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guest · Guest

SAMZ:

In theory investment creates jobs... so with higher capital gains come lower investment.

Less jobs= less income

and at what point do you implment it? 50k in boston is not much, while in rural kansas it is great...

john p · Joined: 10 Mar 2006 Posts: 1820

I think you're right. When I look at all these economic formulas, I wonder about deformation of fundamentals due to internal and external factors.

Changes in taxation, regulation i.e. rent control etc. are totally important factors when interpreting the numbers.

I'm thinking now about potential versus kinetic energy. When a little kid is on a swing going downward there is a buildup of kinetic energy and speed (almost like increased activity in home sales). When the kid is at his peak, the kinetic energy is being subtracted by potential energy going the opposite direction. During this subtraction process, the kid on the swing slows down toward the top. (kind of like the slowdown of sales activity now) When the negative potential energy outweighs the kinetic you hit an inflection point, peak, and then a kinetic energy going back down.

Endogenous and exogenous factors add to the push or pull in flow. They could inhibit or induce activity. More restrictive lending could slow it down, and lower mortgage rates might induce more buying activity. Certain state of affairs veiled issues before. For example, if we had people that couldn't pay their mortgages, we never saw the full extent because in many cases people could sell their homes for a gain or refinance. So when people say that we're in a recession and cite foreclosure statistics, in reality because people don't have the options to refinance or take Home Equity Lines of Credit (HELOC's), we are now recognizing these folks and they are showing up as statistics. It is fundamentally based in part on the fact that house prices are dropping. A good percentage of folks before might have been in the same situation but it never got recorded because they just simply took out a second mortgage or something and yanked out equity...

Further, even if I'm upside down a bit on the value of my home, what does it matter as long as I can pay my mortgage.

Falling prices on top of a recession is a disaster because as someone put earlier, solvency is what creates the situations which force people to sell. Who knows what Barney Frank's new legislation will do to forestall the large ARM reset solvency contingent? I think that there is a lot of wealth out there that wants to find a home in investment, so one man's suffering is another man's investment and buying opportunity. There is indeed lots of suffering, but because the money supply is growing, that money is going somewhere and is out there. In my view, the wealthy who have the money will need to spend it, and if we get inflation, people's debt will become less and less of their take home pay so solvency will be addressed by deflating the value of the dollar and therefore deflating the magnitude of debt.

samz · Joined: 19 Feb 2008 Posts: 102 Location: Medford, MA

samz · Joined: 19 Feb 2008 Posts: 102 Location: Medford, MA

john p · Joined: 10 Mar 2006 Posts: 1820

Add to your comments how we use the GDP as a basis to benchmark certain acceptable levels i.e (% of GDP) If the GDP is skewed by goverment spending, devaluation of the currency etc. we could be drifting further from what we think we know.

http://en.wikipedia.org/wiki/Gross_domestic_product

john p · Joined: 10 Mar 2006 Posts: 1820

Why are the banks so afraid of inflation? What on earth were they thinking was going to happen when they flooded the economy with money?

Take a look at the money supply. Take a look at the M3

http://en.wikipedia.org/wiki/Image:Components_of_the_United_States_money_supply2.svg

The banks have flooded the economy with money and now that it is starting to get to the people they are acting fearful of "inflation". The truth is that prices are adjusting to the increased money supply and the ownership rich are pissed that they can't keep all of the money themselves; they would prefer that we remain indentured servants.

Former Owner · Guest

Two observations-

1. Do folks hear really think that Infation is cause by Investor/speculators?

Samz- you do realize that if the Airline Companies hadn't been speculating with Jet Fuel/oil futures they would be in even worst shape.

What about the Specultors that are Union pension funds. With out this Investing/speculating many of the Pension Funds wouldn't keep pace with inflation and won't have the money to pay future retirees.

Who decides when prudent Inflation hedging ends and speculating begins. Most public employee pensions have 5-15% of asset in Hedge funds that have speculative investments.

The Federal Reserve causes inflation by increasing the Money supply. The Dollar buys less and less when there are more and more $ circulating. Look at how the Federal Reserve is allowing Investment Houses to trade in Mortgage Backed Paper for Treasuries. These Treasuries lead to more Cash on the street and more speculation.

But, no one has the Political will to allow any financial institutions to fail.

2. Capital Gains - Increase capital gains tax will drive more dollars into assets that minimize the Tax consequences. this means there are fewer dollars to fund companies here in the USA. Funding a new company is highly speculative and there are thousands of failures for every Microsoft.

Wouldn't we prefer to have the Companies that solve our Energy crisis to be here in the USA?

Former Owner · Guest

Two observations-

1. Do folks hear really think that Infation is cause by Investor/speculators?

Samz- you do realize that if the Airline Companies hadn't been speculating with Jet Fuel/oil futures they would be in even worst shape.

What about the Specultors that are Union pension funds. With out this Investing/speculating many of the Pension Funds wouldn't keep pace with inflation and won't have the money to pay future retirees.

Who decides when prudent Inflation hedging ends and speculating begins. Most public employee pensions have 5-15% of asset in Hedge funds that have speculative investments.

The Federal Reserve causes inflation by increasing the Money supply. The Dollar buys less and less when there are more and more $ circulating. Look at how the Federal Reserve is allowing Investment Houses to trade in Mortgage Backed Paper for Treasuries. These Treasuries lead to more Cash on the street and more speculation.

But, no one has the Political will to allow any financial institutions to fail.

2. Capital Gains - Increase capital gains tax will drive more dollars into assets that minimize the Tax consequences. this means there are fewer dollars to fund companies here in the USA. Funding a new company is highly speculative and there are thousands of failures for every Microsoft.

Wouldn't we prefer to have the Companies that solve our Energy crisis to be here in the USA?

balor123 · Joined: 08 Mar 2008 Posts: 1204

The double taxation of dividends is also annoying. Taxes also hinder investment. I hold funds that have made money and want to reallocate but can't because the tax loss wouldn't be worth it. So the money stays where it is.

admin · Posted: Wed Aug 20, 2008 1:14 pm GMT Post subject:

Check this out - M3 is now shrinking in real terms:

http://globaleconomicanalysis.blogspot.com/2008/08/m3-contraction-future-is-now.html?ref=patrick.net

- admin