Archive for the ‘economy’ tag
This graphic shows part of the estimated $21 trillion in assets that is being funneled through other parts of the world by the rich in order to take advantage of lax tax codes in other nations or to dodge paying taxes in their native countries altogether:
According to this article from The Guardian:
… some experts believe the amount of assets being held offshore is so large that accounting for it fully would radically alter the balance of financial power between countries. The French economist Thomas Piketty, an expert on inequality who helps compile the World Top Incomes Database, says research by his colleagues has shown that “the wealth held in tax havens is probably sufficiently substantial to turn Europe into a very large net creditor with respect to the rest of the world.”
In other words, even a solution to the eurozone’s seemingly endless sovereign debt crisis might be within reach – if only Europe’s governments could get a grip on the wallets of their own wealthiest citizens.
It’s both shocking and disconcerting to think about how much of that potential tax money could be used to improve the lives of the poor, boost education, create new infrastructure and support life-saving research, all so the super rich can stroke their massive egos and satiate their near limitless greed.
According to the non-partisan Congressional Budget Office, the federal tax rate across all income brackets has reached a 30-year low from 1979 to 2009. Meanwhile:
Although the detailed data that form the basis of CBO’s estimates in this report are available only through 2009, other data can provide some insight into more-recent changes in the distribution of income. Those data suggest that income for households toward the higher end of the distribution increased more rapidly than income for households elsewhere in the income distribution in 2010.
Here’s a chart from the CBO:
Here is quite an enlightening inside look at one of the nation’s largest financial firms, in which Greg Smith, Goldman Sachs executive director and head of the company’s equity derivatives branch in Africa, Europe and the Middle East, announces his plans to resign from the company. Here is a snippet:
Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.
How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.
Cynics like myself won’t find anything surprising in the fact that Goldman Sachs suits were advising their underlings on how make money off of their customers even when it might not prove advantageous for their clients. What is more surprising here is Smith’s retelling of the company’s apparent prior policies of attempting to genuinely meet the financial needs of the customers, even if it meant less money in company coffers. I laud Smith for being so forthcoming, of course, but I’m afraid Goldman Sach’s supposed policies when he was an up and comer are more of an eyebrow raiser. Its current money grubbing tactics should surprise no one.
Thanks to John Eisenhauer @johneyes for posting this on Twitter:
When some1 talks about job creation under #Bush & #Obama show this graph: pensitoreview.com/2010/10/11/oba… | #tcot #conservative #P2 #P21 #PX #obama #ff
Here is the article and the graph:
As mentioned on today’s edition of Fareed Zakaria’s GPS, the 2002 Arab Development Report identified three key elements that were keeping the Arab League, which includes most of the Middle East and Northern Africa, from achieving increased levels of human development. The three are freedom, the empowerment of women and education. Here is the report.
The sad news is that almost 10 years later, that region isn’t much better off. According to an April 2011 report from the International Monetary Fund, the region faces serious economic challenges in recovering from high unemployment and the effects of the social unrest that has swept across the region (known as the Arab Spring):
The key policy challenges across the region are daunting. For oil importers, the main priority is to raise growth and tackle chronically high unemployment, especially among young people. For oil exporters, the focus should be to strengthen or develop ﬁ nancial systems and promote economic diversiﬁ cation. Recent increases in public spending on non-energy-related sectors should be helpful in diversifying activity toward these sectors and rebalancing regional growth. …
In most MENA economies, chronically high unemployment, especially among young people and the educated, is a long-standing challenge that now must be tackled urgently. h e fact that unemployment has remained high for so long suggests that the problem is largely structural—stemming from skill mismatches, labor market rigidities, and high reservation wages. A lasting solution to the region’s unemployment problem will require a combination of permanently higher and inclusive economic growth and reforms to improve the responsiveness of labor markets.
Also according to the IMF, the collective GDP of the Arab League is abysmally low. Estimates from 2007 show that Arab League nations had a GDP (purchasing power parity) of about $2.765 trillion, while India alone had a GDP of $2.818 trillion in that year.
As for education, a 2008 report from World Bank reveals that unemployment was averaging 14 percent in the Middle East and North Africa, which is higher than most everywhere else in the world other than sub-Saharan Africa, and the region has yet to see the positive gains in education that have been shown in parts of Latin America and in other developing regions. This part of the introduction to the report tracks the changes in education in the MENA in the last half century:
Since the early 1960s, the MENA region has registered tremendous gains in terms of more equitable access to formal education. In the 1950s, very few children, particularly girls, were attending formal schools. Now most countries in MENA register full or close to full enrollment in basic education and secondary and tertiary education rates equivalent to countries in other regions at comparable levels of development. Moreover, the region no longer has severe gender disparities in secondary and tertiary education. As a result, most MENA countries have been able to achieve a significant decline in fertility and infant mortality, as well as a rapid increase in life expectancy. The World Bank is proud of being a partner of the region over the course of this impressive evolution.
Notwithstanding these successes—and the considerable resources invested in education—reforms have not fully delivered on their promises. In particular, the relationship between education and economic growth has remained weak, the divide between education and employment has not been bridged, and the quality of education continues to be disappointing. Also, the region has not yet caught up with the rest of the world in terms of adult literacy rates and the average years of schooling in the population aged 15 and above. Despite considerable growth in the level of educational attainment, there continues to be an “education gap” with other regions, in absolute terms.
Women, of course, continue to be forced to wear burkas across the region and educational and career opportunities for half of the MENA population are even bleaker.
Zakaria didn’t mention it — probably because it would have been too controversial for his show — but one fact that is hard to ignore is the pervasiveness of religion in the region. For the faithful, education and economic advancement aren’t exactly high priorities in these regions, and that has been borne out by centuries of religious feuding, wars and general social turmoil, so much so that any kind of educational and economic advancements in the Middle East and Africa will have to take place in spite of the religious fervor that continues to dominate. History has shown that the least developed nations in the world have also been the most superstitious and religious, with the United States being the most obvious and glaring exception.
So, let me get this straight: leaders in Washington are essentially quibbling about $5 billion — Republicans have proposed $39 billion in cuts, while the Democrats came back with $34 billion — when we are one day from a government shutdown? This is the basic impasse? Stunning.
What’s more, Tea Party officials, known for their anti-spending rhetoric, actually voted against a bill that would have at least kept the government running for another week, citing incoherent reasons.
Here’s the brilliant Michelle Bachmann:
I had previously pledged to reject any [budget bill] which does not defund that (health care reform) spending. Unfortunately, today’s [bill] does nothing to defund ObamaCare and that is why I voted ‘no’.
Why would the budget bill defund that spending? The health care bill already passed, and has little to do with current negotiations. So far as I know, for health care funding to be removed from current budget considerations, Congress would have to go back and repeal the already passed law and that repeal would then have to go back to the president’s desk for a signature, which we all know, would be a futile exercise since health care reform was one of Obama’s main domestic goals.
Further, we know from past studies that a government shutdown will cost money. A lot of it. The shutdown of the early-1990s cost an estimated $245 million to $607 million, and the one in the mid-90s cost about $1.4 billion. Thus, the advocates of a shutdown, in their notions about reining in spending and their near-hysterical attempts to do anything in their power to thwart the Obama and the Dems’ policies, would essentially bring more, not less, financial burden to the American people. Stunning again.
Tell House Speaker John Boehner that the sky is, in fact, blue, and he will invariably say it’s purple if he’s convinced himself that that’s the case. Unless, of course, he’s colorblind. Doubtful. Then again, many of us might be colorblind since some have claimed that Boehner actually isn’t white but a drab shade of orange.
But I digress. Boehner is positively convinced that the GOP’s plan to trim the federal budget and right the economy is the best measure for the nation. A Goldman Sachs report from last month says otherwise.
Here’s a snippet from a recent L.A. Times article:
Spending cuts approved by House Republicans would act as a drag on the U.S. economy, according to a Wall Street analysis that put new pressure on the political debate in Washington.
The report by the investment firm Goldman Sachs said the cuts would reduce the growth in gross domestic product by up to 2 percentage points this year, essentially cutting in half the nation’s projected economic growth for 2011.
The analysis, prepared for the firm’s clients, represents the first independent economic assessment of the congressional budget fight, which could lead to a government shutdown as early as next week.
The Republican plan to slash $61 billion from the budget would cut estimated growth for this year in half.
Ever the stubborn one, Boehner, through a spokesman, said the Goldman Sachs report represented “the same outdated Washington mind-set” as the American Recovery and Reinvestment Act of 2009 that pumped about $800 billion in federal funds into the economy during the worst recession since the Great Depression. While many experts at the time said the measure did not go far enough — Paul Krugman at the time said
… it’s widely believed that political considerations led to a plan that was weaker and contains more tax cuts than it should have — that Mr. Obama compromised in advance in the hope of gaining broad bipartisan support.
— the influx of new capital into the economy obviously helped to stabilize markets. If the GOP had gotten its way at the time, presumably by cutting taxes for the wealthiest among us, supporting more deregulation and simply allowing the economy to self-correct, there’s no telling how deep the ship would have sunk.
Below is a graph from the AP on the budget deficit (or surplus) since the Reagan years. The budget under Obama’s watch is estimated to begin moving closer toward the center in a few years. Clinton presided over the only surplus in recent memory, after inheriting a deficit from Mr. Trickle Down’s heir apparent, H.W. Bush.
This article presents an interesting look at what went wrong in the years leading up to the economic recession and unearths the dangers of financial deregulation advocated under former Federal Reserve chairman Alan Greenspan and George W. Bush. A study referenced in the article finds fault, not just with Greenspan, but with Greenspan’s successor, Ben Bernanke, who apparently didn’t recognize a crisis was brewing.
WASHINGTON — The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a federal inquiry.
The commission that investigated the crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors and risky bets on securities backed by the loans.
Of the 10 commission members, the six appointed by Democrats endorsed the final report. Three Republican members have prepared a dissent focusing on a narrower set of causes; a fourth Republican, Peter J. Wallison, has his own dissent, calling policies to promote homeownership the major culprit. The panel was hobbled repeatedly by internal divisions and staff turnover.
The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as a “prime example” of negligence.
It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to collapse in September 2008 after earlier bailing out another bank, Bear Stearns, with Fed help — as having “added to the uncertainty and panic in the financial markets.”
Democrats also come under fire. The decision in 2000 to shield the exotic financial instruments known as over-the-counter derivatives from regulation, made during the last year of President Bill Clinton’s term, is called “a key turning point in the march toward the financial crisis.”
Timothy F. Geithner, who was president of the Federal Reserve Bank of New York during the crisis and is now the Treasury secretary, was not unscathed; the report finds that the New York Fed missed signs of trouble at Citigroup and Lehman, though it did not have the main responsibility for overseeing them.
Former and current officials named in the report, as well as financial institutions, declined Tuesday to comment before the report was released.
We should have seen it coming, that, following the election of one of the most progressive presidents in the last century, bitter Republicans in Congress would, first, attempt to block nearly every piece of legislation proposed by the Obama, thus rendering them the party of “No” (but for only four years, of course), and second, a frustrated electorate (including the ones who have long since lost the inspiration that led them to vote for the president in the first place) will most certainly vote in a majority of Republicans in one, if not both, houses of Congress next week. And so, the predictable, eye-rubbing pattern persists.
On the second part of the previous paragraph, the consequences will be clear: more Bush-Reagan era policies that bolster the rich in spite of the poor, possible repeal or stunting of the new health care bill, reversal of economy-boosting policies that experts say wasn’t strong enough to begin with and general malaise in Congress. Or, more succinctly from Paul Krugman:
The way the right wants to tell the story — and, I’m afraid, the way it will play in November — is that the Obama team went all out for Keynesian policies, and they failed. So back to supply-side economics!
Here’s some rather damning figures that show the federal debt as a percentage of GDP increasing in each of the last six Republican presidential terms and decreasing in each of the last seven Democratic terms going dating back to Truman. Only under Eisenhower and once under Nixon did the federal debt as a percentage of GDP decrease under a Republican president.
What about modern Republican heroes, Reagan, Bush I and Bush II? The debt increased 11.3 percent in Reagan’s first term and 9.3 in his second. Bush I: an increase of 15 percent. Bush II: increases of 7.1 percent and 20 percent. And it’s these folks who talk about fiscal conservatism and responsibility?
Reading reports this week about three people killed amidst protests about a bill expected to soon pass Greece’s parliament, which is an attempt to rein in that nation’s ballooning debt, one may, surprisingly, be thankful that fringe groups in this country, namely the Tea Party, have been largely (I say that with hesitation), peaceful.
As it turns out, even countries led by a socialist, Prime Minister George Papandreou, can get riled up about the government lurching ever more into their private lives and, dare I say, into their pocket books.
According to the above-linked New York Times article
The austerity measures that spurred the current unrest aim to squeeze savings of some $38 billion through 2012. They include public sector salary cuts, higher taxes on alcohol and cigarettes, and tighter retirement rules.
A local candidate for a government office in the county in which I live recently announced his aspirations to keep tax low while supporting and improving infrastructure. One may already have noticed the incongruent arguments of both the Grecian protesters and the local potential politician.
You have to have one or the other. The protesters, while their country is shackled with debt, decry their government’s proposed efforts to prevent the nation’s economic collapse (reduced spending and upped taxes), while the right wingers rail against paying taxes, or increased taxes, in one breath, and they present a hollow case for bettering schools and infrastructure and the like in the next breath.
Once and for all: Taxes get things done. And for the Greeks: the only two options in preventing an economic collapse in a country on the brink are raising taxes and/or cutting spending. There are no other options (Save invading another country and outright taking their resources). Rioting isn’t going to solve a thing. Quite the contrary, and much to Occam’s chagrin, it will result in a new, and more complicated set of problems that will, subsequently, lay heavy on the government’s already depleted coffers.
If these reportedly “White, Republican, Older Male with Money” Tea Party supporters had a lick of logic at all, they would recognize their own non sequitur; that is, that government can’t function without some measure of taxes, and yes, if we want those functions to be the best they can be, erstwhile maintaining the nation’s economic sustainability, sometimes those taxes must be raised to make up the difference. Thus, we can’t have it both ways. We can’t have lower taxes, and at the same time, better infrastructure and services. That’s an illogical presupposition. So, as I was getting around to saying before, if the apparently affluent older males of the Tea Party had it their way, and if we took that way to its conclusive end, we would all live on separate homesteads on are own little archipelagos of land and isolated. We would be free-rangers. Each for his own.
But no! We as a nation have decided, the Founders, even the conservative ones, being light years more forward thinking and erudite than the current emotion-drenched talking heads of today, that the best thing for this nation was to form a representative government with the high calling to
provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity …