If the decline in the Portuguese money supply for September is annualized, it will shrink by more than 20 percent, presaging more economic difficulties for a country already reeling from austerity measures imposed by the European Union. Measures of money supply are watched carefully by economists as a portent for economic behavior over the coming six to 12 months.
With an economy already suffering from 12-percent unemployment, a debt-to-GDP ratio approaching an astonishing 360 percent, and the yield on the country’s 10-year treasury debt exceeding 12 percent, it won’t take much to send the Prime Minister, Pedro Passos Coelho, scurrying to the European Central Bank (ECB), hat in hand, for more help.
In fact Portugal's economy may already have gone over the edge. Simon Ward, economist with Henderson Global Investors, said that the mix of fiscal austerity demanded from the ECB in exchange for a bailout of $115 billion earlier this year and monetary tightening by the ECB has forced Portugal to enter a “Grecian vortex.”
I don’t know which I’m more tired of hearing: Barack Obama gloating that one of the richest men in America supports his tax-the-rich efforts, or Warren Buffett whining that his secretary pays a higher tax rate than he does. Let me state for the record that both men are playing fast and loose with the truth, and they both know it.
It is true that Buffett pays a relatively low rate in taxes on most of his income. That’s because it’s not his salary that matters, but what he receives in dividends from his investments. Such dividends are currently taxed at 15 percent a year. If he pays his secretary a decent wage, which I’m sure he does, her tax rate is surely much higher.
But what Warren doesn’t include in his calculations are the taxes that have already been paid on those dividends before he receives them. You see, corporations must pay Uncle Sam 35 percent of all the profits they make before they can send any of those profits to the owners of the company — that is, the shareholders.
Democrats in the Senate Super Committee released its list of proposals to reduce the deficit, and it unsurprisingly includes over one trillion dollars in new taxes. ABC reports, “Democrats have proposed a framework for the Super Committee that multiple aides confirm is around $3 trillion in deficit reduction over the next decade through a cocktail of cuts to entitlements, including Medicare, and as much as $1.3 trillion in new tax revenues.” The Super Committee is faced with the task of finding a minimum of $1.3 trillion in savings before November 23, when a round of automatic spending cuts will take effect.
Rapper Kanye West and hip-hop kingpin Russell Simmons added some celebrity glitz to the Occupy Wall Street protest in New York when they stopped by.
With an estimated net worth of $340 million, Simmons acknowledged that he was part of the targeted "1 percent" at the top. "I don't pay enough taxes and I know it," he said.
He was willing to pay more. Just not yet. "I want to write my check when everybody else does," he stated.
Mr. Simmons didn't say anything about the "Eat the Rich" posters or whether he was willing to end up in a Crock-Pot.
Rapper West, who is also a restaurateur, producer and actor and worth a reported $70 million, didn't dress down when he showed up to take a look at the other “99 percent.”
"Kanye West Visits Occupy Wall Street Without Removing Gold Chains," said the headline in New York magazine, implying a certain level of risk related to public displays of affluence. Fox News commentator Geraldo Rivera got a bucket of white powder dumped on his head during a visit.
Following the Eurozone summit meeting in Brussels, European Council President Herman Van Rompuy announced the results of the late-night negotiations: "From a series of national debt crises, the situation was evolving into a systemic concern, threatening the stability of the Eurozone as a whole. This threat has been contained."
First, the holders of Greek sovereign debt have voluntarily agreed to accept a write-down of their holdings by 50 percent which would be sufficient, he said, to bring down Greece’s debt-to-GDP ratio from its current level of 150 percent to 120 percent by the year 2012.
Second, in exchange for additional austerity measures, Greece will receive another $140 billion from the IMF by the end of the year.
Third, the “rescue fund,” or European Financial Stability Facility (EFSF), will be leveraged so that it will have available approximately $1.4 trillion to loan to countries that get into financial trouble in the future.
Next, the banks affected by the write-downs will be required to raise their net capital ratios from the current five percent to nine percent by next summer, and further austerity measures will be applied to those states applying for financial help in order to qualify for it.
House Committee on Oversight and Government Reform Chairman Rep. Darrell Issa (R-Calif.) is probing a $730 million conditional loan commitment to Severstal, a Russian company operating mainly in the steel and mining industry. Writing to Energy Secretary Steven Chu, the California Congressman questioned whether Severstal North America, a subsidiary of the powerhouse Russian manufacturer, should benefit from public financing to improve and expand facilities in Dearborn, Michigan.
The North American division of the company has struggled to penetrate the U.S. steel market, and it sold three of its U.S. mills in March. Consequently, Severstal North America received a conditional loan approval from the U.S. Energy Department in July to help retool and expand its factory in Dearborn.
Severstal is owned and controlled by Alexei Mordashov, who is worth $18.5 billion and is one of the wealthiest people in the world, according to Forbes magazine. In Issa’s letter, he asked Secretary Chu why taxpayer money is needed when "announcements made by Severstal during the loan consideration process indicated that the company had ample means to carry out the project."
In Commerce Secretary John Bryson’s announcement that the nation’s Gross Domestic Product (GDP) grew at an annual rate of 2.5% last quarter, he came close to disclosing the real driver of the economy: producers:
In spite of headwinds hitting the U.S. economy, today’s GDP report — the ninth straight positive quarter — reflects strong consumer spending and export growth and continued investment by American businesses (emphasis added).
But then he had to go and spoil it all by touting the Keynesian response to lack of jobs and turning to shill for more government spending:
Despite today’s encouraging numbers, we must do more to create jobs. That’s why it’s critical that Congress act to pass the measures in the president’s Jobs Act.
It’s the Keynesian approach that puts the matter upside down, but continues to be the only ideology considered as a solution: demand creates supply. If that is so, then putting spending power into the hands of consumers will drive the economy. History shows that that leads to all kinds of mischief, including taking of money from those who earned it and giving it to those who didn’t, all in the name of “fairness” and “economic justice.” The fact that the Keynesian approach doesn’t work, never has worked, and never can work, doesn’t bother the statists who favor more government, regardless.
The New York Times and CBS has come out with a new poll that shows Americans have a strong mistrust of government. Almost 90% of Americans do not trust government to do the right thing and almost three quarters say that they believe the nation is on the wrong track. As the poll probes deeper into what Americans believe the government ought to do, partisan differences appear. Nearly 9 out of 10 Democrats believe that the distribution of wealth in the country should be fairer, while 2 out of three independents agree with that, though only 1 out of 3 Republicans believe that to be true. This poll also showed that a significant percentage of Americans support the “Occupy Wall Street” movement while a much smaller percentage support the Tea Party Movement.
Gallup has come out with a poll this September that may narrow down discontent with government more. The overwhelming majority of Americans, 2 out of 3, have a “great deal” or a “fair amount” of confidence in local government — a percentage that has remained very stable over the last fifteen years. A clear majority of Americans, 57%, feel the same way about state government, although that confidence did nosedive in 2009. Faith in the federal government, by contrast, is very low.
Another September Gallup Poll sheds light on part of the reason for the low confidence in the federal government. Since 1979 Gallup has asked respondents “Of every tax dollar that goes to the federal government in Washington, D.C., how many cents of each dollar would you say were wasted?”
Presidential candidate and former Godfather’s Pizza CEO Herman Cain fielded questions from voters in Concord, New Hampshire, on October 12. Cain’s rise in the polls has created intense interest in the businessman’s 9-9-9 plan, which has become the centerpiece of his campaign. And the question-and-answer sessions seemed unremarkable until one voter asked: “So sir, if you bought under 9-9-9 an Apple computer designed in the United States, with components made in Malaysia and assembled in China, would you get to deduct it?” Cain amazingly replied: “I have no idea.”
When Bank of America announced that it was moving its derivatives-laden portfolio at its subsidiary Merrill Lynch over to its bank holding company, it said it was merely responding to pressure from some of its partners to take advantage of the holding company’s higher credit rating. It would also reduce the need for the bank to post an additional $3.3 billion in collateral because of the recent downgrade it suffered at the hands of Moody’s last month.
But the real reason, according to Bloomberg, is that the FDIC insures the bank but not Merrill Lynch, and in the event of a failure in its derivatives holdings, the FDIC, courtesy of the U.S. taxpayer, would pay off depositors who suffered losses.
Bloomberg notes, "Derivatives are financial instruments used to hedge risks or for speculation. They’re derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates." But since the early 1990s banks have more and more moved to the “speculation” part of the equation, generating an estimated $35 billion in trading profits annually.