Comments on: Eight Notes on the Actions of the US Government on the Economy http://alephblog.com/2009/05/31/eight-notes-on-the-actions-of-the-us-government-on-the-economy/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Fri, 25 May 2012 21:31:47 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Gregman2http://alephblog.com/2009/05/31/eight-notes-on-the-actions-of-the-us-government-on-the-economy/comment-page-1/#comment-21883 Gregman2 Tue, 02 Jun 2009 06:21:42 +0000 http://alephblog.com/?p=1759#comment-21883 "A crucial factor is the distribution of debt between productive and unproductive purposes–between genuine investment and mere speculation. The former builds additional productive capacity that can be used to meet financial commitments in the future, even if today excessive increases in the debt burden leads to a recession. But borrowing that merely finances speculation on the stock exchange or the housing market about the prices of shares and houses adds to debt now without increasing our capacity to service it in the future." --Prof. Steve Keen http://www.debtdeflation.com/blogs/ “A crucial factor is the distribution of debt between productive and unproductive purposes–between genuine investment and mere speculation. The former builds additional productive capacity that can be used to meet financial commitments in the future, even if today excessive increases in the debt burden leads to a recession. But borrowing that merely finances speculation on the stock exchange or the housing market about the prices of shares and houses adds to debt now without increasing our capacity to service it in the future.”
–Prof. Steve Keen
http://www.debtdeflation.com/blogs/

]]> By: Darrenhttp://alephblog.com/2009/05/31/eight-notes-on-the-actions-of-the-us-government-on-the-economy/comment-page-1/#comment-21882 Darren Mon, 01 Jun 2009 15:46:42 +0000 http://alephblog.com/?p=1759#comment-21882 David, I'll add to your VAT commentary, this time from Canada. This tax, combined with some government restraint, got Canada from heavy indebtedness in the early 90s to the best fiscal situation in the G7 today. The VAT (called the GST, Goods & Services Tax here) is generally hated (except by some strange unloved economists that like its benefits relative to income taxes), very obvious on your receipt, and has recently been dropped from 7% initially to 5% now as Canada has moved into a better debt position. Really, the US is looking more and more like Canada in the early 90s and you may want to re-examine your thoughts on the pros/cons of a VAT for the US... Darren David,

I’ll add to your VAT commentary, this time from Canada. This tax, combined with some government restraint, got Canada from heavy indebtedness in the early 90s to the best fiscal situation in the G7 today. The VAT (called the GST, Goods & Services Tax here) is generally hated (except by some strange unloved economists that like its benefits relative to income taxes), very obvious on your receipt, and has recently been dropped from 7% initially to 5% now as Canada has moved into a better debt position. Really, the US is looking more and more like Canada in the early 90s and you may want to re-examine your thoughts on the pros/cons of a VAT for the US…

Darren

]]> By: IFhttp://alephblog.com/2009/05/31/eight-notes-on-the-actions-of-the-us-government-on-the-economy/comment-page-1/#comment-21878 IF Sun, 31 May 2009 20:26:20 +0000 http://alephblog.com/?p=1759#comment-21878 Being European I also like VAT. It is a beautiful tax (in its technical implementation) and the worst I can say about it is that it is regressive and can be gamed via fake export schemes. On the other hand, as I live now in CA, the local sales tax is nearly as high as a VAT, just that the sales tax is easily game-able via mail order etc. I also think it is unfair that a sales tax is charged upon used goods (like cars), while a VAT is not. As James pointed out, being regressive VAT encourages savings. (Conversely, if Roth accounts ever grow to a significant amount it will permit to tax spendings from them.) Transparency issues are completely independent on how any particular tax is implemented. With regards to bonds: I started aggressively investing in corporates from October to March. The prices seemed cheap and I got a good return on a fairly diversified portfolio. But I am a small scale investor (401k) in an illiquid market. I am using Fidelity (but Schwab is similar): spreads are high. While I wouldn't mind selling some bonds, I am not willing to pay Fidelity a 5 percent cut to take them from me. David, do you know a brokerage that is more liquid and has tighter spreads than the two mentioned? Or are corporate bonds just always a high spread product unlike exchange traded stock? Being European I also like VAT. It is a beautiful tax (in its technical implementation) and the worst I can say about it is that it is regressive and can be gamed via fake export schemes. On the other hand, as I live now in CA, the local sales tax is nearly as high as a VAT, just that the sales tax is easily game-able via mail order etc. I also think it is unfair that a sales tax is charged upon used goods (like cars), while a VAT is not.

As James pointed out, being regressive VAT encourages savings. (Conversely, if Roth accounts ever grow to a significant amount it will permit to tax spendings from them.) Transparency issues are completely independent on how any particular tax is implemented.

With regards to bonds: I started aggressively investing in corporates from October to March. The prices seemed cheap and I got a good return on a fairly diversified portfolio. But I am a small scale investor (401k) in an illiquid market. I am using Fidelity (but Schwab is similar): spreads are high. While I wouldn’t mind selling some bonds, I am not willing to pay Fidelity a 5 percent cut to take them from me.

David, do you know a brokerage that is more liquid and has tighter spreads than the two mentioned? Or are corporate bonds just always a high spread product unlike exchange traded stock?

]]> By: James Daileyhttp://alephblog.com/2009/05/31/eight-notes-on-the-actions-of-the-us-government-on-the-economy/comment-page-1/#comment-21874 James Dailey Sun, 31 May 2009 12:36:07 +0000 http://alephblog.com/?p=1759#comment-21874 Hello David, I am a bit confused by your comment on the VAT. I agree implementing a consumption tax on top of our current tax structure is downright stupid. However, I don't get how a VAT tax is "insidious". If a 10% sales tax is applied to everything I buy, um...I can do the math even if it isn't on the receipt. An easy fix is to simply require it be disclosed on the receipt - as it is in Britain. I believe a consumption tax is superior for a few reasons. First is its wonderful simplicity - no need for a 60,000 page tax code. Second, it is fair - there is real long term political risk in a democracy when a majority of the population pays very little in taxes. Third, it creates an incentive structure where labor, savings and investment are incentivized rather than punished. It seems to me in an ecomomy drunk with over consumption and excess debt, the long term "solution" is encouraging savings/debt reduction and investment over still more consumption. Hello David,

I am a bit confused by your comment on the VAT. I agree implementing a consumption tax on top of our current tax structure is downright stupid. However, I don’t get how a VAT tax is “insidious”. If a 10% sales tax is applied to everything I buy, um…I can do the math even if it isn’t on the receipt. An easy fix is to simply require it be disclosed on the receipt – as it is in Britain.

I believe a consumption tax is superior for a few reasons. First is its wonderful simplicity – no need for a 60,000 page tax code. Second, it is fair – there is real long term political risk in a democracy when a majority of the population pays very little in taxes. Third, it creates an incentive structure where labor, savings and investment are incentivized rather than punished. It seems to me in an ecomomy drunk with over consumption and excess debt, the long term “solution” is encouraging savings/debt reduction and investment over still more consumption.

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