Wednesday, December 11, 2013

The Wealthy and Politicians Don't Like Paying Taxes

Yahoo - CNBC - The rich pay all the taxes. That is the headline of an article by CNBC, there is a video or their report included in the link. Those poor rich people, don't you feel sorry for them.

According to a government report the top earners pay for all the taxes and people in the bottom 40% receive more in government benefits then they pay out, this is presented as outrageous; but, it is also very misleading. Lets start with some basics. According to this report, the lowest income group, the bottom 20%, made $8,100; but, received $25,000 in "transfers". Huh? I know people who made under $8,100 and the government did not send them $25,000. Oh, wait are they including the unemployed or people on Social Security? I bet they are and lets consider that. We all contribute to unemployment insurance and social security and that money is paid to the government, when receive it, it is not charity. If you pay into social security for 40 years, when you finally get it back it is not coming from the tax on "the wealthy".

As income inequality has grown I am reading and seeing more and more from "libertarians" and financial media whining that they shouldn't have to pay taxes. We hear repeated all over the news when they talk about the "job creators" and it is still a lie. If they were really sincere then they would asked to be taxed based upon the number of full time jobs they created in the United States. Maybe that doesn't work for the wealthy because they certainly haven't created any jobs recently. In fact, we have lost millions of jobs because of the fraud and abuse that was allowed to go on in Wall Street and by banks which eventually led to our recession. Why don't we call them job exporters instead because most of the jobs that have been created in the past few years were jobs that these same people outsourced to China and India.

I have talked about some of this before. Personally, I am in favor of a flat income tax, everyone pays 10% or whatever percent of their income regardless of how it is derived, no deductions. It is slightly more complicated than that; but, not much. I don't want to tax people on welfare income because that then just becomes a paper chase. If hand you a dollar and make you hand me ten cents back, doesn't it make more sense just to hand you 90 cents in the first place. The same should be applied to military pay.

Some people don't like income tax and prefer a sales tax. I have a couple of problems with that. The most important one is very simple again, I want to tax people based on how they have benefited from the nation. We have built a lot of infrastructure and business relies on that infrastructure. Instead we give tax breaks to companies. Those breaks don't show up in the income tax report done by the Congressional Budget Office.

We are seeing this game end for America and the West. We have given away our industrial base and debased our currencies. After the financial crisis, the pie got smaller. The cost of that crisis was all born by the bottom 60% us. The only winners were the top 10%. From the beginning this blog has talked about the financial crisis, what led to it and where it is heading next. I don't know why this information is less read; but, in many ways it is the most critical to our immediate future. Next year should be really interesting.

European Banks and You

I don't think most people understand that after the crash of 2007, the Federal Reserve "lent" hundreds of billions of dollars from the TARP fund to European banks. In addition, to provide liquidity, they also traded billions of dollars for a supposedly equivalent amount of Euros and other European currencies. At the time this happened I wrote about how badly it exposed us to European bank failures, it still does.

The reason I mention the above is so that when you read the following two linked articles you will understand that this is not just some problem over there; but, was intended to make their guaranteed failure take our banks with them. None of this is an accident. I used to play poker a lot, I even beat a couple of professionals and won a few tournaments (I am talking about in person tournaments at proper casinos - I won hundred on line and with non-pros). What I learned from playing pros is that they don't make mistakes very often and watch everything that goes on even when they are not in the hand.

People that are real professionals do the same thing. I am not talking about stock traders, I am talking about smart investors and money managers. People like Greenspan and Bernanke and Paulson do not make mistakes no matter what some media might like you to believe. They are the smartest guys in the room. They would have us believe that Greenspan was a follower of Ayn Rand and he was; but, he is also really smart and violated Ayn Rand's philosophy by agreeing to lend money to failed institutions. He believes in something even more than free markets, he believes in globalism.

Yahoo - Reuters - Europe edges toward plan to close failing banks. The European Union has been working on a program for closing failing banks. Now you have to ask why, don't they have laws for closing banks and businesses, they do, they have bankruptcy law too. The claim is that because of how Europe is now integrated, they have to agree on how to close banks. NO, they don't. There is a line somewhere in the article where it says that because they are not like the United States having the same power to change things is more complicated. They made it clear previously that the EU believes the past problems were not fixed because they lacked a true political union. This is all being used to achieve that goal.

Yahoo - CNBC - Europe outlines plan on closing troubled banks. What a shock, they arrived at a plan, it just happens to be in agreement with the IMF plan and the same one that has been agreed to by the United States and the European Central Bank, it just took them more time to adopt it. Maybe that's what they meant in the previous article? LOL.

In poker, the best don't play the cards, they play the player. It is no different in finance. When a group of poker players is working together, we call that cheating. In finance, they call it cooperation. The game is rigged and the purpose is simple. European banks are going to fail and they already decided which ones, read the second article where it says they have already identified the banks that could not survive their stress tests and are at risk.

Lets assume for the moment, as the Europeans apparently do, that some European banks are going to fail and go away, not just restructure, go away. What happens if a country like Greece ceases having any national banks? They financial system would then be completely dependent on the EU.