| China CPI 4.9%, PPI 6.6%, Money Supply Up 53% in Two Years Posted: 14 Feb 2011 11:09 PM PST The latest numbers show inflation is soaring out of control in China. The CPI is up 4.9% year-over-year, up from 4.6% in December. The PPI clocked in at 6.6% compared with 5.9% last month. Things are even worse than they appear at first glance because China manipulated its CPI basket to reduce the impact of soaring food prices. Thus, China's CPI numbers are not directly comparable to previous months. Please consider China's Inflation Exceeds Target, Adding Rates Pressure China's inflation exceeded the government's 2011 target for a fourth month as prices excluding food rose the most in at least six years, escalating pressure on the central bank to keep raising interest rates.
Consumer prices rose 4.9 percent last month from a year earlier after a 4.6 percent gain in December, the statistics bureau said in a statement on its website today. Producer-price inflation quickened to 6.6 percent from 5.9 percent.
The acceleration reflects higher rents, a 53 percent surge in money supply the past two years and increasing domestic demand in the world's second-largest economy.
Food prices climbed 10.3 percent last month from a year earlier, according to today's report, after gaining 9.6 percent in December. Vegetable prices jumped 2 percent, fruit prices surged 35 percent and grain rose 15 percent, according to the statement. Non-food prices rose 2.6 percent from a year earlier.
Under the revised weightings, the food component declined by 2.21 percentage points and clothing, medical costs and telecommunications were also reduced, the National Bureau of Statistics said today, without giving the new weightings. Residence-related charges, which include rent and utility costs, were increased by 4.22 percentage points, the bureau said.
The NBS also revised the calculation of the components of the producer-price index, adding about 2000 products to the basket and adjusting the weightings. The change reduced January's yearly producer-price inflation by 0.05 percentage points, the bureau said, without disclosing a breakdown of the basket. If you don't like the number, change the weighting in the basket. To make it easier, China should do what Bernanke does - declare food and energy to be "volatile" - then toss them out of the "core" report altogether. As I have said many times, those looking for huge inflation can easily find it, not in the US but in China and India. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Expired Collective Bargaining Agreements in Wisconsin Canceled March 13; Union Extortionists Begin Rallies Posted: 14 Feb 2011 08:45 PM PST Wisconsin governor Scott Walker is doing something that needs to be done in every state in the union - getting rid of collective bargaining agreements with public unions. Please consider Walker takes broad swipe at public employee unionsSaying those who didn't see it coming must have been in a "coma," Gov. Scott Walker unveiled sweeping legislation that would severely curtail public employee rights and dramatically change the way Wisconsin negotiates with unions going forward.
Officials alerted the Wisconsin State Employees Union on Friday that expired collective bargaining agreements would be canceled March 13. State unions have been operating under the terms of their previous contracts, an arrangement that can be terminated with 30 days notice.
The news came on the same day the governor unveiled a budget repair bill that would remove nearly all collective bargaining rights for nearly all public employees in the state and make it easier for employers to fire workers that engage in some form of labor unrest.
WSEU executive director Marty Beil, whose union represents about 22,000 state employees, did not return calls Friday. But AFT-Wisconsin President Bryan Kennedy said Walker's move is part of a nationwide effort to kill labor unions.
"It is a power grab, a coordinated effort to kill the union here," said Kennedy, whose organization represents 17,000 state employees. "This is essentially the governor saying, 'Sit down, shut up and do what you are told.'" Look at how ridiculously ass backwards that comment is from AFT-Wisconsin President Bryan Kennedy. This is definitely not a power grab by Walker. This is an attempt to eliminate unjustified, unworkable power grabs by public unions. The Governor and citizens are tired of pandering, coercion, bribery, whining, and petulant demands of the unions. Union Busting? Sen. Fred Risser, D-Madison, was shocked by the proposal. He said the governor seems to be "union-busting."
"State employees have the right to negotiate in good faith with the state. Without a willingness to even discuss what concessions need to be made with state employees, the governor comes across more like a dictator and less like a leader," Risser said.
Both Democratic and Republican lawmakers said Friday they expected Walker's bill will move quickly through the Legislature, perhaps being passed as early as next week. Republicans control the Assembly 60-38-1 and the Senate 19-14.
Good Faith?Senator Risser calls this "union busting" as if that was a bad thing. Unfortunately, Walker is not getting rid of any unions in this proposal. Hopefully that will be the next step. Furthermore, the idea that unions negotiate in "good faith" is one of the most preposterous statements in history. Under collective bargaining agreements the state must deal with unions. This leads to one-sided negotiations and extortion by unions. Collective Bargaining is ExtortionPlease consider Why Collective Bargaining is Extortion'Collective bargaining' is not what its name indicates. In fact, it means exactly the opposite of what you'd guess. Collective bargaining refers to the obligation of an employer to recognize the elected representatives of a group of workers and his further obligation to negotiate with those representatives. This last part is what makes 'collective bargaining' extortion.
Under collective bargaining laws, employers have to recognize an elected union and have to negotiate with them.
Imagine if the tables were turned and employers had the right to 'employer bargaining', under which the employer could demand whatever pay reductions or workday increases he wanted, the employees had to negotiate with the employer, and employees couldn't quit!
Such an arrangement could only be classified as slavery.
The right to terminate the employer-employee relationship is a fundamental right of both employer and employee. Employment should be mutually beneficial to employer and employee and open to termination by either when it becomes non-beneficial (limited of course by any voluntary contractual agreements).
Second, the misnamed term 'collective bargaining' has given an aura of moral righteousness to the unions who pretend to be fighting for true American values like the freedom of association. However, they are fighting for values quite foreign to the United States, values that come from Marxist collectivism, i.e. the expropriation of the property of employers and the negation of their rights. Union Extortionists Begin RalliesFox News reports Wisconsin Laborers Rally Against Gov. Walker's "Union-Busting" Bill"We have people who are working in the courthouse. We have the snowplow drivers. We have people who do just about every kind of work you can imagine," AFSCME Council 40 Staff Representative James Mattson said.
But Senator Bob Jauch (D-Poplar) has a warning. "In 5 days, this legislature and governor could eliminate 60 years of collective bargaining history," Jauch said.
It is possible, Senator Bob Jauch says, through a new bill from Republican Governor Scott Walker. If it becomes law would forbid most contract discussion and punish resistance to the change.
"They would have no rights to deal with these issues as they have in the past," Mattson said.
Milroy says Gov. Walker will not sit down for a discussion with union officials and that his bill would hurt Wisconsin families and communities.
"For a lot of people this is going to mean a 5-10% cut in their take-home pay," Rep. Nick Milroy (D-Superior) said. It's time to send senator Bob Jauch and Rep. Nick Milroy packing. Taxpayers are fed up. They are sick of extortion by unions that give union workers wages and benefits most taxpayers will never see. Bill Will Drive Workers Away?Sometimes I wonder what planet people are on. The opinions expressed by "experts" in a ridiculously slanted article in in the Journal Times is a case in point. Please consider Experts: Walker's budget bill would likely drive workers awayThe bill proposed by Gov. Scott Walker to restrict collective bargaining for most public employees would likely drive workers from the public sector and the state, according to legal and economic experts.
Those experts said the bill would keep public employee wages down, create contentious and protest-filled union-employer relations and cause confusion about labor issues, all culminating in public employees eventually leaving for private sector jobs or work in other states.
"People will leave the public sector and as a whole the state of Wisconsin will be looked at as a place where there is less stability and, frankly, as a more backwards state," said Marianne Robbins, a Milwaukee-area lawyer specializing in public and private sector labor law.
Employee groups could bargain for wages but any wage increases would not be able to exceed the increase in the Consumer Price Index unless approved in a referendum.
That means there likely won't be decent-sized wage increases, if there are increases at all, said Robbins and Andrew Reschovsky, professor of public affairs and applied economics at the University of Wisconsin-Madison.
"So some (public workers) with options will think about taking jobs elsewhere," said Reschovsky, who is among the University of Wisconsin System staff that would be affected by Walker's bill. "Retirement will look better to some state workers. The most experienced will leave and there could be real costs in lost experience."
Departing workers might look outside Wisconsin, leaving the state with less experienced and lower quality workers, Reschovsky said, especially when it comes to new school teachers and UW System faculty who can take their research and business-growing efforts elsewhere.
Walker's bill would also lead to more contentious relationships between unions and employers, Robbins said. There will likely be confusion about what can be talked about and with whom because of restrictions on what can be negotiated, she added.
"Everyone will be completely distracted by all these issues instead of taking care of what public sector employees do: Clean the streets, teach the children, guard the prisons," she said.
Workers may also be distracted by continuing demonstrations against the bill, said Paul Secunda, associate law professor specializing in labor and education law at Marquette University 's Law School. He said time would also be spent by employees and unions challenging the bill on statutory and even constitutional grounds, in particular relating to language in the law that prohibits labor protests, Secunda said, explaining that could violate freedoms of speech, expression and association.
Such challenges to the bill as well as protests may even come from those who work outside the public sector, Secunda said.
"It's not just about the public sector," he said. "It's about all workers and their inability to have any say over wages, hours and terms and conditions of their employment."
Amazing Collection of Misguided Union-Apologist OpinionsThat is one of the most amazing collections of one-sided union-apologist opinions I have seen anywhere. For starters, the idea that union members will leave the state is preposterous. Where are they going to go? Illinois? New Jersey? Right-to-Work states in the South? California? It would help if these union-apologists would think before spewing massive amounts of nonsense. Next, I hope unions do take these cases to court. Indeed, I hope they are foolish enough to spend every last dime they have taking these issues to court because they will lose. Then the unions will be out of money that would otherwise go to bribing officials, running fear-mongering campaigns, etc. " Everyone will be completely distracted by all these issues instead of taking care of what public sector employees do: Clean the streets, teach the children, guard the prisons" said Robbins. The remedy to that, should it happen would be to privatize it all. Indeed, Wisconsin should privatize it all before it can possibly happen. The idea the we need public union workers is preposterous in and of itself. In fact, that is precisely why Walker's proposal does not go far enough. Exempting public safety workers from the proposal was lame. Role of Government vs. Role of UnionsThe role of government should be to provide the most services at the least cost. The role of unions is to provide the fewest services at the most cost. The unions succeeded. Then the ungrateful extortionists piss and moan and bitch and whine about how underpaid they are. Well if they are underpaid, they have a choice. They can leave. And that is exactly what New Jersey Governor Christie tells union members who whine in that state. Here some Chris Christie articles to consider The reality is few public union workers will leave. And if they do, there will be 5,000 people out of a job willing to do it, probably better, and for less money to boot. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Housing Crash Bites Deeper; Economic Reality Trumps "It's Different Here"; Unprecedented Double-Dip Posted: 14 Feb 2011 01:19 PM PST The popular housing notions "It's different this time" as well as the highly regarded corollary "It's different here" continue to bite the big one. While housing in some cities will always carry a premium, fundamentals, especially price-to-rent ratios, property taxes, and wage growth will eventually matter. Those fundamentals caught up to cities thought to be immune to a housing slump. Please consider Housing Crash Is Hitting Cities Once Thought to Be StableSEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.
The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.
In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.
Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow's calculations, still has as much as 10 percent to fall. Mr. Humphries [chief economist for Zillow] estimates the rest of the country will drop a further 5 and 7 percent as last year's tax credits for home buyers continue to wear off.
CoreLogic, a data firm, said last week that American home prices fell 5.5 percent in 2010, back to the recession low of March 2009. New home sales are scraping along the bottom. Mortgage applications are near a 15-year low, boding ill for the rest of the winter.
"I don't expect the market to get better," said Ms. Dortch, 31, a customer service consultant.
Neither does Gene Burrus, another frustrated seller who became a landlord. "Rent is so cheap it doesn't make sense to buy now," he said. He might reconsider if 10 or 15 percent more comes out of the market.
Whenever the market finally does pick up, all those accidental landlords will want to unload, putting another burden on the market. "So many sellers are waiting in the shadows," said Redfin's chief executive, Glenn Kelman. "The inventory is going to expand and expand and expand. I don't see any basis for significant price increases."
"We're at a period near the bottom but with more volatility than we normally see at this point," said David Stiff, Fiserv's chief economist. "This sort of double dip is unprecedented for housing." Unprecedented Double-DipThe double dip is "unprecedented" because the last rally was totally artificial. - The Fed bloated up its balance sheet with $trillion in Fannie and Freddie paper pushing down mortgage rates
- States an processors alike sponsored foreclosure moratoriums
- Most importantly the Obama administration had two rounds home-buyer tax credits
As expected in this corner, the stimulus from all those measures did not work. Worse yet, they stimulated more new home building smack in the midst of a massive inventory glut. Seattle vs. Las Vegas 2009-2010 Seattle vs. Las Vegas 2000-2010 Those are two of four Las Vegas vs. Seattle comparisons by the New York Times. Las Vegas has given back 100% of its gains since 2000. Seattle has given back all of its gains since 2003. That's quite a drop. Years ago, I got into it on several occasions with the "Rain City Guide", a Seattle real estate blog promoting the idea "It's different here" November 17, 2007: It's not different in Portland and SeattleAugust 19, 2007: Chicken LittleHere is a snip from the former: Rain City Madness
Denial is a mile thick on the Rain City Guide.
This might sound strange coming from a real estate blogger, but I just don't find all the hype about a real estate bubble all that interesting. None the less, it seems that about once a week a new blog starts up with the mission to highlight all the "evidence" that there is a nationwide real estate bubble that is about to pop. The most popular site is the Housing Bubble 2, although there are many others. My Comment: Of course you do not find it interesting. You are a Real Estate agent with a vested interest to deny there is a real estate bubble.
What I would like to hear is a "pro-bubble" argument which takes into account two secular, local Seattle conditions which both tend to limit the supply of urban land:
1. A firm political consensus for "growth management" which will not change & hence unleash a lot of land for at least the next generation or so. (Even if there is land to be found.)
2. Total inability to deal with traffic congestion which is having a centralizing force, making "in city" properties (where one can minimize travel) more and more valuable.
When you take into account these trends — both firmly rooted in our local culture — do you still get a bubble? The same arguments were made about Florida, San Diego, and the entire nation of Japan. Prices in Japan fell for 18 consecutive years and there are less places to build in Japan than there are in Seattle.
The San Diego Bubble
Professor Piggington has a nice recap of The San Diego Housing Bubble and he easily shoots down such arguments that we might be hearing about the Rain City such as:- "Everybody wants to live here."
- "The strong economy."
- "Low interest rates."
Here is the heart of the matter:
Further theories are offered up by home price apologists. They speak of an implausibly sudden shift in demographics, a new era of endlessly looser mortgage lending, and any number of other rationalizations that all, in the end, translate to "it's different this time."
The key to understanding the housing boom really lies in the difference between growth rates of home prices and rents. While one might expect that homes would be more expensive to own than to rent, there is no fundamental reason why the cost difference between renting and owning should have expanded as much as it did since 2001. ....
It's Wasn't Different This TimeHistory now shows it was not different in Seattle after all. Prices in Seattle are back to 2003 levels and falling much faster than other bubble areas that may have bottomed. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| One $90K Fashion-Related Job Opening for the Right Person; Unrelated email from "Granny Bev" Posted: 14 Feb 2011 12:17 PM PST I am going to try something for the first time. Perhaps it will help some reader of my blog. This post has nothing to do with global macroeconomics, but it is about jobs, rather a specific fashion-related job. This post also contains an email from "Granny Bev" an 80-year young woman who writes children's books. She heard me on Coast-to-Coast radio. Her email follows the job opening. Fashion-Related Sales Position for Rue MagazineYesterday, I received an email from a contact on Linked-In about a fashion-related job opening. I know nothing about fashion, but I do know how hard it is to find a good job. In the interest of helping out a reader of this blog who may be interested in what seems to me to be a good opportunity, I am posting this email that I received. Lawrence writes... Hello Mish
My sister's company Rue Media Group, Inc (RUE Magazine) is hiring one to three Sales Directors (online advertising sales). The company is focused on women's fashion, style, home decor and lifestyle.
Rue Media Group is a startup, but it is profitable, and is doing extremely well in terms of revenue, readership, and growth. Target compensation for the position is $90K - $100K+
Please pass the below job description along to anyone who might be qualified and interested.
Best,
Lawrence Job Details, Requirements, DescriptionSales Director - Rue Media Group
Openings in San Francisco, Los Angeles, Chicago, Dallas, Atlanta, and New York
 Company Description
Rue Media Group is an online media company focused on style, fashion, and interior design. Founded in May 2010 and headquartered in San Francisco, CA, Rue Media Group publishes Rue Magazine, an interiors and entertaining online publication with a fashion and lifestyle sensibility. Rue Magazine provides inspiration, inclusive community, and fun to its readership of style and home décor enthusiasts. Representative advertiser clients include Duralee, Gilt Groupe, HGTV, Layla Grayce, Kravet, and Mitchell Gold + Bob Williams.
Job Description
Rue Media Group is seeking experienced and highly motivated Sales Directors to join its team. We seek extraordinary individuals who are passionate about style, design, and fashion, and that bring an entrepreneurial and creative spirit of achievement to the company.
Ideal candidates will be located in the cities of San Francisco, Los Angeles, Chicago, Dallas, Atlanta, or New York, and will have a strong rolodex of agency and advertiser client contacts in the style, design, and/or home décor industries. Favorable references and a track record of success in advertising sales are highly desirable. The Sales Director will be responsible for meeting and exceeding an annual quota, and for driving strong revenue growth and overall client satisfaction.
Job Responsibilities
• Execute outbound prospecting and new business development activities.
• Establish, develop, and maintain revenue relationships with advertiser clients.
• Research, analyze, and prioritize sales territory and client accounts.
• Develop sales and marketing materials such as media kit, custom proposals, and campaign analysis.
• Deliver presentations on the benefits and value of advertising with Rue Media Group.
• Ensure overall client satisfaction, value, and advocacy.
• Manage all phases of the sales process: territory planning, account planning, prospecting, new business development, pipeline development and management, proposal generation, client service, relationship management, negotiation, and bringing deals to closure.
Desired Skills and Experience
• 3+ years of experience in advertising sales, ideally having met or exceeded a six or seven figure annual sales quotas in the past.
• Strong rolodex of agency and advertiser contacts in the style, fashion, and/or interior design industry.
• Strong understanding of online advertising metrics: CPM, CPC, CPA, Page Views, Visits
• Self motivated, driven, and goal oriented.
• Demonstration of leadership and ability to juggle multiple projects with tight deadlines.
• Passion for and/or strong interest in style, fashion, home décor, and/or interior design.
• Motivated by high income and earnings potential.
• Comfortable in a loosely structured startup environment.
• BA or BS degree.
Compensation
Compensation commensurate with experience. Base pay + sales commission. Role initially will be on a contract or consulting basis and will not include benefits. Strong contributors will be considered for full time employment and promotion pending demonstrated success over time.
Target salary is $90K+ at quota.
Miscellaneous
• U.S. Citizens and Green Card Holders only; no visa sponsorship provided.
• Rue Media Group is an Equal Opportunity Employer. This company does not and will not discriminate in employment and personnel practices on the basis of race, sex, age, handicap, religion, national origin or any other basis prohibited by applicable law.
Contacting Us
Please send resume and summary of interest to careers@ruemag.com In a follow-up email with Lawrence, I asked if I could post that on my blog. Here is his reply: Hello Mish
I'm a big fan of your blog! We'd be thrilled and honored if you mentioned our job opportunity on your blog.
A few additional information bits that might be of interest to you:
Rue Media Group started as a grassroots effort in the blogosphere and has blossomed into a profitable business. Founders Crystal Gentilello and Anne Sage, and team members Bri Emery and Cassandra Lavalle are prominent interior design, fashion, and style bloggers.
Crystal and Anne's enthusiasm for the blogging and positive feedback from readers inspired them to take their passion to the next level and launch an online magazine focused on style, fashion, and home décor. Their blogs can be found here:
You'd be doing us and many job seekers out there a huge favor if you can help match us up. Any help you can provide would be graciously appreciated!
Best Regards,
Lawrence Fashion-oriented minds may want to check out those blogs. They are very colorful and well laid out. One thing I do ask. Please do not respond to the inquiry if you are not qualified. It will be a waste of your time and theirs.Wool E. WoolaAs long as I am doing strange and unusual things (posting job openings qualifies), here is an email I received from "Granny Bev", who just turned 80 and is on Social Security. She wrote a children's book she is attempting to promote. She heard me on Coast-to-Coast a couple weeks ago. Granny writes... Hi Mish
The picture of you surprised me. You won't recognize me because we met on Coast-to-Coast. You talked, I listened. I had expected an older man - you look to be in the same age bracket as my Grandsons.
I just turned 80, living on less money than I need to pay my bills. I started planning for my retirement when gas was $ .50 a gallon and my tiny annuity pays for my additional health insurance alongside my Medicare I have $9.00 left over.
Mish, you are the first and so far, only advisor who really seems to understand the financial situation for us elders and bless you for that.
Thank you for listening. If you'd like to see my art work check out my web site that I have set up myself Baashi's Boutique or the site for my book Wool E. Woola on Moonbow Press.
Thanks again
Granny Bev Images from Wool E. Woola I am willing to help those trying to help themselves. If you are an art director in need of art for children please give Granny Bev a ring. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Obama Seeks Huge Array of Tax Hikes Posted: 14 Feb 2011 09:30 AM PST In a move that proves that the President does not have any grasp of the sweeping changes in the mid-term elections, Rejected Tax Increases Make a Return in Obama Budget Proposal. President Barack Obama proposed a budget that calls on Congress to raise the taxes of the highest U.S. earners, multinational corporations and oil and gas companies, reviving revenue provisions that Congress has rejected or brushed aside before.
The budget, released today in Washington, would bring back pre-2001 tax rates for individuals earning more than $200,000 annually and married couples making more than $250,000. The estate tax would return to 2009 levels with a $3.5 million per- person exemption and a 45 percent top rate. Under a law Obama signed in December, lower tax rates expire at the end of 2012.
"These policies were unfair and unaffordable when enacted and remain so today," Obama wrote in his budget message.
The budget plan includes a proposal that would limit itemized deductions for top earners to 28 percent, curbing the value of tax breaks for charitable contributions and home mortgage interest.
The plan includes offsets for the first three years of a "patch" that would prevent the alternative minimum tax from expanding. By not permanently paying for limits on the reach of this tax, which was originally intended to be levied on the wealthy, the administration assumes a revenue source toward the end of the 10-year budget timeframe that Congress has consistently opposed.
Obama is proposing an array of tax incentives. They include the elimination of capital gains on some small business stock, a permanent extension of the tax credit for business research, and extension of a tuition tax credit. He is proposing to revive the Build America Bonds program, which expired at the end of 2010.
The administration also wants to send $250 this year to retirees and some government employees who aren't benefiting from the payroll tax cut included in the December tax law.
Obama again proposes limits on multinational companies' ability to defer income taxes on profits they earn outside the U.S. Corporations such as Microsoft Corp. and Cisco Systems Inc. have argued against the proposals in previous years. Those provisions would raise an estimated $129 billion over 10 years.
Obama has called for an overhaul of the corporate tax code that would lower rates and broaden the tax base. He provided no details on an overhaul in his budget plan.
The budget revives a proposal that Congress pass legislation requiring executives of investment partnerships including private-equity firms to pay ordinary tax rates on the profits they receive as compensation. This pay, known as carried interest, currently can qualify for lower capital gains tax rates. The proposal would raise $14.8 billion over 10 years.
The budget plan includes $85.4 billion in fees that would be collected over a decade, including a new one to help the Commodity Futures Trading Commission carry out oversight of derivatives. The proposed budget estimates the CFTC would collect $117 million in fees in 2012 alone. One thing is for sure. This is not going to fly. Moreover, where are the cuts? And what's with this insane proposal to revive BABs (build America bonds)? The government has no business guaranteeing municipal bonds or any portion of them. About the only thing I see in the proposal of significant merit is a move to revise an item in last year's health-care bill that requires businesses to report payments to corporations totaling $600 for services and goods. If everyone is against that (and they seem to be now), how the hell did that ridiculous provision get in a medical bill in the first place? Note that Obama wants to keep the 1099 requirement for purchases of services, just not goods. Good grief. Just kill it. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Perpetual Liabilities: An endless note on your house you can never pay off Posted: 14 Feb 2011 01:14 AM PST Imagine the perpetual loan, a loan that no matter what you do, you can never pay off. To help conceptualize the idea, think of it as a perpetual interest-only loan in which you are forbidden to completely pay off principal. As preposterous as that deal may sound, it is highly likely you are in one. If you own a house, you are in exactly that deal, except it conveniently not called interest. Instead it's called a property tax. This is a post I have been meaning to write for years. However, I was finally inspired by a reader "Russell" who writes ... Hello Mish
Here's a heads up from Portland Oregon. The city is proposing a property tax hike of 15 percent for the May ballot. Currently, most of the current city property taxes go towards police and firefighter pensions.
This proposed hike is "for the kids", threatening teacher layoffs. I assume this is the first of many hike attempts that we will be seeing in the near future.
Do we really own our property? I say we don't. We basically have a note that we can never pay off from the government. I will now have to pay around 550 a month for the right to own my house.
Isn't that like a 100,000 dollar note that can never be payed off? Why own property in these cities? Why live here? That is what my wife and I are starting to face. We like our neighborhood and the city in general, but if may be time to leave.
Thanks again for all that you do (that you can put this kind of content out daily blows me away),
Russell Portland Seeks Two Tax HikesOregon Live reports Portland school board unanimous: A second school tax hike on the May ballotThe Portland school board voted 6-0 tonight to put a second tax hike before voters in May, saying a higher operating tax is needed to save 200 teaching jobs in Portland Public Schools.
If voters say yes, the local-option property tax set aside to bolster Portland schools would rise to $1.99 per $1,000 of assessed property value, a 60 percent increase from the current $1.25 per $1,000 voters approved in 2006.
It is the second tax increase the school board has referred to the May ballot. The first was a record-setting $548 million school construction bond that, if approved, will cost property owners $2 for every $1,000 of assessed property values for the next six years.
School board members said that financial hard times for families make this a tough time to ask property owners to pay more.
But they said cutting more than 400 teachers, rather than about 150 as would be necessary if the levy passes, would be too harmful to students and to the local economy.
"We are talking about protecting family-wage jobs in Portland," board member Bobbie Regan said. Tell Bobbie Regan to Stuff ItWhat Portland needs is a competing measure on the ballot to lower taxes. If you live in Portland, it is your patriotic duty to get Bobbie Regan's phone number, call her up and tell her where to go. The arrogance and gall of these people is amazing. Not a single teacher need lose their job, not a one. All the union has to do is accept lower wages or benefits. Instead they want to tax you to death, not one but twice so the teachers' union can get wages and benefits that no one else does. Compute Your "Endless Note" InterestTo compute your perpetual interest, take your property tax and divide by the estimated fair market value on your house. Property taxes in Illinois are insane. I pay about $14,000 a year ($1167 a month!) on a house worth about $650,000. Thus my property taxes are roughly 2.2% a year. Is this really "owning" a house? Why Own a House?As noted above, you can never really own one. Property taxes are a perpetual liability. However, I made an agreement with my wife, decades ago, that we would get a house as soon as she finished school. She wanted one, I didn't. However, now that I have one, I am happy with it. There are tradeoffs. My advice to people has not changed. If you want a house and can afford a house, then as long as you really know what you are getting into, and as long as you are quite sure your job is stable then buy a house. (That's quite a lot of IFs) In 2004-2006 I was more vehemently opposed to buying a house than now. Twenty years ago you could get nice appreciation, but that is no longer true. Moreover, I suspect that once home prices bottom, prices will stagnate for a decade. Thus, there is no compelling financial treason to own a house. Indeed, from a financial perspective, there are good reasons to not own a house. However, there are more important things than money. If having a house makes you or a loved one happy, then as long as you can afford a house, and as long as it does not make you a debt slave, it is reasonable to buy one. The biggest key right now is making sure your job is stable. If it's not, then buying a house might bankrupt you if you lose your job. Unfortunately, many people vastly overestimate the stability of their job. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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