DougM

Goldman Sachs: Still Arrogant and Unrepentant

Almost as bad as the fact that this company is borrowing taxpayer's money at close to 0% is the fact that the managers of this company are rewarding themselves with an outsized share of profits that come directly out of the shareholders' pockets. Looking at where the winnings - er, I mean earnings, are coming from, it's not a stretch to say that shareholders of GS are more like investors in a publically-traded hedge fund. At least at a real hedge fund investors would only be paying the managers 20% of the profits; what fraction of the profits are GS shareholders being allowed to keep?

On Jul 26 12:24 PM Chemist29 wrote:

> if you think goldman makes too much money for its shareholders, buy the stock.

Palladium: The New Platinum

Um...palladium, along with platinum and rhodium are *already* used in catalytic converters. Also, note that the reactions are catalyzed by the exposed surface area, so typically they're plated around ceramic cores. In 2007 nano-technology was introduced to reduce the amount of metal needed for a given catalytic surface area. Re. cold fusion, don't hold your breath. Re. hydrogen storage, this presupposes that we ever transition to hydrogen as a fuel. This is extremely unlikely due to the lack of credible hydrogen sources (most is produced from nat gas), the difficulty of transporting hydrogen by pipeline (the small molecules escape too easily), the high cost of hydrogen vehicles, and because there are too many easier ways to use any new hydrogen source from, say, nuclear or renewable power, such as replacing nat gas in oil refineries, fertilizer production, coal or biomass gassification, synthetic liquid fuels.

Does Crude's Price Reflect Reality?

You haven't considered the non-OPEC supply, which is increasingly strained. Moreover, the marginal additional non-OPEC barrels (tar sands, deep water sites) are costly to produce - this supply would dry up overnight if prices went down to $20. Finally, the market is forward-looking; the resource is finite and the population of the world is still rising.

What Were the People of California Thinking?

Through the federal tax system Californians as a group get back 70 cents for every dollar we send to Washington - it's redistributive policies writ large. The state could solve its budget problems without a federal bailout by secession! (Just kidding, but the point is that it seems petty to begrudge a bailout to a state that's paying more than it's "fair share" to the feds.)

Social Security - At the Crossroad?

SS is the major engine of saving in the economy?!? And just where do you think all the extra tax money you feel should be extracted from the economy will come from, especially targetting people with the highest propensity to save and invest. What you really seem to want is less private savings and investments, and more government spending, particularly on transfer programs that simply fund consumption, that will be called "investment".

Social Security: Bankrupt System Will Impact Markets Sooner than Expected

Jason, you are starting to get the picture, whereas Sether is clueless. Once taxes get too high, younger workers will stop paying one way or another, unless (Sether) your plan is to reintroduce slavery.

Those with portable skills and the will to do so will move out of the country. Others such as professional people will work fewer hours, perhaps working only 6 months of the year or less, rather than work an additional 12 months for minimal net take-home pay. Those with the means to do so and of the right age will retire early, lowering their income (and not producing anything anymore) and consuming their savings while benefiting from programs like free healthcare. Small businesses will be hurt the worst, they'll presumably have to pass on the costs in higher prices for goods and services, or by paying lower wages to fewer workers, or both. Those willing to risk punishment may begin to form an underground economy. Finally and worst of all, future generations will see that there is little to be gained economically by (say) spending years in school training to be a physician, versus taking their high-school education and going immediately into a government job such as firefighting where the pay's almost as good and much of the compensation flows in the form of generous early-retirement benefits.

Why Mankiw Is Wrong About Negative Interest Rates

While I agree with you and with Shedlock completely, you've both missed something in Mankiw's proposal: he leads with the Fed setting the interest rate on all the "digital" money to a negative rate. I believe he gives the example of returning 97 cents for a dollar invested, or something along those lines. Anticipating that this would simply lead to people hoarding banknotes, he backstops his plan with forced evapouration of currency from the hands of evil savers.

Oil Futures: Money for the Taking?

In thinking about the producer's situation a bit more, it occurs to me that in trading off some lower current production for higher future prices, there's a cash flow issue. Selling (shorting) a futures contract might not generate a near-term cash flow for the producer; in fact, they might have to post some margin against the position to carry it to expiration. Worse still, the contract is denominated in dollars, the value of which are hard to predict the farther into the future you look.

Oil Futures: Money for the Taking?

It certainly seems true that storage is maxed out on this trade, but the underlying question is still hanging out there. Producers have (in effect) unlimited storage. So if this was such a great trade, you'd expect them to be piling into the long end of the curve selling contracts like crazy against future production while simultaneously reducing current production levels.

Who Should Be Taxed?

This link may be of interest:

www.taxfoundation.org/...

It doesn't split out the upper 0.1%, but I have these figures from a 2005 article in the NYT:

Returns: 145,000
Income split: $1.2 million
Average income: $3 million
Total income: $435 billion

Putting it all together and rounding the numbers a bit:

Lowest 50%: $1 trillion
50-75%: $1.5 trillion
75-90%: $1.5 trillion
90-95%: $1 trillion
95-99%: $1 trillion
99-99.9%: $1 trillion
Top 0.1%: $0.5 trillion

2/3 of the income available to be taxed is in the range from 75%-99.9%, i.e. from $62k to $1.2m. Taxing the upper 0.1% at a 90% rate won't generate as much money as raising taxes on the larger group to, say, 50%.

Leaving aside the question of whether taking more of the money earned by the 0.1% is a good idea as a matter of "justice", the fact remains that if we don't reign in government spending but still want to close the budget deficits, through income taxation alone, this upper-middle group will have to feel the pain. Once Clinton-era rates are back in effect, what then? This group, which is also a source of a lot of political support, probably can't be squeezed much harder before it makes its displeasure known politically.

Who Should Be Taxed?

Taxing the incomes very rich at super-high rates won't work. Given a choice between paying a huge tax or just giving the money away, most will choose the latter, or simply stop producing and just consumer their wealth until it's gone. Then what?

More importantly, it won't work because there just isn't enough total income available in the ranks of the super-rich. Their incomes are high, but their numbers are small. For similar reasons, taxing the poor won't work - their numbers are large, but their incomes small. Income taxation will fall where it always does, on the "working rich", professionals that make good incomes but not ball-player level incomes, who don't make enough to just stop working, and who can't restructure their income in some way so as to avoid the taxes. Income taxes always fall on this group because, as Willie Sutton said, "that's where the money is".

My bet is that once the government's squeezed as much as it can from these people, we'll end up with a VAT, or try to square the books via taxes on forms of consumption the government wants to discourage. You can already see the example of this with the high taxes on cigarettes, alchohol, etc. In the future, carbon taxes, etc. JMHO.

Why I Think Jeremy Siegel's Argument Is Flawed

I agree with Toro. Here's a simpler argument: the S&P index is *already* cap-weighted. If you own the index, you own the companies in it, in proportion to the cap weighting. Here's a thought experiment: suppose you could buy up 100% of the shares of 100% of the companies in the index. You would then "own" 100% of the gains and losses from those companies, via straight-up summation. Now back it off to your actual ownership of less than 100%, and it scales back down the same way - you still end up with a fraction of a straight-up summation, not a weighted average. For Siegel's argument to be correct, you'd have to own a non-cap-weighted index - in fact, you'd have to own an index weighted per his proposed methodology.

Taxpayers vs. Investors: The Imminent Disinformation Schism

Thanks for the informative article. With respect, I think you're overstating the split between investors and taxpayers. As someone who considers himself both, I feel that the government is throwing both groups under the bus. The reason is simple: the majority of voters pay little or no taxes, and the overwhelming majority have saved nothing for their future. Therefore, it costs politicians relatively little to pitch us to the wolves in order to buy votes; all they have to do is make sure politically well-connected folks benefit sufficiently from their policies to be able to preserve their wealth and keep those campaign contributions flowing.

Obama Wants a 'Better Plan'? Here's One: Bite the Bullet

So, I don't live in a McMansion and drive a fancy car purchased on credit, and have tried to save money for my old age so I won't be dependent on the government, and I've "stolen" my savings from my neighors who've leveraged themselves to the hilt to live a lifestyle their economic productivity simply can't support, ever? What's the country come to?

The UN, China Want to Ditch the Dollar

China is running a very old-fashioned merchantilist policy that is ultimately self-defeating. They can't have it both ways. In the long run, they'll have to run a more balanced economy vis-a-vis the rest of the world.