les pensées insouciantes

S&P High Is a Show of Faith in Fed | WSJ

The single strongest explanation for stocks’ “renaissance” of the past six years has been easy money from the world’s central banks, Michael Hartnett, an investment strategist at Bank of America Merrill Lynch, told clients on Thursday.

“Over the past six years there have been 503 global rate cuts, $11.6 trillion of new central-bank liquidity and irrational exuberance in bond markets blessed by policy makers,” he said. How much longer will stocks rise “will depend on whether European and Chinese growth expectations recover before reflation in the U.S. and Japan” forces authorities to slow the flow of easy money and kill the rally.

So far, annual inflation has been benign enough that policy makers have largely ignored it, but U.S. consumer prices nevertheless are up 13% since 2007. Stock indexes only recently have moved above their levels of that period, meaning they remain far from records after adjusting for inflation.

Because so much of the recovery has depended on the Fed, investors continue to worry that the stock recovery will dry up once the Fed stops pumping money into financial markets.

Any questions?

# The Fed

# Inflation

# Irrational Exuberance

In 1988, I invested most of the earnings from this lecture circuit acquiring the leasehold on Connecticut’s Stratford Inn. Hotels, inns and restaurants have always held a special fascination for me. The Stratford Inn promised the realization of a longtime dream to own a combination hotel, restaurant and public conference facility — complete with an experienced manager and staff.

In retrospect, I wish I had known more about the hazards and difficulties of such a business, especially during a recession of the kind that hit New England just as I was acquiring the inn’s 43-year leasehold. I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.

Today we are much closer to a general acknowledgment that government must encourage business to expand and grow. Bill Clinton, Paul Tsongas, Bob Kerrey and others have, I believe, changed the debate of our party. We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.

My own business perspective has been limited to that small hotel and restaurant in Stratford, Conn., with an especially difficult lease and a severe recession. But my business associates and I also lived with federal, state and local rules that were all passed with the objective of helping employees, protecting the environment, raising tax dollars for schools, protecting our customers from fire hazards, etc. While I never have doubted the worthiness of any of these goals, the concept that most often eludes legislators is: “Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape.” It is a simple concern that is nonetheless often ignored by legislators.

A Politician’s Dream Is a Businessman’s Nightmare: A 1992 column on the realities of running a business, by George McGovern, the 1972 Democratic presidential candidate, who passed away at the age of 90 in October.

Timely read.

So, we should probably get rid of most tax deductions and then just lower income tax rates

Per Kiplinger:

About 45 million of us itemize on our 1040s — claiming more than $1 trillion worth of deductions. That’s right: $1,000,000,000,000, a number rarely spoken out loud until Congress started tying itself up in knots trying to deal with the budget deficit and national debt.

Another 92 million taxpayers claim about $700 billion worth using standard deductions…

That’s $1.7 trillion in deductions.

So, median income is ~$50,000 (2011 data) in the U.S. The standard deduction for a single filer was $5,800 in 2011.

Why not just drop income tax rates accordingly and simplify the process?

$5,800 is 11.6% of $50,000.

So, say, 10% across each bracket, i.e. the 25% bracket becomes 22.5%.

Leave room for just the handful of legitimate deductions.

Honestly, only so many that are actually valuable and don’t have distortionary or unintended consequences elsewhere. Charitable donations, and until we decouple insurance from one’s employer, self-employed health insurance premium deductions, maybe teacher supply purchases…

Big headline items like the mortgage interest deduction? One side will say “But, it encourages home ownership.” The other side will say “People just end up buying more house than they should or taking out a larger mortgage, thus causing artificial inflation in home prices, and negating any benefit to the deduction.”

Again, just lower one’s income tax rate, and they won’t need the deductions.

Makes sense, right?

So, why don’t we do it?

The Lady:

Then, the government can’t borrow $1.7 Trillion interest free for a year.

Smart girl.

We make fun of San Francisco and San Francisco values, but I’m very concerned for the future because San Francisco is actually spreading out. The State of California, which is sinking beneath the waves, is literally at the state level controlled by San Franciscans. Our Governor Jerry Brown is from San Francisco, our Lieutenant Governor [Gavin] Newsom is from San Francisco, Nancy Pelosi, the Minority Leader of the House is from San Francisco, the Attorney General Kamala Harris, who is a real, I think — and from my perspective it worries me — a real up and comer…who is very left-wing is from San Francisco, both our Senators are from San Francisco, and this small area with very left-wing values, that are not reflected throughout the rest of the state [Ed. or the rest of the country, for that matter], is the political artery to California and often California is the political artery to the rest of the country. So, I think San Francisco, for all of the mocking that has been done about San Francisco values, in many ways I think a cultural coup d’état is going on and that it’s a very powerful city and a center of politics in this country.

— Author Wesley J. Smith

So, given California is the biggest shit-show in the Union, beyond effectively bankrupt, and going down faster than a high-speed ~~boondoggle~~ train, this should be about as damning a denunciation of the far-Left politics and ideology of “San Francisco” possible, no?

Pelosi’s the shortest-lived House majority in fifty-five years

France: The California of Europe™

KAL’s cartoon: this week, austerity.

Funny/Sad.

France: The California of Europe™

And, for reference, I mean that in the most denigrating way possible.

↵ Reblogged from theeconomist

If You're Under 40, Don't Bank on Social Security | WSJ

If Plan A in your retirement scheme is Social Security, it’s time to start working on Plan B.

Based on reports last week from the folks responsible for the Medicare and Social Security Trust Funds, Americans—especially those under age 40—need to reconsider their retirement plans.

Absent major action by lawmakers, the annual reports say the combined assets of the Old-Age and Survivors Insurance and the Disability Insurance trust funds will be exhausted in 2033—three years sooner than was projected last year. The Disability Insurance fund will be exhausted in 2016, two years earlier than last year’s estimate.

Come 2033, just 21 short years from now, Social Security will pay just 75% of scheduled benefits, just 75 cents on the dollar. So, instead of getting, say, $1,000 per month from Social Security, you’ll get $750 per month come 2033.

The trustees forecast that Medicare’s hospital insurance fund would begin to run out of money beginning in 2024.

Previously

# Social Security

# Political Economy

Great news: “Too big to fail” banks even bigger now « Hot Air

Most Americans Still Have No Idea How Bad the U.S. Economy Is

Merry Christmas!

Hope Santa brings you a new pair of underwear.

You’ll need it after reading this…

(#44. Oy.)

House Passes "Entrepreneur Access to Capital Act" Crowdfunding Bill

The U.S. House of Representatives this week passed a variety of measures intended to make it easier for small businesses to raise money. The most notable of the bills, which have had wide bipartisan support, would create an SEC exemption for crowdfunding.

The crowdfunding bill, called the Entrepreneur Access to Capital Act, would allow companies to give out equity stakes in exchange for investments of up to $2 million.

The stakes wouldn’t count against the SEC’s famous 500-shareholder rule. And individual investors would be capped at putting in $10,000 or 10 percent of their annual income.

This is very exciting.

The bill, sponsored by Rep. Patrick McHenry [R-NC10], passed 407-17, with 9 not voting.

You can view the bill here.

Just For Reference™, the 17 Naye votes, all Democrats, were:

Georgia:

GA-5 Lewis, John [D]

Illinois:

IL-9 Schakowsky, Janice [D]

Maryland:

MD-4 Edwards, Donna [D]

MD-7 Cummings, Elijah [D]

Massachusetts:

MA-1 Olver, John [D]

MA-6 Tierney, John [D]

MA-7 Markey, Edward [D]

MA-8 Capuano, Michael [D]

MA-9 Lynch, Stephen [D]

Michigan:

MI-5 Kildee, Dale [D]

MI-15 Dingell, John [D]

New York:

NY-5 Ackerman, Gary [D]

North Carolina:

NC-1 Butterfield, George [D]

NC-4 Price, David [D]

NC-12 Watt, Melvin [D]

NC-13 Miller, R. [D]

Ohio:

OH-10 Kucinich, Dennis [D]

The bill now has to pass the Senate before being signed into law.

(Source: allthingsd.com)

Infographic: The Obama Economy - By The Numbers

I mostly consider myself a libertarian and I was inspired to create the infographic out of a general frustration with the current economic environment. While I don’t solely blame President Obama for this, I do believe his policies have lengthened (and in many ways worsened) this downturn. Although the infographic is implicitly critical of President Obama, I wanted to avoid opinions and evaluate the hard numbers set against statements and promises he has made in the past.

— Web designer and developer John Ekdahl

Been making the rounds.

Empirically, pretty damning.

Recall: