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Taxes, the Deficit/Debt, and the Fiscal Cliff

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5 minutes ago, Lord Ratner said:
On 1/27/2019 at 9:57 AM, matmacwc said:
VAT is another one of those taxes that are ridiculous and we need to leave it to Europe, most things we take for granted are so overpriced over there, in part, due to this.  I’ll fight VAT tooth and nail.  How bout we spend less.
Gevernment oversight of every step of manufacturing, what could go wrong?

I'd much rather spend 20% on sales tax than 40%+ on income taxes. And I much prefer a system where everyone contributes. Hard to care about a tax that doesn't affect you, and nearly half of Americans (voters) aren't affected by income tax.

I get it, but if you think our government is going to get rid of regular taxes and replace it with VAT your are sorely mistaken, the libs don’t think it’s your money to start with, why do you think anyone would benefit?  The government surely will.

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I get it, but if you think our government is going to get rid of regular taxes and replace it with VAT your are sorely mistaken, the libs don’t think it’s your money to start with, why do you think anyone would benefit?  The government surely will.
We agree there. I actually think the only way to fix it is the long game. Make things worse, compromise heavily to get what you want so it can take root and become "normal," then hope you can undo the bad during the next wave.

Oh, and you have to hope the conservatives don't completely waste two years of near-total control. Again.

I'm not optimistic.

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Whatever tax structure is used such flat tax, progressive tax, or VAT combined with ever rate the idiots in Congress decide upon with up to and including a 70% rate recently mentioned,  that tax method and rate is completely irrelevant if the idiots in Congress keep spending more money that the country takes in.

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I'd much rather spend 20% on sales tax than 40%+ on income taxes. And I much prefer a system where everyone contributes. Hard to care about a tax that doesn't affect you, and nearly half of Americans (voters) aren't affected by income tax.
Many European countries have the 20%ish VAT, but on top of the 40%+ income tax - worst of both worlds.

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Public Service Announcement:

If you use the militaryonesource HR Block software and want to pay taxes owed by credit card, don't pay at the link they give you.  Their link goes to Pay1040.com with a CC fee of 2.49%.  Instead go to Pay1040.com in a separate browser, enter the exact same information, and the fee is only 1.87%.  USAA Cash Back card pays 2.5%, so ya got that going for you, which is nice.  

c640x360_32.jpg

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Help me out here. I've probably been listening to way too much Ray Dalio, Peter Schiff, George Gammon and others. The end is near! Tell me why I shouldn't pull out of the market tomorrow, build a gold vault under my house, and stock up on ammo based on the following ideas trapped in my head:

- $23 Trillion in debt and the Federal government under Trump continues to add $1Trillion per year when the Federal Government owns only about $4T in assets.

- Growth in Banking/Finance/Services industries accounts for the growth in GDP while manufacturing continues to decline. We're consuming way more than we're producing.

- Economy is 70% consumer spending and consumers are more in debt than ever. Home, Auto, Student, and Credit Cart Debt are all time highs during a time of record prosperity. 

- On top of that, the individual taxpayer share of government debt is approx $140,000.

- Quantitative Easing is flooding the system with dollar bills that will drive massive inflation. That inflation will force lenders to raise rates. A 1% raise in interest will cost the government an additional $200 Billion per year in debt maintenance. Artificially keeping rates low during inflation is effectively stealing the savings of you and I.

- The market is propped up by cheap money flooding into corporate buybacks and bad businesses whose shares are priced according to revenue, not profitability.

- We're going to see some social unrest before and after the election. Trump won't win. To mitigate the anti-capitalist social unrest (already occurring elsewhere), the next socialist-leaning democratic administration won't cut benefits, they'll raise taxes, print money, and fuck everything up.

Can anyone make the argument that everything is just fine?

 

 

Edited by torqued

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24 minutes ago, torqued said:

Help me out here. I've probably been listening to way too much Ray Dalio, Peter Schiff, George Gammon and others. The end is near! Tell me why I shouldn't pull out of the market tomorrow, build a gold vault under my house, and stock up on ammo based on the following ideas trapped in my head:

- $23 Trillion in debt and the Federal government under Trump continues to add $1Trillion per year when the Federal Government owns only about $4T in assets.

- Growth in Banking/Finance/Services industries accounts for the growth in GDP while manufacturing continues to decline. We're consuming way more than we're producing.

- Economy is 70% consumer spending and consumers are more in debt than ever. Home, Auto, Student, and Credit Cart Debt are all time highs during a time of record prosperity. 

- On top of that, the individual taxpayer share of government debt is approx $140,000.

- Quantitative Easing is flooding the system with dollar bills that will drive massive inflation. That inflation will force lenders to raise rates. A 1% raise in interest will cost the government an additional $200 Billion per year in debt maintenance. Artificially keeping rates low during inflation is effectively stealing the savings of you and I.

- The market is propped up by cheap money flooding into corporate buybacks and bad businesses whose shares are priced according to revenue, not profitability.

- We're going to see some social unrest before and after the election. Trump won't win. To mitigate the anti-capitalist social unrest (already occurring elsewhere), the next socialist-leaning democratic administration won't cut benefits, they'll raise taxes, print money, and fuck everything up.

Can anyone make the argument that everything is just fine?

Can't tell you everything as fine but as long as the dollar is the reserve currency of the world the party goes on, right now as China is stumbling (Uighurs, Hong Kong, slowing growth) they can't take the title, if they fix those and other problems then we've got problems

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Hate to beat a dead horse if no one is interested, but just some friendly advice to do a little reading up on the repo market, interest rates, inflation and what this means for any savings/investments you have. 

FIVE HUNDRED BILLION DOLLARS.

Quote
Dec 12
 
The New York Federal Reserve Bank has announced that it will be dumping a previously unfathomable amount of money into the liquidity market beginning Friday. Fed’s statement reads:
 
In accordance with the most recent [Federal Open Market Committee] directive, the Desk will conduct repo operations to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures around year end that could adversely affect policy implementation.
 
The Desk will continue to offer two-week term repo operations twice per week, four of which span year end. In addition, the Desk will also offer another longer-maturity term repo operation that spans year end. The amount offered in this operation will be at least $50 billion.
 
Overnight repo operations will continue to be held each day. On December 31, 2019 and January 2, 2020, the overnight repo offering will increase to at least $150 billion. In addition, on December 30, 2019, the Desk will offer a $75 billion repo that settles on December 31, 2019 and matures on January 2, 2020.
 
The Desk intends to adjust the timing and amounts of repo operations as needed to mitigate the risk of money market pressures that could adversely affect policy implementation, consistent with the directive from the FOMC.”
 
Translation: The New York Fed will continue to offer two-week term repurchase operations twice per week. Four of those will span the end of the year. It will also offer one more longer-term “repo” operation that also spans the end of the year. That operation will be at least $50 billion.
 
Also, in order to prevent an avalanche of liquidity issues to end the year, the Fed will continue its daily repo operations through the end of the year. The amount that will be offered each night will be increased to $150 billion. Additionally, there will be a $50 billion term repo, followed by daily $35 billion repo offerings, which will total $365 billion.
 
Adding in $50 billion for the expanded overnight repo, and another $60 billion in T-bill purchases, the total injection in the next 30 days will be $500 billion. Added to the current Fed balance sheet, by mid-January, it will hold more than its all-time high of $4.5 trillion.

 

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3 hours ago, torqued said:

Hate to beat a dead horse if no one is interested, but just some friendly advice to do a little reading up on the repo market, interest rates, inflation and what this means for any savings/investments you have. 

FIVE HUNDRED BILLION DOLLARS.

 

Can I get a translation?

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Fed is dumping money into banks to keep them solvent.  Banks regularly borrow from each other overnight to reconcile accounts, but for some reason they are becoming more reluctant to do those loans, so the Fed had to.

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Fed is dumping money into banks to keep them solvent.  Banks regularly borrow from each other overnight to reconcile accounts, but for some reason they are becoming more reluctant to do those loans, so the Fed had to.

Can you dumb it down further to what that means to the average middle class American? Ie why do I care?


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10 minutes ago, di1630 said:


Can you dumb it down further to what that means to the average middle class American? Ie why do I care?


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Banks don't have liquidity.  You might go to get your money, and it isn't there.  Like in 1929.

Edited by pawnman
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2 hours ago, uhhello said:

Can I get a translation?

 

1 hour ago, di1630 said:


Can you dumb it down further to what that means to the average middle class American? Ie why do I care?


Sent from my iPhone using Baseops Network mobile app

Here's a couple good vids. Forgive the "Click-baity" thumbnails, the actual content is good.

This guy (George Gammon) just recently started explaining current macroeconomics via Youtube videos and I highly recommend his channel for anyone who is interested in the things that are currently happening. He's fantastic at explaining the issues to those of us who aren't expert economists. He has another vid on his channel explaining the Repo Market (above) and why this is a major event.

Here's another great explanation:

 

Edited by torqued
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This Fed Repo and Reverse Repo stuff is way to complicated for my pay grade (old ass) but it seems that all the Fed Repo Operations crashed at the beginning of the 2008 financial crisis (Sept 2008).

- Some history (2001 until the crash in 2008); Fed Admits Failure of ‘Plan A’ to Control Money Market Rates, Shifts Back to Repos (which was ‘Plan A’ till 2008);

https://wolfstreet.com/2019/09/20/fed-admits-plan-a-of-controlling-money-market-rates-fails-shifts-to-plan-b-repos-which-was-plan-a-till-2008/  

- Repo and Reverse Repo Agreements;

https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements

 

 

Edited by waveshaper
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For those who prefer a picture. We spent about a year and a half trying to normalize monetary policy in this country, the markets tanked and the Fed cowards reversed course and slashed interest rates. And when that wasn't enough to get the stock market back to all time highs they decided to blow out the balance sheet again. In 3 short months plowing in so much liquidity they undid what took over a year and a half to sell off. But Jerome Powell assures us this isn't quantitative easing, nope definitely not QE4 going on, nothing to see here the markets are fine.

morgan%20stanley%20fed%20balance%20sheet.jpg?itok=9ZuTpBop

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Yeah, lowering taxes and interest rates along with the current actions being taken by the fed should not happen during a period of economic growth. They should be saved to provide a boost to the economy when we go into a recession.

It has also made it difficult to judge the true health of the economy. Yes, it is growing. But we basically provided a small stimulus package to a healthy economy, so it has covered up any obvious warning signs or consequences that could have been created by the trade war/tariffs/anything else.

I worry that we are going to be in trouble when the next recession hits and those moves are off the table.

Edited by N730
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Translation: Banks are in trouble, the economy is in trouble, and Trump wants to artificially prop up the economy long enough to get reelected. He's attempting to make it sound as if it's for exports, but it's really to save the financial system. He's concerned.

If the Fed prints money to buy bad loans or other poor performing securities to rescue banks, it's called QE. If you or I print money to buy anything, it's called counterfeiting.

The Fed is dumping a fuck-ton of money into the economy and with low/negative interest rates, it is forcing banks to lend it essentially free instead of parking it somewhere. Big money is currently hoarding cash/liquid assets because they currently think it's better to take a hit on inflation than loan defaults and/or big market losses coming down the pike. That could be why there is no money in the repo (repurchase agreement) market, but I'm no expert. It's akin to a bank walking into a pawn shop and saying they need $10,000 to give out in loans that they will repay tomorrow with interest, and using a brand new corvette as collateral. They pawn shop (lending bank) says, "That's a fantastic deal, but we have no money to give you." Things are in danger of coming to halt until the Fed shows up at the pawn shop and hands over a warm stack of freshly printed $100 bills just to keep all interested parties' businesses from tanking.

This new money will take a minute to circulate through the financial system, and when it starts hitting the pockets of the average wage-earner, the price of everything will soar. The purchasing power of your nest egg in the bank falls dramatically. The average person will have less discretionary spending because they'll be spending earnings on the ballooning prices of milk, bread, utilities, healthcare, car payments, student loan payments, credit card payments, and mortgages. When money gets tight and cards are maxed, less consumer goods are purchased and loan payments slow. Borrowers default and it's 2007-8 again, but with multiple bubbles. Your savings and cash accounts are devalued, and your retirement/401K is crushed. Tax revenue shrinks while the Federal Government continues to spend $1 Trillion more (and growing) per year than it receives.

The only question is: "How long?"

 

 

Edited by torqued
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What’s amazing is that everyone in the US can kind of “feel” it coming. Talk to blue collar or middle class folks and they’ll tell you that things are good, but something just feels odd about the growth. So, they’re not expanding as much, and they’re saving more.

The saddest part is this isn’t a Republican vs. Democrat thing. It’s both sides, just doing what’s politically advantageous. We don’t have anyone trying to rein in the Fed... because who could? They’re extra-governmental.

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40 minutes ago, torqued said:

The only question is: "How long

3-5 years. 

here's a tin-foil hat idea for you: Trump props up the economy long enough to get re-elected, then intentionally let's it crash a year into his second term. He then gets to turn around and blame the dems since they held congress and therefore the purse strings, tell everyone that only he can save us and lead us out with his business acumen (never mind that government is not a business and is designed to operate at a loss, albeit ideally not $1 trillion+ a year) and sets himself up for term 3. Boom, term limits gone, political opponent vilified, and messiah status established.

Not a real prediction, but a fun idea for a book, yeah? Real note: this is how dictatorships form all over the world, so the only part I'm pulling out of my ass is it happening in America. Not realistic for us but its not far fetched for a lot of places, especially third world countries that got a taste of the developed world and lost it.

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2 hours ago, Kiloalpha said:

Talk to blue collar or middle class folks and they’ll tell you that things are good, but something just feels odd about the growth. So, they’re not expanding as much, and they’re saving more.

Except a lot of farmers. Many of them are directly feeling the ramifications of our current trade policies. But then the government bails them out of a problem they created with billions of dollars they don't have and expect to be thanked. All the way, the government is ignoring the fact that some of the markets farmers have lost will not be coming back.

At least the auto industry repaid their bailout, most with interest. The emergency farm subsidies are money that shouldn't have been necessary to begin with.

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51 minutes ago, N730 said:

Except a lot of farmers. Many of them are directly feeling the ramifications of our current trade policies. But then the government bails them out of a problem they created with billions of dollars they don't have and expect to be thanked. All the way, the government is ignoring the fact that some of the markets farmers have lost will not be coming back.

At least the auto industry repaid their bailout, most with interest. The emergency farm subsidies are money that shouldn't have been necessary to begin with.

This is a very good point. However, the food industry has been living in a sheltered economy for a long time, with illegal immigrants working as insanely cheap labor, and farm act subsidies keeping the market costs for certain crops over-competitive internationally.

Corn in particular, ever since GWB’s wonderful ethanol idea, has been the definition of a boondoggle. That ear of corn in Walmart should be at least triple the price, but due to insane subsidies and cheap labor it remains that low. Not to even get started on how the blended fuels are worse for engines...

Ted Cruz, even with his dad having assassinated JFK, was right when he stood in Iowa and told the corn farmers to their faces that those subsidies need to end.

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I hate this convo.  There is seemingly no move to win.  And there isn't even a move to not play.

 

At least we will always have our cush gubment jerbs...  Right?

Edited by brawnie

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22 hours ago, torqued said:

This new money will take a minute to circulate through the financial system, and when it starts hitting the pockets of the average wage-earner, the price of everything will soar. The purchasing power of your nest egg in the bank falls dramatically. The average person will have less discretionary spending because they'll be spending earnings on the ballooning prices of milk, bread, utilities, healthcare, car payments, student loan payments, credit card payments, and mortgages. When money gets tight and cards are maxed, less consumer goods are purchased and loan payments slow. Borrowers default and it's 2007-8 again, but with multiple bubbles. Your savings and cash accounts are devalued, and your retirement/401K is crushed. Tax revenue shrinks while the Federal Government continues to spend $1 Trillion more (and growing) per year than it receives.

One of the toughest concepts for the average joe to wrap their brain around is that inflation isn't just something that happens naturally, as we've been conditioned to believe, and at the end of the day, it is really a back-door tax.

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