TPS

What's wrong with using creative ways to generate revenues in supporting the growth of local government?

This is a nice little summary of things: Money editorial although I disagree with how he tries to tie the Fed's bailout to taxpayers paying for it. In a world of fiat currencies, we'll pay for this via the inflating currency.

no doubt he did a pretty stupid thing, especially since he pissed both wall street and the bush admin off. <just came across this piece he wrote in the post about how the admin blocked states from preventing subprime lending. enemies

Since I'm in agreement with you on the Fed's actions, I'll refrain....

Geez, I go on my annual golf weekend and miss the best discussion in years! Good stuff guys. I can't even find a post where I disagree with GG. I would add that the creation of the Fed was instigated by Mr JPMorgan himself because he didn't want to have to put up his own (bank's) money to stave off the next crisis as he did in 1907. A few other things to add: - The Fed has really only two goals/functions: trying to maintain price stability; and maintaining trust/confidence (via ensuring adequate liquidity) in the system. In times of crisis, price stability goes out the window. - A friend of mine's wife has been emailing me articles relating to the moral hazard issue, asking why shouldn't people have to "pay for their mistakes" (buying houses beyond their means)? My friend owns the best restaurant in my home town of Riverside (county), CA--the capital of mortgage defaults. I asked her, what would you rather have happen: make these people pay for their mistakes, or keep the restaurant in business? The FED is not trying to prevent a recession--we're in one; rather, it's trying to prevent a depression. - My favorite economist, the late H. Minsky, has a book titled "Can IT Happen Again?" IT being a depression. He argued IT could NOT happen again because of a large government sector which stabilizes aggregate demand, and the Fed's "lender of last resort" function which ensures liquidity in times of crisis. This current environment is the most severe test of this view. While I joked in a response to GG that we're in a depression, I do believe that adequate monetary and fiscal policies can prevent IT from happening again. However, I also have to believe that there are some serious deals being made with those countries (China, Japan, OPEC countries) that hold significant $ assets, getting them to refrain from selling off these assets until things have "settled down." ??? Pure speculation on my part. - Love "The Drane's" posts. However, I have to ask if you believe we really had a "capitalist system" before this crisis? - Last point, this crisis reminds me a bit of the South American debt crisis of the 1980s. The solution then (The "Baker Plan") was to let banks carry "dead assets" for several years, slowly writing them off. It was manageable because banks' assets were more diversified. - Great time to be teaching economics.

Here are two options; one risky, one not. Minimal risk: follow JSP's recommendation and pay off the 6.8% fixed rate loan with your "own" money. It's always better to pay off a higher interest loan with funds making less. That would leave you with a payment of $630/mo. Throw the remainder of the cash into a mutual fund and add to it on a montly basis. Risky option: Throw the $32k into a mutual fund. If it earns the historical average of about 12%, then in about 4.3 years you'll have an amount equal to what you owe. Pay it off, then put the majority of your $920 loan payment into the MF. Current problem with this strategy is we're near the peak of a cycle. If there's a significant market correction after you've thrown the $32K in, you're screwed.

I was on the west coast when they went on sale, and I was told they went on sale at 10 am est. I got up at 6:50 am, a little hung over mind you, and got two pretty decent tickets. Well, I get an email about 3 weeks ago telling me my tickets are being printed and there's a facsimile of the tickets on the email. Lo and behold, I bought tickets for the night before at Turning Stone CAsino!! Damn beer!! Oh well, i can always go early and play some golf. Who knows, maybe Don and Walt will need a 4th...

F'n great post! I'm going to find something to go to this weekend just to honor its sentiments.

I'd always like PJ but never saw them until then. That definitely was one of the best shows I'd ever seen and got me officially addicted...

Sept. 9 DENVER BRONCOS Win Sept. 16 @ Pittsburgh Steelers Loss Sept. 23 @ New England Patriots Win Sept. 30 NEW YORK JETS Win Oct. 8 DALLAS COWBOYS Win Oct. 21 BALTIMORE RAVENS Win Oct. 28 @ New York Jets Loss Nov. 4 CINCINNATI BENGALS Win Nov. 11 @ Miami Dolphins Win Nov. 18 NEW ENGLAND PATRIOTS Loss Nov. 25 @ Jacksonville Jaguars Loss Dec. 2 @ Washington Redskins Win Dec. 9 MIAMI DOLPHINS Win Dec. 16 @ Cleveland BrownsWin Dec. 23 NEW YORK GIANTS Win Dec. 30 @ Philadelphia Eagles Loss

As you know, the somewhat original band stopped touring after Pretzel Logic. Fagen toured with different folks after they broke up (after Goucho). Then the reunion tour began in the 1990s. But Steely Dan (Becker and Fagen), with originals like Denny Dias and Jeff "Skunk" Baxter, stopped touring in 1975.

First concert was Steely Dan at Santa Monica Civic Aud 1973. Saw them twice again in 1974, the last real tour year. Favorite(s): Loggins & Messina's very last concert at Honolulu convention center--front row seats, dead center. 1976 or 77, can't remember now. Eagles at Aloha Stadium--I think it was 1979/80? Jimmy Buffet opened, but I missed him because I passed out from the pakalolo and beer. I woke up as the Eagles started their first song--Hotel California. Ahhh...memories.... Pearl Jam at HSBC a few years ago. Current favorite concert band.

You're getting more agreeable all the time...

Philadelphia won't make the playoffs this year; the Bills will. TKO is a great player, but he's got bad karma man. O-fer in Cincinatti; he leaves; they go to playoffs. Goes to Buffalo; O-fer here. Good luck Philly, yer gonna need it. Playoffs here we come!

I guess it's a semantic issue. I interpret the quote as essentially what you said. "The air force is regarded as being more willing" isn't much different than saying "they simply have fewer things to worry about." That's how I read it. They are regarded to be more willing because they CAN bomb the sh-- out of Iran without much damage to themselves. On the other hand, the Army doesn't have the capability to engage Iran, and more than likely Iran will respond by going after our troops in Iraq. I interpret this as one of many attempts by the lifers in the military to put the brakes on the insane policies that Cheney and the neocons are pursuing. There are top brass who disagree with what these idiots want to do, and they are using the media to try and prevent them from from doing it. Which, for military people, is unprecedented. But, hey, I'm only an economist...

The quote: "The US air force is regarded as being more willing to attack Iran. General Michael Moseley, the head of the air force, cited Iran as the main likely target for American aircraft at a military conference earlier this month."

You'll note the dissenters are believed to be army/navy; it said the air force was in favor.

Generals threaten to quit over Iran? The continuing saga between Cheney's neocons and the lifers.

thanks for completing that. As you'll note, it was sent by iTPS given the time....

Ok, as a public service I think I should post once a week on articles about government contracts and corruption. Since the right believes it's ok to spend or waste money on defense, and they don't seem to care that more money is wasted in this area because it "says defense spending in the constitution is ok" or something stupid to that effect, I will try to keep up with all of the articles about abuse of government waste in this area. If I wasn't so busy, I'd try to post an article every day. However, since I don't have time--unlike DCtom (in fact I'm wondering what his job is...?), I'll try to post weekly on the subject. And it falls under the subject heading that government does create wealth for a lot of people.

the eye of the beholder... For example, I don't find the topic "regression toward the mean" interesting; but I do find the topic "how we went to war on lies" interesting.

Interesting look at how this got spun... Pelosi's Plane Problem

Charlie Trotter's, Chicago.

ECO101: Discretionary fiscal policy is actively manipulating government's budget to achieve a particular outcome. Government can either change taxes, change spending, or both. Any change in fiscal policy changes the government's budget situation. Keynesians argue that tax cuts stimulate the economy by causing deficits in the short term. Any discussion about tax cuts is ALSO a discussion about the government's budget. Now that you finally agree that tax cuts impact revenue generation in the short term, maybe we're getting closer. Ignoring the expenditure side to keep it simple for you, assume the tax rate is 20%. If you cut it to 18% (a 10% reduction), and GDP grows by 3%/year, then it will take 3 1/3 years to generate revenues from increased income to compensate for the tax RATE cut, even if expenditures were held constant. So, yes, if you wait long enough, GDP growth will finally generate enough tax REVENUE to balance the budget--or eliminate the DEFICIT. The real argument is whether so-called supply-side tax cuts will increase GDP by greater than its long term trend over time. Which is why I bring in the issue of GDP growth. Of course GDP is cyclical, and it can be greater or less than 3% growth. Tax cuts are usually enacted when the economy is sluggish. Keynesians would argue that the tax cuts will create a stimulus (via the government now running a deficit) to increase economic growth, but they will not change the long run growth trend (Long run growth is a function of labor force growth and productivity increases). From the BEA web site, current personal taxes were $1,296 billion in the first quarter of 2001; personal tax receipts did not exceed that number until the first quarter of 2006. The reason is because GDP growth has not been any greater under Bush (and his tax cuts) than under any other administration (in fact, on average, it's been less than the historical 3% trend). During Bush's first 3 years real GDP grew by an average 1.6%; in the past 3, it's grown by an average of 3.5% (it's averaged 2.6% for the first 6 years). I don't disagree at all. Of course tax policy influences corporate decisions. Much like Microsoft's dividend payment a few years back, which came out of its cash hoard (balance sheet), after the decrease in the tax rate on dividends. But you insinuated my statement about taxes was incorrect--"CFOs would laugh at it." Nothing you said contradicts my statement, or gives any indication why CFOs would not agree with my statement. This offshoot to the discussion was based on your query about whether the rise in corporate profits could be due to the desire to pay out dividends, and I responded that dividend policy doesn't impact profits. Please give me a concrete example of how dividend policy impacts profitability. Because you ignore the growth rate for 1994 and choose to say the taxes impacted 1995, the lower growth year. Absolutely. In fact, they adjusted behavior on the expectation of the tax increase. Or do you believe that high income tax payers aren't forward looking? Try looking up articles from the credit section in the Wall Street Journal for the weeks leading up to and following enactment of the law in August. I am not saying it was the sole factor responsible for falling rates, but it contributed. There was a lot of discussion about how much of an effect it had, and almost all agree it had an effect. You'll also find discussions on Clinton's policy of relying on lower long term rates to stimulate the economy. I'm not sure where you get your data. From the FED's data on interest rates, the spread between the 10-year bond and 6 month T-Bill was about 2.5% for the first half of 1994, then falling to 2% toward the second half. In 1995 the spread started at 1.3%, and ended the year at 0.4%. The early 1994 spread was about the same as it was in 1993 as well. Since the spreads actually decreased in 1995, I guess that would mean Greenspan's policy did have the effect I stated.