Financial Crisis NIMBY

Zerohedge posted a brief research note from Brevan Howard noting visibility for what it calls a fiscal drag in 2013. It views this as a certainty to be caused by an increase in capital gains and dividend taxes, presumably as the Bush tax cuts finally expire, and the expiration in the reduction of the payroll tax that was in place in 2011 and was extended this year.  

This is interesting. I think the more important question is whether or not the above breaks are extended thus kicking the can a little further down the road or whether these breaks come to an end and the country begins to have some sort of reckoning for all of the incredibly easy and consumer friendly policies and the various too big to fail protection policies enacted. 


My own belief system (which is probably not relevant) calls for tearing off the band aid, I’ve said this all along and of course that is not what has happened. Many believe that housing and jobs are the two important parts of the US economy. Housing is still drifting lower (for the most part) and while employment numbers have not looked as bad as housing (we’ll see if the increase in participation rates persists) we are still way behind most other past economic downturns in terms of job recovery. 


It would shock me if somehow the political will was exhibited such that the country turned the corner on being accountable for all that has gone on. The Fed’s intention to keep rates at zero into 2014 supports the idea that no such corner will be turned, at least not yet.


I don’t know when the country will ever be accountable but if it happens it could be very ugly. It seems as though many accept that not everyone will get what they want but far fewer believe that they will be the ones to give anything up. This is very visible in the comments on posts about social security. Some folks believe that to not get their full payment is to be stolen from by the government. 


Without getting into either side of that sentiment, if you are fully entitled to benefit from some pool of capital (like a pension) starting in five years and three years from now that pool of capital goes bust then entitled or not you face the reality of not getting paid. Pensions have PBGC but social security does not. While a five year timetable for social security is not correct the 2030s could be and so people of a certain age, who will absolutely be entitled to X amount may only end up with some percentage of X or not be able to start accessing X until much later than they expect. 


I have no doubt that such an outcome would cause a huge outrage. There’s a NIMBY sense to what must occur if there is ever to be a financial reckoning but whatever the reality is that sacrifice of some sort will be in everyone’s back yard, hopefully everyone plans and prepares accordingly.

6 Comments

  1. financial reckoning?

    Have you ever considered just shutting the television off?

    Much of the chatter out there is just that: Chatter. Talking heads that really don’t know very much.

    Considering other eras mankind has gone through, we’re actually living in one of the sweet spots.

    Reply
  2. I hear you on the expiration of serveral tax reductions. It’s going to be VERY interesting. Well, actually probably more pathetic.

    I’m more inclined to rip the bandaid off as well – let the tax cuts all expire – but given the role of Grover Nordquist in all of this, I have zero idea how it will turn out.And of course that affects the investment changes I’ve made, but such is life.

    Reply
  3. I’m willing to take a hit in the future…but the wealthy had better give up the same increments

    Reply
  4. i think it will be means testing so the wealthy and even not so wealthy will be affected.

    Reply
  5. Surely means testing is fairer, as long as you’re not faced with losing thousands if your income or wealth reaches a certain figure. For example a multi-millionaire wouldn’t receive anything and someone whose income is $100k would receive reduced entitlements.

    Reply
  6. who knows how far it will come down, Obama obviously thinks $250k is “rich” although this would happen after he is out.

    Reply

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Financial Crisis NIMBY

Zerohedge posted a brief research note from Brevan Howard noting visibility for what it calls a fiscal drag in 2013. It views this as a certainty to be caused by an increase in capital gains and dividend taxes, presumably as the Bush tax cuts finally expire, and the expiration in the reduction of the payroll tax that was in place in 2011 and was extended this year.  

This is interesting. I think the more important question is whether or not the above breaks are extended thus kicking the can a little further down the road or whether these breaks come to an end and the country begins to have some sort of reckoning for all of the incredibly easy and consumer friendly policies and the various too big to fail protection policies enacted. 


My own belief system (which is probably not relevant) calls for tearing off the band aid, I’ve said this all along and of course that is not what has happened. Many believe that housing and jobs are the two important parts of the US economy. Housing is still drifting lower (for the most part) and while employment numbers have not looked as bad as housing (we’ll see if the increase in participation rates persists) we are still way behind most other past economic downturns in terms of job recovery. 


It would shock me if somehow the political will was exhibited such that the country turned the corner on being accountable for all that has gone on. The Fed’s intention to keep rates at zero into 2014 supports the idea that no such corner will be turned, at least not yet.


I don’t know when the country will ever be accountable but if it happens it could be very ugly. It seems as though many accept that not everyone will get what they want but far fewer believe that they will be the ones to give anything up. This is very visible in the comments on posts about social security. Some folks believe that to not get their full payment is to be stolen from by the government. 


Without getting into either side of that sentiment, if you are fully entitled to benefit from some pool of capital (like a pension) starting in five years and three years from now that pool of capital goes bust then entitled or not you face the reality of not getting paid. Pensions have PBGC but social security does not. While a five year timetable for social security is not correct the 2030s could be and so people of a certain age, who will absolutely be entitled to X amount may only end up with some percentage of X or not be able to start accessing X until much later than they expect. 


I have no doubt that such an outcome would cause a huge outrage. There’s a NIMBY sense to what must occur if there is ever to be a financial reckoning but whatever the reality is that sacrifice of some sort will be in everyone’s back yard, hopefully everyone plans and prepares accordingly.

Submit a Comment

Your email address will not be published.

WP-SpamFree by Pole Position Marketing