<< <i>There was no silver shortage. Only small investor sized bars were unavailable. Large 1000 oz bars were always >>
There will never be a silver shortage. There will always be silver available at a price, just perhaps more than you want to pay or at a higher price than a commodity exchange says it should cost.
<< <i>There was no silver shortage. Only small investor sized bars were unavailable. Large 1000 oz bars were always >>
There will never be a silver shortage. There will always be silver available at a price, just perhaps more than you want to pay or at a higher price than a commodity exchange says it should cost. >>
I can agree with that to a point. But during the height of the frenzy 1000 oz bars were like 50 cents over spot... It was joe the plumber sizes that had the outrageous premiums. As always, smaller buyers pay higher premiums especially during a period of frenzy when spot fell so quickly.
Also as a counter point to what you are talking about... many buyers here found a source of silver at premiums 2-3 dollars or a bit higher for brand new maples. Brand new material always fetches higher premiums then used stuff. Like when you buy from the US mint (ASE). So a smart shopper was able to find silver at much lower premiums then what the frenzied masses were paying on ebay which was 18+ an ounce.
I just wish people would use the term 'shortage' more carefully. Just like the claim that there is a shortage of Americans to do certain jobs. The reality is there is a shortage of Americans to do certain jobs at certain (low) wages. Raise the wage and you'll have plenty of workers. What it really means is that the price/wage expectation is too low for current conditions.
The price of silver during a "common" economic recession? Or are you saying the price of silver is in a recession? >>
cohodk, I guess you are referring to my OP. I'm not saying that silver has recession prices. Of course it has its ups and downs. The OP was to mean how long do we have during this economic recession to buy PM's which would normally be at lower costs. Or better yet, another question would be "how long will the recession be?"
The OP was to mean how long do we have during this economic recession to buy PM's which would normally be at lower costs. Or better yet, another question would be "how long will the recession be?"
Still not quite sure I understand. Are you saying that PMs should be much lower than current? To answer your 2nd question, much longer than you want, IMHO.
<< <i>The OP was to mean how long do we have during this economic recession to buy PM's which would normally be at lower costs. Or better yet, another question would be "how long will the recession be?"
Still not quite sure I understand. Are you saying that PMs should be much lower than current? To answer your 2nd question, much longer than you want, IMHO. >>
I think you are reading too much into this. I'm not saying where PM's should be. I'm saying nothing more than how long does the board think we have in this recession? One year, two, five? Whatever the opinions are, it gives me an idea of how long I (and others) have to accumulate at low and possibly lower prices next year. My larger picture is that we race out of this recession into a greater inflation. That's do in part of the expansion of M3 which is, of course, no longer reported. My personal opinion is that a lot of the "bailout" money is being sat on by the banks for a later date or event. That's yours and my money that they are sitting on. I have no confidence in this current or next administration. No one is allowing for failure and restructuring. Congress is compounding the problem. Paulson is changing his mind with billions at hand with no oversight. I see chaos. Also, every currency in history, no exception, has eventually failed.
I pose the OP question rather rhetorically. I have drastically changed my investment strategery since 2005 regarding RE and late 2007 regarding equities. My thoughts of where we are heading is no mystery to this forum. I was just looking for guidance, estimates, opinions from greater minds of where they think we are or how much time we have left.
I must add, that this PM forum has allowed us of like-minded people to voice opinions without the masses from the US forum responding with tin-foiled-hat comments. At first I was insulted being thrown out here in oblivion. I felt like a second class citizen. A Marine. Anyone who has worked for the Dept. of the Navy knows this is not an insult but a metaphor. Your an outcast but proud.
I think we've got years left in this recession, and that's because the government refuses to let the free market be free. If you study the great depression, it was made worse with all of the manipulation and programs that were enacted - the same kind of thing that's going on now and will continue to go on. On other reason it will take a long time to recover is that there is no real mechanism for recovery. The best way to recover is to ensure that everyone has a good job. I don't see any of the recovery plans really aiming to employ people. The factories are gone. How is the US going to employ people in real jobs that add or create value? Until I can answer this question, I don't see any kind of recovery coming.
You have touched on what my big concern is. After the 1930's depression and WWII, America emerged as the strongest nation dictating money policy. I don't see us emerging out of this -ism dictating any money policy except for forgiveness.
<< <i> I don't see any of the recovery plans really aiming to employ people. >>
You must not have been paying attention during the elections. The new administration plans on infrastructure projects, building an alternative energy (wind mostly) energy grid and financing R&D for altenrative energy. All of that will create jobs. They also want emergency financing for the auto industry. Where the money is going to come for that is not clear. Don't be surprised if the promised middle class tax cuts are slow to be approved by Congress. So far only funding for the financial sector has been approved by Congress.
<< <i>You must not have been paying attention during the elections. The new administration plans on infrastructure projects, building an alternative energy (wind mostly) energy grid and financing R&D for altenrative energy. All of that will create jobs. They also want emergency financing for the auto industry. Where the money is going to come for that is not clear. Don't be surprised if the promised middle class tax cuts are slow to be approved by Congress. So far only funding for the financial sector has been approved by Congress. >>
I was paying attention but I don't believe the infrastructure projects are really going to make a huge impact... maybe they will. But infrastructure projects will only last so long.
It's unclear to me that emergency funding for the auto industry (or any other industry) would remain in the US. GM in particular (although it would be audacious) would probably take the money and build factories overseas. A lot of good that will do for the US. With every company scrambling to offshore work and production as fast as possible, it would be interesting to see if they would re-open and re-establish US operations after they have already decided that they can't compete in the US.
And the tax cuts aren't going help an economic recovery either, and if you think we'll actually see these tax cuts you're kidding youself. First of all, the Bush tax cuts will be allowed to expire. Your taxes will in fact go up. And Obama has vowed to make the business and investing environment as unfriendly as possible by raising capital gains taxes, raising taxes on corporations, and raising taxes on "wealthy" people. Investment and entrepreneurship will dry up due to lack of financing (due to dis-incentives (higher taxes) for investing) and discouraging (higher) tax rates. The environment of punish the successful and reward the failure will continue and get worse.
<< <i>And Obama has vowed to make the business and investing environment as unfriendly as possible by raising capital gains taxes, raising taxes on corporations, and raising taxes on "wealthy" people. Investment and entrepreneurship will dry up due to lack of financing (due to dis-incentives (higher taxes) for investing) and discouraging (higher) tax rates. >>
Captial gains taxes will still be lower than ordinary income rates, so regardless of whether the rates change there will still be incentive to invest in capital growth. Most venture capital comes from pension money anway and pension funds pay no capital gains tax. As far as the tax on the "wealthy" is concerned, the rates would go back to the rates in effect during the Clinton years, when we had a growth economy. In contrast, the economy declined during the years in which the Bush rate cuts were in effect, so your premise is not substantiated by history.
<< <i>Captial gains taxes will still be lower than ordinary income rates, so regardless of whether the rates change there will still be incentive to invest in capital growth. Most venture capital comes from pension money anway and pension funds pay no capital gains tax. As far as the tax on the "wealthy" is concerned, the rates would go back to the rates in effect during the Clinton years, when we had a growth economy. In contrast, the economy declined during the years in which the Bush rate cuts were in effect, so your premise is not substantiated by history. >>
That is an over-simplistic view of history. The tech/economic boom on the 90's was not created nor inspired by any government policies. It was fueled by technology advances. Bush had the unfortunate task of being the one who had to preside through the inevitable and unavoidable crash of the tech bubble as well as the devastating 9/11 attacks. You can't even begin to compare the effectiveness of tax policies in 90's to the 00's.
The bottom line is that taising taxes will NEVER have a stimulative effect, even if the rate is below some historical bench mark. Venture capital is only a small part of funding for businesses. Most small businesses get loans from banks and investors directly, not VC firms. Banks and investors have to be encouraged to participate with lower tax rates, as well as business are more likely to be successful and more profitible when their costs, including taxes, are lower rather than higher.
The facts are that capital gains tax revenues DOUBLED following the 2003 tax cut. What do you think will happen with this is increased, regardless of the amount of the increase?
You are just missing the point. The incentive to capital investment is not the capital gains tax rate per se --it is the differential between the capital gains rate and the ordinary income rate. We had plenty of capital investment when rates were much higher.
Investors looking for a return on capital can either invest in capital assets and pay a long term capital gains tax at a favorable rate lower than ordinary income, or they can buy interest bearing securities and CDs and earn a low rate of return and pay taxes on the interest at the higher ordinary income rates.
What investors will not do is invest if they do not believe that the investment will garner a return. As an old investment banker once told me when we could not find a way to structure a transaction for capital gains--"ordinary income is not so bad either."
We are experiencing a financial socialist tax with all these bailouts coming indirectly out of our 401K's. (Not so) funny thing is that it's under the reign of the "elephants." How bad will it be under the "donkeys?"
<< <i>You are just missing the point. The incentive to capital investment is not the capital gains tax rate per se --it is the differential between the capital gains rate and the ordinary income rate. We had plenty of capital investment when rates were much higher. >>
I am not missing anything.
The question is, "will raising tax rates increase or decrease investment activity?"
The answer is, it will DECREASE investment activity. Whatever level there is now, we can expect less. Not exactly what you want to see in a declining economic situation.
<< <i>You are just missing the point. The incentive to capital investment is not the capital gains tax rate per se --it is the differential between the capital gains rate and the ordinary income rate. We had plenty of capital investment when rates were much higher. >>
I am not missing anything.
The question is, "will raising tax rates increase or decrease investment activity?"
The answer is, it will DECREASE investment activity. Whatever level there is now, we can expect less. Not exactly what you want to see in a declining economic situation. >>
All I know is that just the expiration of the "Bush" tax cut alone will cost me $800 more in tax per month!
And who knows what it will be after Dear Leader BO, PM Pelosi and Co. take the "reign."
So, will my investment activity DECREASE?
But then again the argument goes that I can afford it and need to spread it around to those people who don't have the means to invest, save or take on risk.
Someone has to pay for the growing federal deficit created over the past 8 years, plus the growing deficit due to the bailouts, stimulous plans, and reduced revenues from the recessionary economy. You can't expect people with no money to pay for it. So that leaves you.....and me. Just be grateful that you are still in the upper brackets despite the tanking economy.
<< <i>Someone has to pay for the growing federal deficit created over the past 8 years, plus the growing deficit due to the bailouts, stimulous plans, and reduced revenues from the recessionary economy. You can't expect people with no money to pay for it. So that leaves you.....and me. Just be grateful that you are still in the upper brackets despite the tanking economy.
CG >>
CG, if you want to lay blame let's include all kings men. This goes back 31 years when the Community Reinvestment Act was signed by Carter. In 1993, Clinton tried to reduce cost and compliance burden. In 1999 he signed the Gramm-Leach Act to repeal the 60 year Glass-Steagall Act. So on and so forth. Throw in a little Fannie and Freddie, Public Allies and Acorn and extortion, Countrywide greed and one sees this is an enormous problem that has had a lot of time to fester.
There's a lot of blame to spread around. The American people who selfishly bought houses that they could not afford. Predator lending is no excuse. Adults should know what they are signing. No one is putting a gun to their head to buy an expensive house. People became greedy, cried "racist" when minorities couldn't get loans. Bush boosted about a homeownership society. Greenspan underestimated the impact of subprimes in his book. He was suppose to be the Maestro.
As far as me being grateful to still be in the upper brackets so that I can pay more taxes, are you joking. You mean I deserve to bailout selfish people living beyond their means buying houses, cars, flat screens and have maxed out credit cards. The only reason I'm in the bracket is because I took responsibility for my actions. I took no handouts along the way. I also started from nothing in another country and in another language.
I served in the Marines. On the side I bought and sold RE until 2005. I left that market when I saw the absurdity in CA...40 year notes, 125% loans. I exited the equities in January when this credit crisis began to expose itself. This was no brilliance on my part, it was plain as day what was happening.
I have also failed but I learned from my failures. Whatever happened to bankruptcies and its protections. Nothing is allowed to fail (except for the middle class imho.) Who decided nothing is allowed to fail. Now, you and I pay for all of this social-garbage. We are so far down the path now. We had a chance to clean this up a few years ago...transparency and responsibility. As far as bailing out this country, I personally think it's too late. The next to last thing to fail will be the dollar. The last thing to fail will be the American Republic.
Until the 1980’s the tax brackets ran as high as 70%, with a 50% cap on earned income. Around 1981 or so the top brackets were lowered to 50% if I recall correctly. So even rolling back the Bush tax cuts to reinstate the 39% bracket is low in comparison.
Of course back then people invested in leveraged tax shelters—oil and gas programs, R&D, even wind and solar deals—figuring it was better to invest in risky deals than to throw the money down a rat hole by giving it to the IRS. Some tax shelter deals paid off too, but mostly investors lost their money in those deals. On the other hand, we got wind turbine and solar electrical power fields built that are still operating today. The 1986 tax reform act killed the shelters and put an end to wind and solar energy development (the economics did not work without the tax benefits) and also curtailed domestic independent oil and gas drilling (although the oil and gas bubble had actually burst a few years before when prices fell).
Maybe its time to reinstate tax deductions or credits for investments in alternative energy or other target industries. Still, at 39% the tax bracket is probably much too low to encourage investors to take the risk. It was easier to be bold with your money when the IRS was taking 70% of it.
<< <i>Until the 1980’s the tax brackets ran as high as 70%, with a 50% cap on earned income. Around 1981 or so the top brackets were lowered to 50% if I recall correctly. So even rolling back the Bush tax cuts to reinstate the 39% bracket is low in comparison. >>
And guess what happens when you lower tax rates? Revenues increase! Or at least they have in the past. What does that tell you? People make more money and do more investing with lower tax rates which leads to the higher revenue.
Remember, we're not operating in a vacuum. If you run up tax rates in the US, you'll send investment dollars offshore. Again, not the way to boost the economic recovery in the US.
<< <i>Until the 1980’s the tax brackets ran as high as 70%, with a 50% cap on earned income. Around 1981 or so the top brackets were lowered to 50% if I recall correctly. So even rolling back the Bush tax cuts to reinstate the 39% bracket is low in comparison.
Of course back then people invested in leveraged tax shelters—oil and gas programs, R&D, even wind and solar deals—figuring it was better to invest in risky deals than to throw the money down a rat hole by giving it to the IRS. Some tax shelter deals paid off too, but mostly investors lost their money in those deals. On the other hand, we got wind turbine and solar electrical power fields built that are still operating today. The 1986 tax reform act killed the shelters and put an end to wind and solar energy development (the economics did not work without the tax benefits) and also curtailed domestic independent oil and gas drilling (although the oil and gas bubble had actually burst a few years before when prices fell).
Maybe its time to reinstate tax deductions or credits for investments in alternative energy or other target industries. Still, at 39% the tax bracket is probably much too low to encourage investors to take the risk. It was easier to be bold with your money when the IRS was taking 70% of it.
CG >>
You're quite right, that the government was incentivizing all sorts of things, and laying a heavy and distorting hand on the economy, before the Reagan tax reforms swept it away.
I remember well investing in solar schemes in the 70s and losing money, based on the tax code. I also unhappily became a landlord with rental properties for the same reason. You'd better believe I was delighted to pay more taxes under Reagan than I ever did before to be relieved of having to unstop toilets at 2:00 am, even though it took me five years of working weekends to pay off all the debts after the rental market (consequently) crashed.
The big omission, IMO, was Reagan's succumbing to the real estate lobby, and leaving in the tax deduction for mortgage interest. That camel's nose under the tent made mincemeat of the effort to get the tax structure back to the main job of raising revenue for the government, in short order.
Yes, the current or contemplated tax levels are probably too low to incentivize tax payers to make otherwise dumb investment decisions.
But wouldn't we rather people invest based on the essential merits of the investment?
And if the lead time for the investment is too remote for an otherwise desireable purchase (like solar panels), wouldn't tax credits be a far more efficient means of stimualting the industry?
Somewhere down the tracks we have all derailed...the economy and this thread.
One thing Carter wanted to do that I agree with is getting off of foreign oil. Carter's NEA and PURPA was to encourage conservation and renewables much like what BO wants to do now.
Carter imposed the windfall profit tax on the dreaded big oil. Windfall profit tax is such a misnomer on companies that actually make something. The only entity that is guilty of windfall profit tax is Congress!
If Carter had larger attachments he could have put OPEC in its place. Maybe we wouldn't be in such a sheit-sandwich that we find ourselves in now.
Side note: Does anyone find it baffling that BO has Paul Volcker as an advisor(?)....he was appointed by Carter! Volcker must be 100 years old. I admire the service but come on... I thought it was about change. This is redux. We were concerned about BigMc being too old to be President and BO is looking at Volcker to entrust our Fed.
<< <i> And guess what happens when you lower tax rates? >>
It depends. A consequence of the Reagan tax cut, which eliminated tax shelters, was a recession which began in the real estate market. The elimination of tax benefits of real estate syndications eliminated a significant part of the source of demand for ownership of commercial real estate. At the same time, investment in wind and solar energy dried up.
Ultimately, the recession which spread to the rust belt hard cost the Federal government revenues and Bush the Elder had to raise taxes – by which he reneged on his “no new taxes” pledge. The recession ultimately cost him his job.
So, history shows that sometimes tax cuts do not lead to a growth in tax revenues.
You can also take to position that Dpoole stated above that investments should stand or fall on their own economic merit. But when you already have certain segments of the economy humming along based in part on the tax code, you need to understand the economic consequences of changing the rules in the middle of the game.
Now we have the government talking about assisting industry in the development of alternative energy as a national priority. Well, that was exactly what was happening back in the 1980’s when investors had tax incentives to invest in wind and solar projects. The tax legislation implemented during the Reagan-Bush administration killed alternative energy—who benefitted from that? Could it have been Bush’s buddies in the oil patch?
Jim Rogers, the other half of Soros and Quantum Fund, retired in his forties, road a motorcycle around the world, wrote a book. Years later he drove a modified yellow Mercedes around the world with his new wife. He wrote another book. Liked it. I have always enjoyed his thoughts and predictions.
Today he says that the last American bubble is the US Bond market. He states that when this bubble pops, the dollars drops. And he also says to buy silver, grossly undervalued.
Comments
<< <i>Allow me to post this bit: >>
Permission granted.
<< <i>There was no silver shortage. Only small investor sized bars were unavailable. Large 1000 oz bars were always >>
There will never be a silver shortage. There will always be silver available at a price, just perhaps more than you want to pay or at a higher price than a commodity exchange says it should cost.
The price of silver during a "common" economic recession? Or are you saying the price of silver is in a recession?
Knowledge is the enemy of fear
<< <i>
<< <i>Allow me to post this bit: >>
Permission granted.
<< <i>There was no silver shortage. Only small investor sized bars were unavailable. Large 1000 oz bars were always >>
There will never be a silver shortage. There will always be silver available at a price, just perhaps more than you want to pay or at a higher price than a commodity exchange says it should cost. >>
I can agree with that to a point. But during the height of the frenzy 1000 oz bars were like 50 cents over spot...
It was joe the plumber sizes that had the outrageous premiums. As always, smaller buyers pay higher premiums
especially during a period of frenzy when spot fell so quickly.
Also as a counter point to what you are talking about... many buyers here found a source of silver at premiums
2-3 dollars or a bit higher for brand new maples. Brand new material always fetches higher premiums then used
stuff. Like when you buy from the US mint (ASE). So a smart shopper was able to find silver at much lower premiums
then what the frenzied masses were paying on ebay which was 18+ an ounce.
<< <i>But now that I see that article - wow - the manipulation is incredible.
sigh... >>
Dude, that is just too funny!!!
Knowledge is the enemy of fear
<< <i>What are "recession" prices? Seriously.
The price of silver during a "common" economic recession? Or are you saying the price of silver is in a recession? >>
cohodk, I guess you are referring to my OP. I'm not saying that silver has recession prices. Of course it has its ups and downs. The OP was to mean how long do we have during this economic recession to buy PM's which would normally be at lower costs. Or better yet, another question would be "how long will the recession be?"
Ren
Still not quite sure I understand. Are you saying that PMs should be much lower than current? To answer your 2nd question, much longer than you want, IMHO.
Knowledge is the enemy of fear
<< <i>The OP was to mean how long do we have during this economic recession to buy PM's which would normally be at lower costs. Or better yet, another question would be "how long will the recession be?"
Still not quite sure I understand. Are you saying that PMs should be much lower than current? To answer your 2nd question, much longer than you want, IMHO. >>
I think you are reading too much into this. I'm not saying where PM's should be. I'm saying nothing more than how long does the board think we have in this recession? One year, two, five? Whatever the opinions are, it gives me an idea of how long I (and others) have to accumulate at low and possibly lower prices next year. My larger picture is that we race out of this recession into a greater inflation. That's do in part of the expansion of M3 which is, of course, no longer reported. My personal opinion is that a lot of the "bailout" money is being sat on by the banks for a later date or event. That's yours and my money that they are sitting on. I have no confidence in this current or next administration. No one is allowing for failure and restructuring. Congress is compounding the problem. Paulson is changing his mind with billions at hand with no oversight. I see chaos. Also, every currency in history, no exception, has eventually failed.
I pose the OP question rather rhetorically. I have drastically changed my investment strategery since 2005 regarding RE and late 2007 regarding equities. My thoughts of where we are heading is no mystery to this forum. I was just looking for guidance, estimates, opinions from greater minds of where they think we are or how much time we have left.
I must add, that this PM forum has allowed us of like-minded people to voice opinions without the masses from the US forum responding with tin-foiled-hat comments. At first I was insulted being thrown out here in oblivion. I felt like a second class citizen. A Marine. Anyone who has worked for the Dept. of the Navy knows this is not an insult but a metaphor. Your an outcast but proud.
Longwinded I know.
Ren
You have touched on what my big concern is. After the 1930's depression and WWII, America emerged as the strongest nation dictating money policy. I don't see us emerging out of this -ism dictating any money policy except for forgiveness.
Ren
<< <i> I don't see any of the recovery plans really aiming to employ people. >>
You must not have been paying attention during the elections. The new administration plans on infrastructure projects, building an alternative energy (wind mostly) energy grid and financing R&D for altenrative energy. All of that will create jobs. They also want emergency financing for the auto industry. Where the money is going to come for that is not clear. Don't be surprised if the promised middle class tax cuts are slow to be approved by Congress. So far only funding for the financial sector has been approved by Congress.
CG
<< <i>You must not have been paying attention during the elections. The new administration plans on infrastructure projects, building an alternative energy (wind mostly) energy grid and financing R&D for altenrative energy. All of that will create jobs. They also want emergency financing for the auto industry. Where the money is going to come for that is not clear. Don't be surprised if the promised middle class tax cuts are slow to be approved by Congress. So far only funding for the financial sector has been approved by Congress. >>
I was paying attention but I don't believe the infrastructure projects are really going to make a huge impact... maybe they will. But infrastructure projects will only last so long.
It's unclear to me that emergency funding for the auto industry (or any other industry) would remain in the US. GM in particular (although it would be audacious) would probably take the money and build factories overseas. A lot of good that will do for the US. With every company scrambling to offshore work and production as fast as possible, it would be interesting to see if they would re-open and re-establish US operations after they have already decided that they can't compete in the US.
And the tax cuts aren't going help an economic recovery either, and if you think we'll actually see these tax cuts you're kidding youself. First of all, the Bush tax cuts will be allowed to expire. Your taxes will in fact go up. And Obama has vowed to make the business and investing environment as unfriendly as possible by raising capital gains taxes, raising taxes on corporations, and raising taxes on "wealthy" people. Investment and entrepreneurship will dry up due to lack of financing (due to dis-incentives (higher taxes) for investing) and discouraging (higher) tax rates. The environment of punish the successful and reward the failure will continue and get worse.
<< <i>And Obama has vowed to make the business and investing environment as unfriendly as possible by raising capital gains taxes, raising taxes on corporations, and raising taxes on "wealthy" people. Investment and entrepreneurship will dry up due to lack of financing (due to dis-incentives (higher taxes) for investing) and discouraging (higher) tax rates. >>
Captial gains taxes will still be lower than ordinary income rates, so regardless of whether the rates change there will still be incentive to invest in capital growth. Most venture capital comes from pension money anway and pension funds pay no capital gains tax. As far as the tax on the "wealthy" is concerned, the rates would go back to the rates in effect during the Clinton years, when we had a growth economy. In contrast, the economy declined during the years in which the Bush rate cuts were in effect, so your premise is not substantiated by history.
CG
<< <i>Captial gains taxes will still be lower than ordinary income rates, so regardless of whether the rates change there will still be incentive to invest in capital growth. Most venture capital comes from pension money anway and pension funds pay no capital gains tax. As far as the tax on the "wealthy" is concerned, the rates would go back to the rates in effect during the Clinton years, when we had a growth economy. In contrast, the economy declined during the years in which the Bush rate cuts were in effect, so your premise is not substantiated by history. >>
That is an over-simplistic view of history. The tech/economic boom on the 90's was not created nor inspired by any government policies. It was fueled by technology advances. Bush had the unfortunate task of being the one who had to preside through the inevitable and unavoidable crash of the tech bubble as well as the devastating 9/11 attacks. You can't even begin to compare the effectiveness of tax policies in 90's to the 00's.
The bottom line is that taising taxes will NEVER have a stimulative effect, even if the rate is below some historical bench mark. Venture capital is only a small part of funding for businesses. Most small businesses get loans from banks and investors directly, not VC firms. Banks and investors have to be encouraged to participate with lower tax rates, as well as business are more likely to be successful and more profitible when their costs, including taxes, are lower rather than higher.
The facts are that capital gains tax revenues DOUBLED following the 2003 tax cut. What do you think will happen with this is increased, regardless of the amount of the increase?
Investors looking for a return on capital can either invest in capital assets and pay a long term capital gains tax at a favorable rate lower than ordinary income, or they can buy interest bearing securities and CDs and earn a low rate of return and pay taxes on the interest at the higher ordinary income rates.
What investors will not do is invest if they do not believe that the investment will garner a return. As an old investment banker once told me when we could not find a way to structure a transaction for capital gains--"ordinary income is not so bad either."
CG
FWIW----I see absolutely no inflation for the forseeable future. Except perhaps in your tax bill.
Knowledge is the enemy of fear
Ren
<< <i>You are just missing the point. The incentive to capital investment is not the capital gains tax rate per se --it is the differential between the capital gains rate and the ordinary income rate. We had plenty of capital investment when rates were much higher. >>
I am not missing anything.
The question is, "will raising tax rates increase or decrease investment activity?"
The answer is, it will DECREASE investment activity. Whatever level there is now, we can expect less. Not exactly what you want to see in a declining economic situation.
<< <i>
<< <i>You are just missing the point. The incentive to capital investment is not the capital gains tax rate per se --it is the differential between the capital gains rate and the ordinary income rate. We had plenty of capital investment when rates were much higher. >>
I am not missing anything.
The question is, "will raising tax rates increase or decrease investment activity?"
The answer is, it will DECREASE investment activity. Whatever level there is now, we can expect less. Not exactly what you want to see in a declining economic situation. >>
All I know is that just the expiration of the "Bush" tax cut alone will cost me $800 more in tax per month!
And who knows what it will be after Dear Leader BO, PM Pelosi and Co. take the "reign."
So, will my investment activity DECREASE?
But then again the argument goes that I can afford it and need to spread it around to those people who don't have the means to invest, save or take on risk.
Comrade Renski
CG
You buy ......................THEY DROP.
You sell........................THEY GO UP
You do neither.............THEY GO UP.
You do neither
but your friend buys....THEY GO UP EVEN FASTER.
Camelot
<< <i>Someone has to pay for the growing federal deficit created over the past 8 years, plus the growing deficit due to the bailouts, stimulous plans, and reduced revenues from the recessionary economy. You can't expect people with no money to pay for it. So that leaves you.....and me. Just be grateful that you are still in the upper brackets despite the tanking economy.
CG >>
CG, if you want to lay blame let's include all kings men. This goes back 31 years when the Community Reinvestment Act was signed by Carter. In 1993, Clinton tried to reduce cost and compliance burden. In 1999 he signed the Gramm-Leach Act to repeal the 60 year Glass-Steagall Act. So on and so forth. Throw in a little Fannie and Freddie, Public Allies and Acorn and extortion, Countrywide greed and one sees this is an enormous problem that has had a lot of time to fester.
There's a lot of blame to spread around. The American people who selfishly bought houses that they could not afford. Predator lending is no excuse. Adults should know what they are signing. No one is putting a gun to their head to buy an expensive house. People became greedy, cried "racist" when minorities couldn't get loans. Bush boosted about a homeownership society. Greenspan underestimated the impact of subprimes in his book. He was suppose to be the Maestro.
As far as me being grateful to still be in the upper brackets so that I can pay more taxes, are you joking. You mean I deserve to bailout selfish people living beyond their means buying houses, cars, flat screens and have maxed out credit cards. The only reason I'm in the bracket is because I took responsibility for my actions. I took no handouts along the way. I also started from nothing in another country and in another language.
I served in the Marines. On the side I bought and sold RE until 2005. I left that market when I saw the absurdity in CA...40 year notes, 125% loans. I exited the equities in January when this credit crisis began to expose itself. This was no brilliance on my part, it was plain as day what was happening.
I have also failed but I learned from my failures. Whatever happened to bankruptcies and its protections. Nothing is allowed to fail (except for the middle class imho.) Who decided nothing is allowed to fail. Now, you and I pay for all of this social-garbage. We are so far down the path now. We had a chance to clean this up a few years ago...transparency and responsibility. As far as bailing out this country, I personally think it's too late. The next to last thing to fail will be the dollar. The last thing to fail will be the American Republic.
Ah, but I digress.
R
Of course back then people invested in leveraged tax shelters—oil and gas programs, R&D, even wind and solar deals—figuring it was better to invest in risky deals than to throw the money down a rat hole by giving it to the IRS. Some tax shelter deals paid off too, but mostly investors lost their money in those deals. On the other hand, we got wind turbine and solar electrical power fields built that are still operating today. The 1986 tax reform act killed the shelters and put an end to wind and solar energy development (the economics did not work without the tax benefits) and also curtailed domestic independent oil and gas drilling (although the oil and gas bubble had actually burst a few years before when prices fell).
Maybe its time to reinstate tax deductions or credits for investments in alternative energy or other target industries. Still, at 39% the tax bracket is probably much too low to encourage investors to take the risk. It was easier to be bold with your money when the IRS was taking 70% of it.
CG
Investors can be bold
However, there are few
successful old , bold, investors.
Camelot
<< <i>Until the 1980’s the tax brackets ran as high as 70%, with a 50% cap on earned income. Around 1981 or so the top brackets were lowered to 50% if I recall correctly. So even rolling back the Bush tax cuts to reinstate the 39% bracket is low in comparison. >>
And guess what happens when you lower tax rates? Revenues increase! Or at least they have in the past. What does that tell you? People make more money and do more investing with lower tax rates which leads to the higher revenue.
Remember, we're not operating in a vacuum. If you run up tax rates in the US, you'll send investment dollars offshore. Again, not the way to boost the economic recovery in the US.
<< <i>Until the 1980’s the tax brackets ran as high as 70%, with a 50% cap on earned income. Around 1981 or so the top brackets were lowered to 50% if I recall correctly. So even rolling back the Bush tax cuts to reinstate the 39% bracket is low in comparison.
Of course back then people invested in leveraged tax shelters—oil and gas programs, R&D, even wind and solar deals—figuring it was better to invest in risky deals than to throw the money down a rat hole by giving it to the IRS. Some tax shelter deals paid off too, but mostly investors lost their money in those deals. On the other hand, we got wind turbine and solar electrical power fields built that are still operating today. The 1986 tax reform act killed the shelters and put an end to wind and solar energy development (the economics did not work without the tax benefits) and also curtailed domestic independent oil and gas drilling (although the oil and gas bubble had actually burst a few years before when prices fell).
Maybe its time to reinstate tax deductions or credits for investments in alternative energy or other target industries. Still, at 39% the tax bracket is probably much too low to encourage investors to take the risk. It was easier to be bold with your money when the IRS was taking 70% of it.
CG >>
You're quite right, that the government was incentivizing all sorts of things, and laying a heavy and distorting hand on the economy, before the Reagan tax reforms swept it away.
I remember well investing in solar schemes in the 70s and losing money, based on the tax code. I also unhappily became a landlord with rental properties for the same reason. You'd better believe I was delighted to pay more taxes under Reagan than I ever did before to be relieved of having to unstop toilets at 2:00 am, even though it took me five years of working weekends to pay off all the debts after the rental market (consequently) crashed.
The big omission, IMO, was Reagan's succumbing to the real estate lobby, and leaving in the tax deduction for mortgage interest. That camel's nose under the tent made mincemeat of the effort to get the tax structure back to the main job of raising revenue for the government, in short order.
Yes, the current or contemplated tax levels are probably too low to incentivize tax payers to make otherwise dumb investment decisions.
But wouldn't we rather people invest based on the essential merits of the investment?
And if the lead time for the investment is too remote for an otherwise desireable purchase (like solar panels), wouldn't tax credits be a far more efficient means of stimualting the industry?
Here's a warning parable for coin collectors...
One thing Carter wanted to do that I agree with is getting off of foreign oil. Carter's NEA and PURPA was to encourage conservation and renewables much like what BO wants to do now.
Carter imposed the windfall profit tax on the dreaded big oil. Windfall profit tax is such a misnomer on companies that actually make something. The only entity that is guilty of windfall profit tax is Congress!
If Carter had larger attachments he could have put OPEC in its place. Maybe we wouldn't be in such a sheit-sandwich that we find ourselves in now.
Side note: Does anyone find it baffling that BO has Paul Volcker as an advisor(?)....he was appointed by Carter! Volcker must be 100 years old. I admire the service but come on... I thought it was about change. This is redux. We were concerned about BigMc being too old to be President and BO is looking at Volcker to entrust our Fed.
R
<< <i> And guess what happens when you lower tax rates? >>
It depends. A consequence of the Reagan tax cut, which eliminated tax shelters, was a recession which began in the real estate market. The elimination of tax benefits of real estate syndications eliminated a significant part of the source of demand for ownership of commercial real estate. At the same time, investment in wind and solar energy dried up.
Ultimately, the recession which spread to the rust belt hard cost the Federal government revenues and Bush the Elder had to raise taxes – by which he reneged on his “no new taxes” pledge. The recession ultimately cost him his job.
So, history shows that sometimes tax cuts do not lead to a growth in tax revenues.
You can also take to position that Dpoole stated above that investments should stand or fall on their own economic merit. But when you already have certain segments of the economy humming along based in part on the tax code, you need to understand the economic consequences of changing the rules in the middle of the game.
Now we have the government talking about assisting industry in the development of alternative energy as a national priority. Well, that was exactly what was happening back in the 1980’s when investors had tax incentives to invest in wind and solar projects. The tax legislation implemented during the Reagan-Bush administration killed alternative energy—who benefitted from that? Could it have been Bush’s buddies in the oil patch?
CG
Today he says that the last American bubble is the US Bond market. He states that when this bubble pops, the dollars drops. And he also says to buy silver, grossly undervalued.
Ren
The crew is drunk, the Captain's mad
and the steering wheel is broke.
First mate Poopson says, "a storm is a coming fast".
prepare the bilg pumps says he, but we traded
them off the Coast of Fez, for some food to feed the crew.
Break out the bailing buckets says he,
But the buckets we gots, has got holes in the bottoms
as big as me fist says I.
Oh, I wishes I stayed in Brighton and never sailed on the
Briny seas, Though the officers says, "That all is well" we knows
that things ain't so good. We am going down to Davey Jones,
as deep as the seas go down. The last sounds we ears from above
is that" All is well, stand fast by the brasses " and glub, bubble, glubb,
glub glub. Down to Davey's Jones locker here we goes.
Camelot
Ren
Camelot