What is Wall Street, anyway? I would be willing to bet that 90% of the protesters from Occupy Wall Street and of self-styled liberals have absolutely no idea what Wall Street is, what it does, and how important it is.
If not for Wall Street, there wouldn’t be any Main Street, certainly not as we know it today.
In order for any business to be successful, it must run on capital. Capital can be funded by an owner’s personal investment or through funds from outside investors. The ability to grow from the Mom and Pop store to the bigger corporation model is dependent upon the business owner’s ability to get risk capital.
This risk capital is necessary to rent the space, hire the employees, grow the inventory,and buy the equipment to get the business going. There is no guarantee that this money could ever be paid back. But the investors are willing to risk their hard-earned money in the hope that the venture is successful enough to 1) repay the money borrowed and 2) to give back a reasonable profit for the risk taken.
So where does that money typically come, that risk capital? Wall Street. Look around the house at what you have. Your lights? From the utility company. Where did that capital come from to build the utility plants, to lay the distribution networks, to expand them? Risk capital. Wall Street. Where did Macy’s get its start? Or Google, or IBM? Or any of the energy, pharmaceutical, or chemical companies? Or virtually any large corporation you can think of today — where did it get its funds to really get going and continue to grow? Wall Street.
And the people on Wall Street, people sometimes described (invariably by clueless politicians and populists who know nothing about what it takes to run a business or create jobs) as paper-pushers who make unconscionable amounts of money, what do they do?
They must be able to analyze how businesses (Main Street) work, and which ones (out of the many thousands out there all claiming to be worthy) are likely to be successful. They must develop the confidence of potential investors, and convince them to invest in these projects. They must bring the companies and investors together to agree on how much of the company the investors would get for the amount of capital that is being invested. Should the money invested be equity (ownership in the company) or bonds (loans to the company), and if bonds, what interest rate? Most importantly, more than in any other business, pay day never comes to Wall Street unless the capital is successfully raised. And if Main Street is not successful with its new capital, good luck for that Wall Street company in trying to raise money for its next project.
There have been abuses on Wall street, certainly. But there is absolutely no reason to believe that there are any more abuses than in any other business. And those abuses almost always are paid for with serious financial pain to those companies.
But none of these abuses can compare with the financial abuses and mismanagement that we endure daily from our government. Our government has us at the brink of bankruptcy, with a $17 trillion dollar debt (more than 100% of our GDP) which balloons to more than $100 trillion if our entitlement obligations are included.
We have President Obama and the Democratic leaders of the Senate (Harry Reid) and the House (Nancy Pelosi) saying that this is not a current problem (clearly not the truth) and spending money they don’t have to get votes for the next election. A short trip through YouTube (circa 2004-2005) clearly show that Barney Frank (Democratic House…), Chris Dodd (Democratic Senate ….) and Maxine Waters (Democratic House ….), among other Democrats, were principally responsible for the recent economic meltdown. The videos of Congressional Hearings demonstrate unquestionably that Fannie Mae and Freddie Mac were cooking their own books and lending to dangerously unqualified borrowers, but the Democrats prevented any remedial action to be taken.
And taxpayers and Main Street have borne the heavy burden of their negligence during this sluggish, anemic economic recovery.
Wall Street is an invisible backbone of our economy — providing the money and investments that are necessary to continue America’s upward mobility in all facets of our lives. Focusing only on trumped up Wall Street problems or buying into the class warfare hatred of the rich is misguided — especially while giving our government a free pass to use and abuse our taxpayer money each day.
The new pre-school plan presented by Mayor de Blasio reveals just how politically disingenuous he really is.
In his effort to push the progressive agenda he put forth during his campaign, de Blasio has vowed to have universal pre-school in New York State to be paid for only by the wealthiest New Yorkers.
Here’s the logical inconsistancy: If universal pre-school is the all-important and necessary step for all children in their educational development (the merits of which is fodder for another article entirely), then the only logical conclusion is that the cost should also be borne by all taxpayers the way K-12 already is — not just a select few. If “everyone” is not willing to pay his or her fair share of this “necessary” project, then maybe that tells us that it should not be done.
This line of thinking clearly echoes the Obama Administration’s sentiment that the rich “pay just a little bit more”, and it is not welcome in New York.
Today marks the fifth anniversary of the Santinelli Rant on the floor of the Chicago Mercantile Exchange, which spawned the infamous Tea Party (Taxed Enough Already?). Even if you heard it then, it’s definitely worthwhile listening to once more:
The first Tea Party protests subsequently followed on February 27th to protest the American Recovery and Reinvestment Act (ARRA) stimulus bill signed by President Barack Obama on February 17th, 2009.
There is raging debate about whether or not the Tea Party still holds the influence it did during the 2010 Congressional elections as well as whether or not ARRA helped our economy recovery.
“Five years later, the U.S. economy is undoubtedly in a stronger position, thanks to the grit and determination of our nation’s workers and businesses. The economy has now grown for 11 straight quarters, and businesses have added 8.5 million jobs since early 2010. While far more work remains to ensure that the economy provides opportunity for every American, there can be no question that President Obama’s actions to date have laid the groundwork for stronger, more sustainable economic growth in the years ahead.”
At the same time, Obama has more than doubled the public debt. CNS News reported that “the marketable debt of the U.S. government has more than doubled–climbing by 106 percent–while President Barack Obama has been in office, increasing from $5,749,916,000,000 at the end of January 2009 to $11,825,322,000,000 at the end of January 2014”
It was certainly no surprise to most of us the the CBO report showed Obamacare was costing the economy countless jobs. White House and congressional Democrats could have put a rational spin on it – that this was a necessary price to pay in order to get his signature health care proposal implemented, – but they didn’t do that.
Instead, they chose a response which showed them to be the disingenuous hypocrites that they truly are. It also showed that the true intention is simply political — in other words, they wantonly come up with whatever excuse will lose them the least number of votes.
The White House and congressional Democrats have explained the CBO’s job loss outlook to actually be a good thing. The job losses merely reflect the fact that individuals will, going forward, have choices. Such examples include the option to retire before one might have otherwise done so, or perhaps stay at home as a single parent because the government is providing for them (health care) what otherwise only a job could.
But this “logic” is ridiculous. Electing the option to not work when one could do so will certainly prevent many people from getting ahead along the economic chain. And in combination with an extension of food stamp benefits, an extension of unemployment benefits, an extension of other welfare programs, and raising the minimum wage, all are acting in tandem to prevent the upward mobility that the President has said he so sorely wants and unequivocally demands.
He can’t have it both ways. The President cannot be both against economic inequality and simultaneously for policies that maintain prolonged dependence. The preposterous idea that work is now a “lifestyle” choice reveals the shallowness of his commitment to economic success.
This $956 billion bill will set the course of U.S. food policy for the next half-decade. The old farm bill expired in 2012, and its replacement is 959 pages long, costing some $956.4 billion over 10 years.
The chart below is courtesy of the WaPo.
This bill includes such goodies as:
— $3 million plan for Christmas tree taxes (15 cent levy per tree)
–$100 million will go to study how to get Americans to buy more maple syrup
–$1 million will buy weather radios for rural Americans
–$15 million ‘wool trust fund’
–$170 million program to protect catfish growers from overseas competition
But most of that money goes to food-stamp and nutrition programs, which are administered by the U.S. Department of Agriculture. The 10-year spending total for those entitlements will hit $756 billion under the new law.
The folks over at CNSNews reported that, according to the US Treasury, Public Debt has increased $6.666 Trillion during Obama’s Presidency.
The amount of debt listed on January 20, 2009 was compared to the amount of debt held January 31, 2014 — the most current day available. Those figures are $10,626,877,048,913.08 and $17,293,019,654,983.61, respectively.
That means the total amount of debt has gone up $6,666,142,606,070.53 under President Obama.
To put it into perspective, public debt first reached $6.666 trillion in July, 2003. CNSNews notes that in slightly more than 5 years, “the U.S. has accumulated as much new debt as it did in it’s first 227 years”.
Now, to make an entirely different comparision:
The public debt held by George W. Bush on the first day of his inauguration (Jan 20, 2001) was $5,727,776,738,304.64. On his last day full day in office, Jan 19, 2009, the debt was $10,628,881,485,510.23.
Therefore, debt during his 8 years increased $4.901 Trillion. One could also argue that debt went up some 85% during his term.
On the other hand, so far, Obama’s debt so far has increased 63% over 5 years.
If one were to take 85% and divide it by 8 years , one would find the average rate of debt increase to be 10.625% a year under Bush. For Obama’s debt to only increase by the rate of Bush’s, Obama’s debt percentage increase would be 53.125%. But Obama’s is more, currently at 63% debt increase — more than a year ahead of the average pace of Bush.
Taking Obama’s current rate of debt increase, 63%, and dividing it by 5 years, the average rate of debt incrase by Obama is 12.5% per year. At that pace, by the time Obama’s Administration is complete after 8 years, the debt increase will be 100.8%.
That means we can expect our Public Debt to increase by at least $10.711 Trillion, or that our public debt will be roughly some $21.337 Trillion at the end of his term. (This is only at the current rate of spending and debt, without taking into account future programs, etc)
In other words, it will have only taken 233 years to spend the first $10 trillion and roughly 8 years to spend the second $10 trillion.
The story of “I, Pencil” is rightfully regarded as one of the most important economic essays of the 20th century. Known for both its brevity and simplicity, “I, Pencil” conveys the truth about the correlation between free people and economic freedom.
The brilliance of “I, Pencil” is that the lesson is told from the most unexpected perspective — that of the lowly pencil. Yet the very humbleness of the pencil is perfectly juxtaposed by the complexity through which the pencil itself comes into being.
Told through the eyes of the pencil, the pencil delightfully describes human ingenuity, cooperation, and connectedness — all necessary parts to bring the pencil to fruition. The pencil explains that it is a people free and unfettered, who have each learned and exchanged a skill, that ultimately will create a good — be it a pencil like him, or otherwise.
Ultimately, using the perspective of the pencil is a metaphor for Read’s salient point: for us all to look introspectively and understand ourselves, our potential, and the world in which we live and can contribute. That it is ultimately people, not some government, who can organize, work, and create a thing of beauty and of necessity.
In that regard, the recent movie adaptation of “I, Pencil”, produced by Competitive Enterprise Institute, fell short of its potential. To be sure, the film most certainly has beautiful and simple graphics to convey the story and show the complexity of markets. However, the message itself is narrated from an outside perspective explaining the process of creative industry using a pencil as an example, which is not how “I, Pencil” is written.
By choosing to retell “I, Pencil”, with a replacement narrator looking in instead of the pencil looking out, the film loses the charm of the story and the central message about individuals, their potential, and freedom to create. The story needs that foundation in order to powerfully and properly explain that people, not government, are the true source of economic freedom.
Though the film is good, it is not great, and misses a wonderful opportunity to really bring to life the message of “I Pencil”, and convey its truths about individual freedom and free markets. Start with the essay and then watch the movie — and be uplifted about the ingenuity of free people.
Mikhail Khodorkovsky, the former Yukos CEO and Russian billionaire, has just recently been released from jail. If I were him, my first act of new-found freedom would be to sue Goldman Sachs for billions of dollars. Watch out, Goldman Sachs investors!
I am a liberty-loving free market individual, which means I am generally pro-business. But as I have indicated so many times before, crony-capitalism is not free market, and thus it should be called out. Unfortunately, that cronyism does not entirely escape the upper echelons of the finance world and a horrific lack of integrity sometimes seeps into Wall Street. The story of Mikhail Khordorkovsky and Goldman Sachs is such an example.
First, a parallel story: in the late 1980’s, the State of Washington issued Washington Power Public Service bonds (commonly called “WPPSS”) to finance a number of nuclear power plants. The bonds were considered very high quality as they were guaranteed 1) not only by the project, but 2) also unconditionally by the State of Washington, and 3) even regardless of whether the plants ever actually got constructed.
First Boston was a lead underwriter of this issue.
When oil and gas prices dropped sharply a few years later, the State of Washington decided to renege on its guarantee and default to the tune of $2.25 billion. It argued (incredibly) that they didn’t have the right to make such a guarantee. The Washington Courts upheld this point of view (naturally), and the Supreme Court (ridiculously) claimed that it was a state matter, despite the fact that many little old ladies — like my mother — pension funds, and other investors from all around the country were devastated by this “fraud”. This was undeniably gross negligence.
The most frustrating part of the matter, however, happened after the decision was issued. The State of Washington needed to raise money by issuing new bonds. And who do you think was the lead underwriter this time around, despite the scam that had cost their customers hundreds of millions of dollars….
You guessed it — First Boston again, a stunning lack of integrity from world of government and finance. But this fraud pales in comparison to that of Mikhail Kordorkovsky and Vladmir Putin.
I was reminded of the WPPSS affair (also known as “Whoops”) when in 2003, in a brazen act of thievery, Vladimir Putin “confiscated” the controlling interest in shares of the Yukos Oil Company held by Mikhail Khodorkovsky.
Khordorkovsky built a company that grew in wealth and stature upon the collapse of the Soviet Union. Shortly after Kordorkovsky was named “Person of the Year” by the Russian business magazine “Expert”, he was arrested.
There were laughable “criminal” and “tax cheating” charges leveled against Khodorkovsky, for which he has been in jail for a decade until just last month.
As Khordorkovsky’s popularity grew while in prison, Putin suddenly and obviously made a public relations decision in connection with the Olympics to release the famed Khordorkovsky. (Indeed, just in the last week, Khordorkovsky’s business partner was also released from his prison sentence.)
Everyone knew that the criminal charges were just a very thinly veiled justification for President (Dictator) Putin to steal the company for himself and the Russian people. I get it – that is his nature. But what has this to do with integrity, finance, or even WPPSS?
Underwriters.
Just as First Boston underwrote the first WPPSS project that fraudulently defaulted and was able to (incredibly) underwrite for the State of Washington again, Putin was able to perform his grand confiscation with the help of a major underwriter.
Upon restructuring the oil company following the arrest of Khodorkovsky, that fact that Vladmir Putin could then go to Goldman Sachs, who would gladly orchestrate the largest underwriting of stolen goods and fraud the world has ever seen, is utterly staggering.
But the coziness between Putin and Goldman doesn’t end there. Just last winter, Goldman Sachs renewed its relationship with Putin by signing a three-year agreement with Russia’s Economy Ministry and the Russian Direct Investment Fund.
During that time, Goldman Sachs will be paid $500,000 to help Putin attract foreign investors. This latest partnership has been slammed by the Human Rights Foundation.
Now that Khodorkovsky is a free man once again, it wouldn’t take much for him to highlight the close relationship between Vladmir Putin and Goldman Sachs. I’m not a lawyer, but one would think that Goldman might have reason to be concerned about a potential lawsuit from Mr. Khodorkovsky for aiding and abetting the confiscation of his company.
Most people like receiving a tax refund – it’s kind of like a windfall for many people, especially those for whom saving is a difficult discipline. However, getting a big tax refund from the IRS may not necessarily be the best thing for you in certain situations.
Try to think about your refund in a different way. Essentially, you are giving the government an interest-free loan, which they give back to you when you file your taxes. There’s really no reason to do that, other than you like the surprise surplus.
A lot of people don’t like the idea of owing the government, or are afraid they will not have the money available at tax time to pay the bill. That is a valid concern. However, if you adjust your withholding enough so that you owe on April 15th, that also means you have more money in your paycheck each month.
In reality, whether you owe the government or they owe you, the amount of tax collected is virtually the same. The difference is whether you have your taxes paid for you via your paycheck, and have a smaller paycheck because of it (and a refund in the spring), or whether you set the money aside on your own and have a little bit more to take home from work every pay period.
If you set your withholding so that you’ll owe at tax time, you are in essence holding your own money longer. This can be helpful in situations such as being in debt, where payments are due every month. By having extra in your paycheck due to having less money deducted for taxes, you could use the extra money to pay a little more on your debt, thereby reducing the amount of interest you pay in the long run. Some people prefer this approach.
One potential thing to worry about with regard to waiting on federal tax returns. We have seen situations where state governments have delayed issuing refunds in the recent past due to staffing, fiscal woes, and other such problems. Even the federal government last year delayed receiving returns until Jan 31st last year (and therefore remitting refunds) — though that was due to the Fiscal Cliff. However, since the example has been seen in some states, and since the IRS apparently understaffed, it is not an unlikely possible scenario that the federal government might also delay issuing refunds on a larger scale in the future.
At the end of the day, whether you like to keep your own money until tax time or whether you prefer the windfall method, you can achieve this your preference by going to visit your Human Resources administrator. If you want more money in your paycheck – and possibly owing the IRS, claim more dependents. If you prefer a refund, claim fewer dependents. The form to make changes on is called a W-4.
It’s always good practice once a year to review your tax and financial situation and make adjustments as necessary.
______________________ Now What?
Did you like what you read?
If you did, I hope you’ll join my Secret Tax Club.
It’s free, it’s via email, and it’s for you.
I periodically send out information such as tax tips, reading suggestions, articles and more, and the information is not always available anywhere else, even on my own website.
As we get into blame season surrounding the extension of the debt ceiling, let’s make sure we remember – and remind anyone who will listen — what actually caused the government to shut down just a few short months ago.
The Democrats insisted that the Republicans accept a pure Continuing Resolution (CR) as a first and final offer with no negotiation along the way.
In contrast, the Republicans (after a number of initial offers were rebuffed and ignored with no discussion), made a final offer of 1) simply delaying the individual mandate for one year (which is effectively now happening) and 2) subjecting Congress to ObamaCare as the existing law actually requires anyway.
The Democrats refused even this more than reasonable –and in hindsight quite astute — offer causing the Government to shut down.
In what possible world can the shutdown be blamed directly on the Republicans?!
_______________________________ Now What?
Did you like what you read?
If you did, I hope you’ll join my Secret Tax Club.
It’s free, it’s via email, and it’s for you.
I periodically send out information such as tax tips, reading suggestions, articles and more, and the information is not always available anywhere else, even on my own website.
