Central Perk: 6 dec. 2010

luni, 6 decembrie 2010

Mish's Global Economic Trend Analysis

Cookies for Susie and Obama's "Temporary" Tax Compromise; Total Cost $900 Billion
$930 Billion in Quarantined $100 Bills to be Burned, Don't Worry Real Cost is Only $120 Million; Security Measures "Too Difficult to Print"
Texas Ratios of Banks and Credit Unions from 3rd Quarter 2010 FDIC / NCUA Reports
San Diego Mayor Jerry Sanders' "Radical Idea" to Cut Costs; Is Sanders a Hero or a Liar?

Cookies for Susie and Obama's "Temporary" Tax Compromise; Total Cost $900 Billion

Posted: 06 Dec 2010 06:49 PM PST

President Obama has agreed to a tax deal that's bound to please deficit-hawk hypocrites on both sides of the aisle. The total cost is $900 billion over the next two years.

Of course the last extension was "temporary" and the next extension will be "temporary" as well.

I have a better idea, why don't we just "temporarily" extend these deals until 2020 and be done with it? We might be in a genuine recovery by then.

Of course we will then have to factor in the idea that we may need to "temporarily" extend the benefits "one" more time lest we sink the nascent 2020 recovery.

Obama's Proposed "Compromise"

Inquiring minds may be asking "Just how compromising is the compromise, and more importantly, what's in it for Susie?" Those are very good questions. The answers can be found in the article Obama Agrees to Extend Tax Cuts for Everyone for Two Years.

President Barack Obama said he'll agree to a two-year extension of all Bush-era tax cuts in exchange for extending federal unemployment insurance. The plan also would cut the payroll tax by 2 percentage points.

Obama said he would accept a lower rate for the estate tax than Democrats wanted in order to break a stalemate over extending the Bush tax cuts before Congress adjourns. The current tax rates, enacted in 2001 and 2003, are set to expire Dec. 31.

Without the compromise, middle-income families would become "collateral damage for political warfare here in Washington," Obama said in televised remarks. He said he still believes the nation can't afford to permanently extend the top tax rates.

"This compromise is an essential step on the road to recovery," Obama said.

In addition to keeping the current tax rates for all Americans, the plan outlined by Obama would extend aid for the long-term unemployed for another 13 months. The payroll tax -- which funds Social Security and Medicare -- would be cut by 2 percentage points during 2011 to help spur hiring.

Obama also endorsed allowing a full deduction for equipment purchases that currently must be deducted over time. The proposal would accelerate $200 billion in tax savings for companies in the first year and benefit 1.5 million companies and several million individuals who run businesses, according to White House estimates.

Total revenue lost from the so-called expensing proposal over 10 years would be $30 billion; companies taking the immediate deductions wouldn't be able to write off their expenses through depreciation in years to come.

Total Cost $900 Billion

The total cost of extending all the tax breaks plus the new giveaways is $900 billion. Assuming of course the extensions are "temporary".

The New York Times itemizes the costs in Obama and G.O.P. in Deal on Tax Cuts

President Obama announced a tentative deal with Congressional Republicans on Monday to extend the Bush-era tax cuts at all income levels for two years as part of a package that would also keep benefits flowing to the long-term unemployed, cut payroll taxes for all workers for a year and take other steps to bolster the economy.

The package would cost about $900 billion over the next two years, to be financed entirely by adding to the national debt, at a time when both parties are professing a desire to begin addressing long-term fiscal imbalances.

It would reduce the 6.2 percent Social Security payroll tax on all wage earners by two percentage points for one year, putting more money in the paychecks of workers. For a family earning $50,000 a year, it would amount to a savings of $1,000.

For a worker slated to pay the maximum tax, $6,621.60 on income of $106,800 or more in 2011, the cut would mean a savings of $2,136. That would replace the central tax break for middle- and low-income Americans in last year's economic stimulus measure, White House officials said.

The deal would also continue a college-tuition tax credit for some families, expand the earned-income tax credit and allow businesses to write off the cost of certain equipment purchases. The top rate of 15 percent on capital gains and dividends would remain in place for two years, and the alternative minimum tax would be adjusted so that as many as 21 million households would not be hit by it.

In addition, the agreement provides for a 13-month extension of jobless aid for the long-term unemployed. Benefits have already started to run out for some people, and as many as seven million people would potentially lose assistance within the next year, officials said.

Some senior Democrats said an agreement by Mr. Obama to accede to Republican demands on the estate tax could lead to a revolt among lawmakers. Mr. Obama noted that he, too, still strongly disagreed with the Republican insistence on extending the tax breaks for the highest earners. "Ever since I started running for this office, I've said that we should only extend the tax cuts for the middle class," he said, acknowledging that he had been thwarted in one of the chief goals of his presidency.

Meaning of Compromise

I have discussed congressional compromises on several occasions, most recently in Meaning of "Compromise"

Sometimes the word to fear most out of congress is "compromise". Typically it means both parties load up a bill with massive amounts of spending while simultaneously preaching the need for deficit reduction.

To congress, the word "compromise" does not mean giving up anything you want. Instead, it means giving the other guy something you do not want him to have in return for a similar favor.

The process is much like asking a group of kids at a birthday party if they want cherry pie, chocolate cake, or fudge for desert and if there is no consensus winner, everyone gets a full slice of each, with chocolate chip cookies thrown in for good measure because that's what cousin Susie likes. It's irrelevant whether or not cousin Susie is even at the party.

Chocolate Chip Cookies for Susie

Susie was not at the party. Nonetheless, like a bolt out of the blue, president Obama proposed kiddies get two additional cookies not previously on the menu.

1. A two percent payroll tax reduction
2. A full, upfront deduction for equipment purchases, in lieu of depreciation

The cost of the expensing provision is a mere $30 billion spread over 10 years.

The deficit-busting problem is the huge out-of-the-blue payroll tax reduction coupled with the "temporary" extension of income tax reductions for everyone.

I am all in favor of cookies, especially tax-cut cookies. However, I want to know how the deficit-hawk hypocrites on both sides of the aisle intend to pay for them. The answer is they don't intend to, which of course is what makes them deficit-hawk hypocrites in the first place.

The war-mongering will continue and so will the earmarks and so will a host of other things we cannot afford and do not even need.

But, hey, let's pig out. Cookies are on the table.

The question of the day is: Are there any Senate republicans with the backbone of N.J. Governor Chris Christie?

We are about to find out. A vote is coming up.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

$930 Billion in Quarantined $100 Bills to be Burned, Don't Worry Real Cost is Only $120 Million; Security Measures "Too Difficult to Print"

Posted: 06 Dec 2010 01:21 PM PST

In an effort to thwart counterfeiting, the US Government has implemented a $100 bill design so difficult to print even the U.S. Treasury cannot print them.

The government needs to burn $930 billion in flawed $100 bills, more than 10% of all existing cash. The cost of printing the flawed bills was a mere $120 million.

Please consider Government can't print money properly

Because of a problem with the presses, the federal government has shut down production of its flashy new $100 bills, and has quarantined more than 1 billion of them -- more than 10 percent of all existing U.S. cash -- in a vault in Fort Worth, Texas, reports CNBC.

Officials with the Treasury and the Federal Reserve had touted the new bills' sophisticated security features that were 10 years in the making, including a 3-D security strip and a color-shifting image of a bell, designed to foil counterfeiters. But it turns out the bills are so high-tech that the presses can't handle the printing job.

It would take an estimated 20 to 30 years to weed out the defective bills by hand, but a mechanized system is expected to get the job done in about a year.

Combined, the quarantined bills add up to $110 billion -- more than 10 percent of the entire U.S. cash supply, which now stands at around $930 billion.

The flawed bills, which cost around $120 million to print, will have to burned.

The new bills are the first to include Treasury Secretary Tim Geithner's signature. In order to prevent a shortfall, the government has ordered production of the old design, which includes the signature of Bush administration Treasury Secretary Henry Paulson.

To point out the obvious: you can't print gold and gold coins are relatively easy to check for purity.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Texas Ratios of Banks and Credit Unions from 3rd Quarter 2010 FDIC / NCUA Reports

Posted: 06 Dec 2010 11:42 AM PST

This interactive Texas Ratio display contains data for every bank and credit union found in 3rd quarter FDIC and NCUA reports. This is a lot of data and it may take extra time to load. Please be patient. It takes an extra 3-5 seconds on my computer. Your results may vary. If you have an inadequate memory, the display may be slow or inoperable.

Thanks to Ellie Fields and Ross Perez at Tableau Software for help with the display.

Data compiled by and thanks to Ken Tumin at DepositAccounts.com

Texas Ratio Definition

The Texas ratio is a measure of a bank's credit troubles. Developed by Gerard Cassidy and others at RBC Capital Markets, it is calculated by dividing the value of the lender's non-performing assets (Non performing loans + Real Estate Owned) by the sum of its tangible common equity capital and loan loss reserves.

In analyzing Texas banks during the early 1980s recession, Cassidy noted that banks tended to fail when this ratio reached 1:1, or 100%. He noted a similar pattern among New England banks during the recession of the early 1990s.

The higher the Texas Ratio the higher the risk of failure. Ratios above 100% may be problematic.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

San Diego Mayor Jerry Sanders' "Radical Idea" to Cut Costs; Is Sanders a Hero or a Liar?

Posted: 06 Dec 2010 09:15 AM PST

Jerry Sanders, the mayor of San Diego claims to have a "radical" ideas to reduce city expenditures. Inquiring minds have a couple of questions. The first question is: Just how radical is the plan? The second question is: Just how big of a liar is Jerry Sanders?

Let's start the discussion with a look at Pension-Squeezed Cities May Turn to San Diego's 'Radical Idea'

Cities from New York to San Jose, California, facing almost $400 billion in unfunded pension liabilities, will be watching what San Diego Mayor Jerry Sanders calls his "radical idea" to cut costs.

After voters in the eighth most-populous U.S. city rejected a half-cent sales tax increase to balance the budget Nov. 2, Sanders is pushing to eliminate pension plans for new city employees, offering 401(k)-like savings accounts instead.

"We're all going to have to get realistic," Sanders, a 60-year-old Republican, said in a telephone interview. "The private sector went through this. Government will have to relook at how we do stuff as well."

Sanders's defined-contribution plan would apply to civilian employees in the city of 1.3 million. Police and firefighters would not be eligible, because lower benefits might hurt recruiting, he said.

That's Radical?

The deeper in that article you read, the less radical it gets. You want radical? Start talking bankruptcy. While I commend elimination of public pension plans, it is beyond absurd to use the term "radical" for any plan that exempts police and firefighters.

Moreover, the excuse "lower benefits might hurt recruiting" is pathetic. In fact, it's a blatant lie proving Sanders is beholden to public unions.

Lies Don't Stop There

It would be bad enough if the lies stopped there. But they don't.

Please consider SD Mayor Lied About Critical Need for Prop D Sales Tax

11/19/10

Was Mayor Sanders Lying About Critical Need for Prop D Sales Tax? Short answer -- HELL YES!

It was just three weeks ago that San Diego Mayor Jerry Sanders was running carefully orchestrated "town hall meetings" around the city -- threatening citizens with death and destruction if we did not approve Prop D -- the city sales tax increase. Fortunately in an epic battel, the measure lost by an awesome 62%-38% marign.

The frowny faced police chief and fire chief each dutifully stood before audiences and announced inevitable dramatic personnel and service cutbacks if the sales tax didn't pass. Doomsday was upon us.

[See article for list of cuts Sanders said he would have to make]

[Proposition D Went down in flames 62% to 38%]

Today the mayor sends out a press release (included below) cheerily announcing numerous solutions to close the budget deficit -- and NO MENTION OF PUBLIC SAFETY PERSONNEL CUTS, or indeed of any of the threatened cuts. Somehow the deadly unsolvable city budget deficit of three weeks ago is quite solvable after all!

There is no delicate way to say this -- given the short time frame to come up with these solutions, it is quite clear that Mayor Jerry Sanders knowingly lied to the public to frighten voters into supporting higher taxes.

Not that the Sanders solutions will solve the problem. His reforms are too tepid, and don't deal with the dramatically growing deficit problem. Carl DeMaio's comprehensive plan offers much better, more fundamental reforms.

It's clear that Mayor Sanders knew all along that the life-threatening service cuts (and resulting deaths) were cynical fabrications. Why does anyone still respect this man?

Who Backed Proposition D

Let's dig a little deeper with a look at Who funded the pro and con Proposition D campaigns?

The election results — Proposition D was rejected by 62 percent of voters — continue a pattern of labor unions losing city ballot initiatives over the past decade, a period in which public anger over guaranteed pensions for public workers has reached a crescendo.

Sales tax supporters, including Mayor Jerry Sanders, say the results are more a reflection of the public's anti-tax mood in the middle of a rough economy than an indication that labor's influence at City Hall is wilting.

"I don't think it shows labor's weak," Sanders said. "Going out for a tax increase at any time is difficult and going out right now is especially difficult. ... This was kind of a lightning rod ballot initiative."

Proposition D opponents, including Councilman Carl DeMaio, say voters are wising up after years of city leaders giving away generous pension benefits to union workers. DeMaio said San Diegans are willing to pay higher taxes but only after the city fixes its beleaguered pension system.

Proposition D supporters spent more than $500,000, with most of the money coming from city employee unions. Opponents spent more than $320,000 with significant contributions from restaurants, car dealers, developers and the Lincoln Club, a pro-business group.

Donations for Prop D

The article notes the following donations.

City Firefighters Union - $153,800
San Diego Imperial Counties Labor Council - $50,600
City Police Union - $52,000
Municipal Employees Association - $50,000
AFSCME - $28,2000

I have a problem with taxpayer dollars going to public unions who are supposed to be public servants, using my tax dollars to campaign for still higher tax dollars.

Someone needs to stop this insanity. I propose not only to eliminate collective bargaining but to outlaw public unions altogether on the grounds no one watches out for the public interest.

If you want to talk "radical", that's radical.

Sanders Claims to be a Republican

In calling for increased sales taxes to bail out public unions, Mayor Sanders proves he is in bed with the police and fire unions. Sanders is not only a liar, but the wimpiest Republican on the face of the earth, a total disgrace to the Republican party.

City Councilmember Carl DeMaio's Plan

Those looking for genuine reform can amazingly enough find it right on a city Councilmember's home page. Councilmember Carl DeMaio has a very nice website appropriately named "Clean Up City Hall"

Please consider DeMaio's "Roadmap to Recovery" Plan that Balances City's Budget and Reforms Pension System.

SAN DIEGO –City Councilmember Carl DeMaio today unveiled a comprehensive five-year financial recovery plan that balances the city's budget and restructures long-term city finances to eliminate the city's structural budget deficit.

"To fix the city's financial problems and safeguard our neighborhood services, we must embrace new approaches in city government," noted DeMaio.

Titled the "Roadmap to Recovery," DeMaio's plan borrows some elements of the bankruptcy process – with the imposition of a five year mandatory spending caps, reorganizing city operations, and restructuring several significant liabilities facing the city.

The centerpiece of DeMaio's plan is a heavy dose of pension reforms – including a freeze on "pensionable pay," creation of several more affordable pension options, and requiring city employees to share in increased costs and investment risks in the pension system.

DeMaio noted that fixing the city's financial problems will require several tough, but necessary adjustments in city labor contracts.

There are many elements to the plan. Please click on the preceding link and give it a look.

Click here for a nice Roadmap to Recovery Slideshow.

Note: If the document load with the wrong orientation. Click once on the document then, click on "Rotate Clockwise".

If you wish to see still more details please see the Full Copy of Roadmap to Recovery. That PDF is 89 pages.

I salute Councilmember Carl DeMaio and his Roadmap to Recovery for San Diego. He offers a genuine proposal, one that may work.

Other cities are in far too much trouble for anything but bankruptcy to work.

It's possible San Diego is in a state-of-no-return as well, but at least DeMaio offers some genuine alternatives. Meanwhile, Jerry Sanders offers nothing but lies, hoping to buy more votes from the police and fire unions.

If you live in San Diego, please support Carl DeMaio should he ever decide to take on Sanders and run for mayor. His plan shows he would be a capable mayor, deserving of your vote.

Email Sanders

If you live in San Diego, please forward this post to your friends and neighbors. You may also wish to Email JerrySanders@sandiego.gov to let him know just what you think.

It's time for genuine reform for public unions and their untenable pension plans.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Damn Cool Pics

Chinese Traffic Accident Compilation
TSA Sexy Maneuvers
Chinese Designer Builds Sustainable Egg House
Epic Fails - Part 9
Cool Matching Tattoos
Only on TV
Don't SuperSize Me (Infographic)

Chinese Traffic Accident Compilation

Posted: 06 Dec 2010 04:54 AM PST

Chinese drivers drive their new cars like what they used to ride: bikes. The result is disaster. Traffic accidents captured on CCTV in China.

TSA Sexy Maneuvers

Posted: 06 Dec 2010 02:32 AM PST

Cleavage karate chop, two-handed testicle twister and other sexy TSA maneuvers.

Chinese Designer Builds Sustainable Egg House

Posted: 06 Dec 2010 02:22 AM PST

Struggling college students could really learn a thing or two from Daihai Fei. The recent college grad discovered that rent prices in Beijing were more than he could afford. Instead of moving away from the city or becoming homeless, he decided to build his own mobile home.

Daihai Fei's home is an shaped like an egg and is self-sustaining. A solar panel on the roof provides power for his reading lamp, and the abode is spacious enough for a small bed and bookshelf. Daihai Fei spent only $960 building his home, which he has smartly parked right across the street from his workplace.

Daihai Fei built his amazing egg-house on a bamboo frame, covered with various insulating materials, and topped with a layer of stitched bag. The bags themselves are filled with sawdust and grass seeds, which he sprays with water regularly, to help the grass grow faster. Inspired by the grass-covered roofs of Norway, he knows the grass will over greater protection for his home.