.
2. Have the central bank (the Federal Reserve) buy up $1 trillion in toxic, impaired mortgages. If these mortgages were such a great deal, then why didn’t private buyers snap them up? Exactly: they were fetid garbage no private buyer would touch except at steep discounts that would have sent the banks into insolvency. (That isn’t allowed in crony-capitalist State-run economies.)
The market was thus denied the opportunity to discover the price of all this mortgage debt, and this effectively destroyed the private market for mortgages. Literally 99% of all mortgages in the U.S. are guaranteed by the Central State. Suppressing market price discovery works just as well in the mortgage market as it does in the housing market.
3. Lower the rate that banks can borrow from the Fed to zero, and then pay the banks interest on all funds deposited at the Fed. I wish we had this option, don’t you? We could borrow $1 billion from the Fed at zero interest, then deposit the $1 billion with the Fed and skim risk-free interest.
But the real-estate effect of ZIRP (zero-interest rate policy) is to lower the mortgage rate to such a low level that it makes no sense to take on the risks and unknowns of real estate valuations for such a paltry return. After all, what if the bank loans $300,000 on a $400,000 home, the value subsequently drops to $300,000 and the buyer defaults? The bank will lose capital it can’t afford to lose dumping the property at auction.
Better to avoid the mortgage market altogether by refusing most applicants as risks–and given the high debt levels of most households, they may indeed be poor risks.
4. Try to prop up the housing market by giving poor credit risk buyers loans with only 3% down. This generates a new pool of ready buyers, but since the government is guaranteeing the loan, qualifying is easy and the buyers only have a few thousand dollars of skin in the game. This means defaulting is not very painful, especially if it takes the lender a few years to foreclose on the property.
The net effect of subsidizing poor credit risks to buy houses is that another pool of uncertainty is created, as these buyers are defaulting in droves, dumping inventory that had just been cleared back on the market. (The default rates of FHA loans is skyrocketing, and now the taxpayers will have to bail out the FHA.)
This is what happens when you try to prop up the market with unqualified buyers and 3% down mortgages–those buyers bail out in huge numbers and the homes return to the inventory. The clearing of inventory was as phantom as the real estate valuations on the banks’ balance sheet.
5. Load young people up with the equivalent of a mortgage in student loans. That insures that the majority of potential new homebuyers won’t be qualified to buy a house–they’re already indentured to the banks for student loans. Those fortunate few who get good-paying jobs will qualify for a mortgage when they’re getting grey hair; most will never qualify, having been buried by impossible-to-default student loans.
OK,let’s see how our Organs of Central Planning are doing: check, check, check, check, check: a perfect score! they’re doing everything possible to cripple the real estate market.
Do they care? Of course not; the only goal is to keep the zombie banks alive, regardless of the cost to the nation. Great work, Ben, Barack, Timmy and the rest of the gang at Central Planning: thanks to your policies, the real estate market will never clear and therefore it can never be restored to health.
Statistics: Posted by yoda — Mon Mar 19, 2012 12:36 am
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