flow5

Time for the U.S. Economy to Reindustrialize

Try the Cannabis Café in Portland, Oregon. I'm sure they allow alarmists and cranks.

Time for the U.S. Economy to Reindustrialize

More MISDIRECTION: "Gretchen Morgenson at the NY Times writes about the tax loss carry-forward "gift" for home builders in the recently signed "Worker, Homeownership and Business Assistance Act of 2009": Home Builders (You Heard That Right) Get a Gift "

Time for the U.S. Economy to Reindustrialize

And the TRADE WAR continues: "BEIJING — China’s top bank regulator said Sunday the weakening U.S. dollar and low interest rates are spurring speculation in stocks and property, distorting global asset prices and threatening the global economic recovery"

Time for the U.S. Economy to Reindustrialize

Past due. We need comprehensive incentives (investment tax credits, and accelerated depreciation on research & development), from our Federal Government: to help reinvigorate our industrial manufacturing base (to produce higher quality & lower cost, goods & services), not the redirection and albatross of $8,000 tax breaks for “new” home buyers, & $6,500 for repeat home speculators (The Worker, Homeownership, and Business Assistance Act of 2009). Not commercial real estate (strip malls, etc.).

We need real economic business investment to be targeted in new technology (in machinery, equipment, & software). We need the Federal Government as the “playing field” has been historically, increasingly competitive, and even more imbalanced (because of dumping, subsidies, tariffs, currency pegs, etc.).

E.g., the “idiosyncratic” Corporate Income Tax (gathered from “Corporate financial statements”), in China is 25%, in Hong Kong is 16%, in Japan is 30%, in Mexico is 25%, in Russia is 20%, but it is a combined Federal & State 39.1% in the U.S. (2nd highest among OCED countries).

These figures are not strictly comparable (equally weighted); but the results are corroborated using the tax revenue as a % of GDP metric):SEE: www.taxfoundation.org/...
SEE also PriceWaterHouseCoopers study where the U.S. is higher than 101 other countries, out of 178: www.doingbusiness.org/...

Bank Lending Stays on the Sidelines

The FOMC can make these banks lend, maybe not in the private sector but they can, and have been, in the public sector. Excess reserves, or predominately, the bank's equivalent (cash assets), represent higher reserve ratios - period.

Lower the renumeration rate on required, excess, and supplemental, reserves and the banks would be forced, or would seek out new loans, and purchase additional securities.

This of course, the FOMC's exit strategy (raise renumeration rates), or likewise, raise reserve ratios, and monetize whatever the FED decides.

How Will Payday Lenders Be Affected by New Bill in Congress?

(1) "Sen. Durbin's bill would create a federal rate cap of 36% on all forms of short term credit"
(2) "almost 100,000 people will be put out of work!"
(3) They use these loans of their own free will, all fees and terms are clearly disclosed

36% is still too high, higher than usury laws imposed prior to that moron Paul Volcker.

England had to address bounced check fees. They were lowered. The same would happen here

drug addicts use drugs on their own free will as well knowing the consquences of their actions

you should work on the illegal immigrants problem which displaces millions of U.S. workers

people like you should find anthor country to live in. you as are most others, completely ignorant of the circumstances upon which these lower income borrowers ask for money, borrowed money that leaves them much worse off financially

Nationalize U.S. Banks

The government would manage the banks more conservatively than the bankers ever have or ever will. Carnage will always confront us.

Increased Government Investment in Banks?

MichaelZZ - who creates jobs...the poor? Disincentives for the rich don't work. And I don't remember where the rich actually pay that large of a percentage anyway...i.e., increases in their taxes will not produce substantial revenues, but are likely to result in fewer jobs.

Everyone pays too much tax. Governments should be smaller. Spending should be smaller. Unilateral transfers to foreigners can be almost completely eliminated. The only item in the Federal Budget Deficit that can't be reduced is interest (from an economic standpoint).

We need to reduce our dependence on foreign oil, increase our competitiveness in world markets (sell higher quality & lower cost, goods & services), etc.

Central Banks Are Destroying Traditional Risk Spread Methodologies

a very literate commentary. but I don't understand why banks would borrow in the Euro-dollar system, which is unregulated (no legal reserves, only "prudential" or liquidity reserves) which has been allowed by the governments and central bankers to create trillions of new inter-national units of account. this deluge of international money has imposed excessive inflationary pressures on prices (e.g., housing, etc.).

Hyperinflation, Here We Come

There are various degrees of hyperinflation. The U.S. will experience a loss in the faith and credit of the Federal Government (unsupportable Federal Debt interest payments), followed by debt repudiation and the issuance of a new currency). There is no time table but at some point the increase in tax collections necessary to cover the Federal, State, & Local debt payments will be exhausted and all debt (public & private) will go into default.

And at the same time, a surfiet of Euro-dollars (dollar denominated assets) will cause a flight from the dollar and a economic catastrophe of unprecedented proportions. It is in no way inevitable but it seems the most probable outcome considering nothing, no nothing, is being done to avert this senario.

The Credit Bubble: Deregulation Gone Wild

(socialize the risk) The Depression program: Home Owner's Refinancing Act (or HOLC), was passed in June 1933 and liquidated in June 1936. At closure HOLC returned a profit (returned $14m in 1951). The agency was authorized to acquire defaulted residential mortgages, from lenders/investors, & provide government bonds to replace & refinance,the defaulted mortgages, at lower interest rates, and for longer maturities (15 years). HOLC bailed out both banks and homeowners (50% of all homeowners were in default).

Originators frequently realized losses on the principle, through acceptance & substitution, based on the terms of a new loan (maximum of 80% of appraised value). The scope of operations translated into current figures, would be loans to 10 million homeowners, for $1.4 trillion (equal to all existing subprime mortgages).

The Credit Bubble: Deregulation Gone Wild

WeezieBenobi: "Socialize the risk, but privatize the profits" – apropos: take the RFC " Between 1933 and 1935, the RFC (socialize) purchased more than $1.7 billion in preferred stock in individual banks.

To gauge the significant size of this agency's activity, in 1935 the total book value of equity capital (including the RFC investment) for all commercial banks was $3.6 billion. New RFC bank investment effectively ended by late 1935, and banks gradually REPURCHASES the government's stock out of their earnings (privatize) when the banks subsequently returned to profitability...& others.

This article opened up "pandora's box". Keynes & his desciples maintained that commercial banks were financial intermediaries. So this Keynesian interpretation inspired the enactment of the DIDMCA of March 31st 1980.

This act provided the legal basis to convert 38,000 financial intermediaries into 38,000 commercial banks. Lending by commercial banks is inflationary. Lending by financial intermediaries is not.

But the "show stopper" is that today, legal reserves are no longer binding. But the obstruction is bigger.

The Act didn't provide direct control over the volume of legal reserves & reserve ratios of all money creating institutions, e.g., pass-thru's: Interbank demand deposits (IBDDs) owned by the repondent banks, held by correspondent banks, and redeposited with the Reserve banks. In order to prevent the PYRAMIDING of reserves, a 100% reserve ratio would have to be applied to these accounts.

In due course, under this Act, our means-of-payment money supply will swell, until it approximates M-3. I.e, since 1942, money creation is a system process. I.e., no bank, or minority group of banks (from an asset standpoint), can expand credit (create money), significantly faster than the majority banks expand. This is the process by which the primary money supply is evolving.