Shakespeare: all about the pounds and pence, not the poetry? - latimes.com
EXCERPTS:
"Shakespeare, Mr. “I can raise no money by vile means” [“Julius Caesar”], was in fact a tax dodger, a grain hoarder and a determined debt collector [“Neither a borrower nor a lender be” -- “Hamlet”].
"Nowadays, we’d call him a profiteer and a scofflaw. In Tudor England, where he was investigated for his laconic tax observances and once prosecuted for his hoarding practices, it’s a surprise that he didn’t end up swinging from a gibbet “for daws to peck at” [“Othello”]. No wonder he vigorously wrote, in “Henry VI part 2,” “The first thing we do, let’s kill all the lawyers.”
"Researchers turned up archival evidence that for a decade and a half – including some very hungry years for England -- Shakespeare “purchased and stored grain, malt and barley for resale at inflated prices to his neighbors and local tradesmen.” When they couldn’t or wouldn’t pay, Shakespeare went after them full-throatedly, and the profits he did make he used “to further his own money-lending activities.”
"Not all of this is new, but Jayne Archer, one of the researchers, suspects that the fact that so little of this information has made its way into Shakespeare’s public profile may be laid to “willful ignorance on behalf of critics and scholars who … cannot countenance the idea of a creative genius also being motivated by self-interest.”
"There’s evidence that the memorial raised up to him in his hometown not long after his death originally showed him with an image with which his neighbors associated him: a bag of grain, not the writerly accouterments of quill and parchment added later. Four hundred years later, the tourists still make pilgrimages to Stratford because, face it, who’s going to go home with souvenir paperweights and china thimbles commemorating the Tudor equivalent of a commodities trader?
Showing posts with label Expectations. Show all posts
Showing posts with label Expectations. Show all posts
Wednesday, April 3, 2013
Monday, December 24, 2012
Friday, December 21, 2012
Milk Prices Could Double as Farm Bill Stalls - NYTimes.com
Milk Prices Could Double as Farm Bill Stalls - NYTimes.com:
EXCERPTS:
WASHINGTON — Forget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a newfarm bill that amends farm policy dating back to the Truman presidency.
WASHINGTON — Forget the fiscal crisis and the automatic budget cuts. Come Jan. 1, there is a threat that milk prices could rise to $6 to $8 a gallon if Congress does not pass a newfarm bill that amends farm policy dating back to the Truman presidency.
Lost in the political standoff between the Obama administration and Congressional Republicans over the budget is a virtually forgotten impasse over a farm bill that covers billions of dollars in agriculture programs. Without last-minute Congressional action, the government would have to follow an antiquated 1949 farm law that would force Washington to buy milk at wildly inflated prices, creating higher prices in the dairy case. Milk now costs an average of $3.65 a gallon.
Higher prices would be based on what dairy farm production costs were in 1949, when milk production was almost all done by hand. Because of adjustments for inflation and other technical formulas, the government would be forced by law to buy milk at roughly twice the current market prices to maintain a stable milk market.
But the market would be anything but stable. Farmers, at first, would experience a financial windfall as they rushed to sell dairy products to the government at higher prices than those they would get on the commercial market. Then the prices customers pay at the supermarket would surge as shortages developed and fewer gallons of milk were available for consumers and for manufacturers of products like cheese and butter.
***
“But it would be short-term euphoria followed by a long hangover that would be difficult for us to recover from,” said Mr. Norton, who is president of the New York Farm Bureau. “I don’t think customers and food processors are going to pay double what they are paying now for dairy products.”
The Senate passed a farm bill in July. A House version of the bill made it out of committee, but House leaders have yet to bring its version to the floor.
Under the current program, the government sets a minimum price to cover dairy farmers’ production costs. If the market price drops below that, the government buys dairy products from farmers to buoy prices and increase demand. Since milk prices have remained above that minimum price in recent years, dairy farmers usually do better by selling their products commercially rather than to the government.
But if 1949 rules go into effect, the government would be required to buy dairy products at around $40 per hundredweight — roughly twice the current market price — to drive up the price of milk to cover dairy producers’ cost.
“It would be bad for consumer demand in the long run,” said Chris Galen, a spokesman for the National Milk Producers Federation, which represents more than 32,000 dairy farmers.
Mr. Galen and others in the dairy industry said reverting to 1949 policies could probably force the makers of butter, cheese, yogurt and other dairy products to look for cheaper alternatives, like imported milk from countries like New Zealand.
***
In a conference call with reporters on Thursday, Tom Vilsack, the agriculture secretary, said the department was exploring all its options to deal with the possibility of the 1949 law going into effect.
Among the options: the agriculture secretary could drag his heels on the milk purchases until Congress passes a new farm bill or an extension of the 2008 one that expired in September, said Vincent Smith, a professor of agriculture at Montana State University in Bozeman.
“This is a totally antiquated law that has nothing to do with farming conditions today,” Professor Smith said. “It was put as a poison pill to get Congress to pass a farm bill by scaring lawmakers with the prospect of higher support prices for milk and other agriculture products. Letting it go into effect for even a few months would be particularly disastrous for consumers and food processors. “
Wednesday, February 8, 2012
Wednesday, August 31, 2011
Beyond the Gold and Bond Bubbles - WSJ.com
David Malpass Beyond the Gold and Bond Bubbles - WSJ.com
EXCERPTS:
"Treasury bond yields have been at near-record lows and gold prices at record highs, attracting millions of investors into idle assets through coins, exchange-traded funds and even warehousing facilities. This reflects fear about inflation and the stability of the financial system and, for some, the coming breakdown of society under the weight of $3.6 trillion in annual Washington spending and transfer payments.
***
"Mr. Bernanke should directly confront the fear index imbedded in high gold prices and low bond yields. Gold at more than $1,800 per ounce is a loud public statement of no confidence in our central bank. It means people would rather buy gold than hire workers or start businesses—that they don't trust the central bank to maintain the value of their money.
Former Fed Chairman Paul Volcker thought of high gold prices as his enemy and repeatedly said so as a way to build confidence in the central bank. In the 1970s, high gold prices reflected Fed incompetence that had produced inflation, stagnation and malaise. Jimmy Carter named Mr. Volcker to replace G. William Miller as Fed chairman in 1979, a rare moment of Washington accountability. Gold then fell in the 1980s and '90s in what was called affectionately "The Great Moderation." Inflation and oil prices followed gold prices down, tax rates were cut, and jobs became plentiful. Foreign capital beat a path to America's door, the mirror image of the exodus of growth capital the Fed's weak dollar is fueling.
EXCERPTS:
"Treasury bond yields have been at near-record lows and gold prices at record highs, attracting millions of investors into idle assets through coins, exchange-traded funds and even warehousing facilities. This reflects fear about inflation and the stability of the financial system and, for some, the coming breakdown of society under the weight of $3.6 trillion in annual Washington spending and transfer payments.
***
"Mr. Bernanke should directly confront the fear index imbedded in high gold prices and low bond yields. Gold at more than $1,800 per ounce is a loud public statement of no confidence in our central bank. It means people would rather buy gold than hire workers or start businesses—that they don't trust the central bank to maintain the value of their money.
Former Fed Chairman Paul Volcker thought of high gold prices as his enemy and repeatedly said so as a way to build confidence in the central bank. In the 1970s, high gold prices reflected Fed incompetence that had produced inflation, stagnation and malaise. Jimmy Carter named Mr. Volcker to replace G. William Miller as Fed chairman in 1979, a rare moment of Washington accountability. Gold then fell in the 1980s and '90s in what was called affectionately "The Great Moderation." Inflation and oil prices followed gold prices down, tax rates were cut, and jobs became plentiful. Foreign capital beat a path to America's door, the mirror image of the exodus of growth capital the Fed's weak dollar is fueling.
Tuesday, May 10, 2011
Some Bet End of QE2 Will Boost Treasurys - WSJ.com
EXCERPTS:
"Even before last week's selloff in risky assets, investors worried about slowing growth were buying up Treasury debt. To some, this is a preview of what is going to happen when the Federal Reserve ends its bond-buying program less than two months from now.
Over the past four weeks, the yield on the 10-year Treasury note has fallen from 3.58% to 3.16%, its lowest level since December. The bond market rallied even though the biggest buyer of Treasurys over the past several months is planning to leave the market at the end of June.
Gains in Treasurys have been driven largely by weak economic data. Even a better-than-expected jobs number Friday couldn't derail the market.
The recent rally is evidence for some investors that the end of the Fed's second big bond-buying program, known as quantitative easing, or QE2, might actually benefit or, at worst, be a nonevent for bonds.
It could be a boon for Treasurys if economic growth slows, knocking down commodity prices and reducing the risk of inflation.
"If QE2 contributed to stocks and to risk assets and to the commodity bubble, well, what happens after QE2?" said David Ader, head of government-bond strategy at CRT Capital. "When QE2 ends, maybe those assets go the other way, and people buy more Treasurys."
"Even before last week's selloff in risky assets, investors worried about slowing growth were buying up Treasury debt. To some, this is a preview of what is going to happen when the Federal Reserve ends its bond-buying program less than two months from now.
Over the past four weeks, the yield on the 10-year Treasury note has fallen from 3.58% to 3.16%, its lowest level since December. The bond market rallied even though the biggest buyer of Treasurys over the past several months is planning to leave the market at the end of June.
Gains in Treasurys have been driven largely by weak economic data. Even a better-than-expected jobs number Friday couldn't derail the market.
The recent rally is evidence for some investors that the end of the Fed's second big bond-buying program, known as quantitative easing, or QE2, might actually benefit or, at worst, be a nonevent for bonds.
It could be a boon for Treasurys if economic growth slows, knocking down commodity prices and reducing the risk of inflation.
"If QE2 contributed to stocks and to risk assets and to the commodity bubble, well, what happens after QE2?" said David Ader, head of government-bond strategy at CRT Capital. "When QE2 ends, maybe those assets go the other way, and people buy more Treasurys."
Prices of Used Cars Rising Sharply - WSJ.com
EXCERPTS:
"Prices for used cars hit a record high in April and are poised to go even higher as production cutbacks during the recession and the more recent Japanese earthquake has made used vehicles a hot commodity as dealers dive into the depleted pool for cars to fill their lots.
The one-two punch has added between $1,500 to $3,000 to the price of some used cars just in the last six months, meaning more money for trade-ins and a tougher time for shoppers looking for a deal.
"The price of used cars is just crazy right now," said Adam Lee, chairman of Maine dealer Lee Auto Malls. His dealership is paying hefty sums for cars it normally might not purchase to have a full inventory. "It can be a piece of junk—cars we used to pay $2,000 or $2,500 for, we are now paying $5,200 to $5,500," Mr. Lee said.
Dealers say the prices of used vehicles will continue to soar as inventories of lower-priced and economy cars shrink. Japanese auto makers Toyota Motor Corp. and Honda Motor Co. have warned their production could be limited through year-end. U.S. dealers say they expect to exhaust existing inventories and face severe shortages of new Japanese cars by July.
"Prices for used cars hit a record high in April and are poised to go even higher as production cutbacks during the recession and the more recent Japanese earthquake has made used vehicles a hot commodity as dealers dive into the depleted pool for cars to fill their lots.
The one-two punch has added between $1,500 to $3,000 to the price of some used cars just in the last six months, meaning more money for trade-ins and a tougher time for shoppers looking for a deal.
"The price of used cars is just crazy right now," said Adam Lee, chairman of Maine dealer Lee Auto Malls. His dealership is paying hefty sums for cars it normally might not purchase to have a full inventory. "It can be a piece of junk—cars we used to pay $2,000 or $2,500 for, we are now paying $5,200 to $5,500," Mr. Lee said.
Dealers say the prices of used vehicles will continue to soar as inventories of lower-priced and economy cars shrink. Japanese auto makers Toyota Motor Corp. and Honda Motor Co. have warned their production could be limited through year-end. U.S. dealers say they expect to exhaust existing inventories and face severe shortages of new Japanese cars by July.
Friday, April 29, 2011
Inflation? Numbers Show Faith in Fed - WSJ.com
"Ben Bernanke held the first postpolicy-meeting news conference by a Federal Reserve chairman in part to bolster confidence that the Fed remained committed to controlling inflation. The words "inflation expectations," or some variation of them, were uttered 21 times in the session.
While investors and the public have concerns about short-term price increases, they appear to have confidence in Mr. Bernanke's ability to control inflation over the long-term. That is crucial to the Fed's success in rebooting the economy, because once higher long-term inflation expectations take root, they can become self-perpetuating, which would mean higher interest rates that could slow growth.
/
Long-term inflation-expectation gauges, from consumers and from the bond market, remain subdued and are little changed from a year ago. They point to inflation that isn't far above the average of the past decade, when inflation was historically low.
One rough gauge of future inflation expectations is the gap between yields on plain-vanilla Treasury bonds and Treasury inflation-protected securities of the same maturity.
TIPS are regularly adjusted for inflation, so this gap in yields, called the break-even inflation rate, shows how much future interest traders are willing to give up for inflation protection, which can be interpreted as the future inflation rate they expect.
The 10-year break-even inflation rate earlier this month surged to 2.66%, the highest since 2006. Amid a host of downbeat economic data in recently, that rate has retreated to less than 2.6%. These numbers are relatively high in the short history of break-even inflation rates, but that period was one of historically low inflation.
/
Many economists, likely including those at the Fed, doubt longer-term inflation pressures can take hold with unemployment still near 9%. The Labor Department on Thursday reported a jump in weekly jobless claims, which have started drifting higher again, a sign of lingering job-market weakness.
"The prospect of a wage-price spiral is much less than the prospect of a sharper slowdown in the economy," said Bernard Baumohl, chief global economist at the Economic Outlook Group in Princeton, N.J.
Wednesday, April 13, 2011
Fed Plays Down Inflation - WSJ.com
EXCERPT:
"Top Federal Reserve officials sent a clear signal that the Fed is unlikely to follow the European Central Bank in lifting interest rates from rock-bottom levels anytime soon, playing down the idea that soaring commodity prices will lead to broader U.S. inflation.
At the Economic Club of New York on Monday, Janet Yellen, the Fed's vice chairwoman, said U.S. monetary policy "continues to be appropriate."
Recent increases in prices of oil, grain and other commodities are "unlikely to have persistent effects on consumer inflation or to derail the economic recovery" and are "not likely to warrant any substantial shift in the stance of monetary policy," she said. The key, Ms. Yellen added, is that households and businesses don't expect inflation to take off in the long run.
Speaking in Tokyo earlier, William Dudley, president of the Federal Reserve Bank of New York, said, "We think that it's important not to overreact to a rise in headline inflation because the increase in commodity prices is probably going to be temporary rather than persistent"—a sentiment Ms. Yellen echoed."
"Top Federal Reserve officials sent a clear signal that the Fed is unlikely to follow the European Central Bank in lifting interest rates from rock-bottom levels anytime soon, playing down the idea that soaring commodity prices will lead to broader U.S. inflation.
At the Economic Club of New York on Monday, Janet Yellen, the Fed's vice chairwoman, said U.S. monetary policy "continues to be appropriate."
Recent increases in prices of oil, grain and other commodities are "unlikely to have persistent effects on consumer inflation or to derail the economic recovery" and are "not likely to warrant any substantial shift in the stance of monetary policy," she said. The key, Ms. Yellen added, is that households and businesses don't expect inflation to take off in the long run.
Speaking in Tokyo earlier, William Dudley, president of the Federal Reserve Bank of New York, said, "We think that it's important not to overreact to a rise in headline inflation because the increase in commodity prices is probably going to be temporary rather than persistent"—a sentiment Ms. Yellen echoed."
Thursday, March 31, 2011
Chinese Rush to Buy Soap Ahead of Price Increases - WSJ.com
EXCERPTS:
"BEIJING—Chinese shoppers are clearing supermarket shelves of soap, laundry detergent and shampoo after media reports warned of sharp price increases, the latest signal of public alarm over rising inflation despite government attempts to bring it under control.
State media began reporting late last week that the four consumer-goods companies that dominate the market for detergents—Unilever PLC, Procter & Gamble Co., Guangzhou Liby Enterprise Group and Nice Group—are expected to increase prices soon by 5% to 15%.
That news spurred consumers across the country to flock to supermarkets to fill their shopping carts. At a Tesco PLC grocery store in Shanghai, a service manager said customer numbers doubled over the weekend, and the shoppers stripped shelves bare of laundry detergent.
***
China's consumer-price index rose 4.9% in February from a year earlier, unchanged from January's rate and higher than Beijing's target of 4% for the year. Chinese consumers here have been hit hard by rising food prices, which increased 11% in February from a year earlier. Prices of everything from eggs to garlic have surged.
***
Many consumers feel their only course of action is to stock up on goods that won't spoil quickly.
"Shampoo is already way too expensive, and I can't bear any further price increases," Ms. Wang said.
With five bags of Tide laundry detergent in her grocery cart, Ramona Yan, a 24-year-old website editor, said buying in bulk now would save her money in the coming months."
"BEIJING—Chinese shoppers are clearing supermarket shelves of soap, laundry detergent and shampoo after media reports warned of sharp price increases, the latest signal of public alarm over rising inflation despite government attempts to bring it under control.
State media began reporting late last week that the four consumer-goods companies that dominate the market for detergents—Unilever PLC, Procter & Gamble Co., Guangzhou Liby Enterprise Group and Nice Group—are expected to increase prices soon by 5% to 15%.
That news spurred consumers across the country to flock to supermarkets to fill their shopping carts. At a Tesco PLC grocery store in Shanghai, a service manager said customer numbers doubled over the weekend, and the shoppers stripped shelves bare of laundry detergent.
***
China's consumer-price index rose 4.9% in February from a year earlier, unchanged from January's rate and higher than Beijing's target of 4% for the year. Chinese consumers here have been hit hard by rising food prices, which increased 11% in February from a year earlier. Prices of everything from eggs to garlic have surged.
***
Many consumers feel their only course of action is to stock up on goods that won't spoil quickly.
"Shampoo is already way too expensive, and I can't bear any further price increases," Ms. Wang said.
With five bags of Tide laundry detergent in her grocery cart, Ramona Yan, a 24-year-old website editor, said buying in bulk now would save her money in the coming months."
Tuesday, October 26, 2010
Bernanke Asset Purchases Risk Unleashing 1970s Inflation Genie - Bloomberg
EXCERPTS:
"For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.
Bernanke next week is likely to preside over a decision to launch another round of large-scale asset purchases after deploying $1.7 trillion to pull the economy out of the financial crisis, comments from policy makers over the past week indicate. This time, with interest rates already near zero, the Fed will be aiming to increase the rate of inflation and reduce the cost of borrowing in real terms. The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower.
Estimates for the ultimate size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch Global Research to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after the Nov. 2-3 meeting. The danger is that once the Fed kindles price increases, inflation will be difficult to control.
“By reducing real interest rates and trying to break the psychology of ‘Why spend today when I can buy goods cheaper tomorrow,’ they are hoping to drive growth that would be more commensurate with a pickup in employment,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The risk is a late 1970s type of scenario where the inflation genie gets out of the bottle.”
The U.S. Treasury Department yesterday sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.
QUESTIONS:
1. How can the yield on a security be negative?
2. What is it about the current economic environment that is causing this yield to be negative right now?
"For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.
Bernanke next week is likely to preside over a decision to launch another round of large-scale asset purchases after deploying $1.7 trillion to pull the economy out of the financial crisis, comments from policy makers over the past week indicate. This time, with interest rates already near zero, the Fed will be aiming to increase the rate of inflation and reduce the cost of borrowing in real terms. The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower.
Estimates for the ultimate size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch Global Research to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after the Nov. 2-3 meeting. The danger is that once the Fed kindles price increases, inflation will be difficult to control.
“By reducing real interest rates and trying to break the psychology of ‘Why spend today when I can buy goods cheaper tomorrow,’ they are hoping to drive growth that would be more commensurate with a pickup in employment,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co. in New York. “The risk is a late 1970s type of scenario where the inflation genie gets out of the bottle.”
The U.S. Treasury Department yesterday sold $10 billion of five-year Treasury Inflation Protected Securities at a negative yield for the first time at a U.S. debt auction as investors bet the Fed will be successful in sparking inflation. The securities drew a yield of negative 0.55 percent.
QUESTIONS:
1. How can the yield on a security be negative?
2. What is it about the current economic environment that is causing this yield to be negative right now?
Thursday, October 7, 2010
Fed Officials Mull Inflation as a Fix - WSJ.com
EXCERPTS:
"The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.
The rationale is that getting inflation up even temporarily would push 'real' interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.
Both inside and outside the Fed, though, such an approach is controversial. It could undermine the anti-inflation credibility the Fed won three decades ago by raising interest rates to double-digits to beat back late-1970s price surges. "It's a big mistake," said Allan Meltzer of Carnegie Mellon University, a central bank historian. "Higher inflation is not going to solve our problem. Any gain from that experience would be temporary," adding that the economy would suffer later.
Others warn that pushing inflation higher than the target could create public confusion and risk fueling financial bubbles and market instability. They say Fed policy already is weakening the dollar and as a result prompting a gold and commodity boom. "The Fed is treading upon a mine-laden path that has never been tip-toed through in this country," said Andrew Busch, a currency strategist at BMO Capital Markets.
QUESTION:
If the Fed decides to pursue a policy that will cause more inflation, and people start to expect higher inflation, what effect is this likely to have on nominal interest rates?
"The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed's informal target.
The rationale is that getting inflation up even temporarily would push 'real' interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.
Both inside and outside the Fed, though, such an approach is controversial. It could undermine the anti-inflation credibility the Fed won three decades ago by raising interest rates to double-digits to beat back late-1970s price surges. "It's a big mistake," said Allan Meltzer of Carnegie Mellon University, a central bank historian. "Higher inflation is not going to solve our problem. Any gain from that experience would be temporary," adding that the economy would suffer later.
Others warn that pushing inflation higher than the target could create public confusion and risk fueling financial bubbles and market instability. They say Fed policy already is weakening the dollar and as a result prompting a gold and commodity boom. "The Fed is treading upon a mine-laden path that has never been tip-toed through in this country," said Andrew Busch, a currency strategist at BMO Capital Markets.
QUESTION:
If the Fed decides to pursue a policy that will cause more inflation, and people start to expect higher inflation, what effect is this likely to have on nominal interest rates?
Wednesday, August 11, 2010
Yields Dive as Fed Sets More Buying - WSJ.com
EXCERPTS:
"The Treasury market welcomed the Federal Reserve's plan to shower it with more cash, instantly driving 10-year yields to new 16-month lows. But the response was muted as investors realized that, with rates already so low, the Fed's plan to buy U.S. government debt may have relatively little impact. The key determinant of interest rates for now is likely to be the health, or lack thereof, of the U.S. economy.
The 10-year Treasury note's price jumped nearly a full point in the moments after the Federal Reserve announced its plan to reinvest money that rolls out of its mortgage portfolio into longer-dated Treasury debt. The yield, which moves in the opposite direction of price, fell to 2.779%, the lowest since April 2009, from 2.818% just before the Fed's announcement.
That is good news for many in the economy—the 10-year Treasury yield is a benchmark that affects other rates, including mortgage rates, which also are at historic lows—but investors are beginning to wonder just how much more juice the Fed has to drive rates any lower.
The 10-year yield already has tumbled from about 4% in April as investors flocked to U.S. government debt amid worries about Europe and the durability of the U.S. economic recovery.
"The Treasury market welcomed the Federal Reserve's plan to shower it with more cash, instantly driving 10-year yields to new 16-month lows. But the response was muted as investors realized that, with rates already so low, the Fed's plan to buy U.S. government debt may have relatively little impact. The key determinant of interest rates for now is likely to be the health, or lack thereof, of the U.S. economy.
The 10-year Treasury note's price jumped nearly a full point in the moments after the Federal Reserve announced its plan to reinvest money that rolls out of its mortgage portfolio into longer-dated Treasury debt. The yield, which moves in the opposite direction of price, fell to 2.779%, the lowest since April 2009, from 2.818% just before the Fed's announcement.
That is good news for many in the economy—the 10-year Treasury yield is a benchmark that affects other rates, including mortgage rates, which also are at historic lows—but investors are beginning to wonder just how much more juice the Fed has to drive rates any lower.
The 10-year yield already has tumbled from about 4% in April as investors flocked to U.S. government debt amid worries about Europe and the durability of the U.S. economic recovery.
U.S. Is Bankrupt and We Don't Even Know: Laurence Kotlikoff - Bloomberg
EXCERPTS:
"Uncle Sam’s Ponzi scheme will stop. But it will stop too late. And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
"Uncle Sam’s Ponzi scheme will stop. But it will stop too late. And it will stop in a very nasty manner. The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
Friday, July 2, 2010
Six Months to Go Until
The Largest Tax Hikes in History
EXCERPTS:
"In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:
- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%
Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.
The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
Second Wave: Obamacare
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:
The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:
The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”
Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.
Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0sXQBdtlX
"In just six months, the largest tax hikes in the history of America will take effect. They will hit families and small businesses in three great waves on January 1, 2011:
First Wave: Expiration of 2001 and 2003 Tax Relief
In 2001 and 2003, the GOP Congress enacted several tax cuts for investors, small business owners, and families. These will all expire on January 1, 2011:
Personal income tax rates will rise. The top income tax rate will rise from 35 to 39.6 percent (this is also the rate at which two-thirds of small business profits are taxed). The lowest rate will rise from 10 to 15 percent. All the rates in between will also rise. Itemized deductions and personal exemptions will again phase out, which has the same mathematical effect as higher marginal tax rates. The full list of marginal rate hikes is below:
- The 10% bracket rises to an expanded 15%
- The 25% bracket rises to 28%
- The 28% bracket rises to 31%
- The 33% bracket rises to 36%
- The 35% bracket rises to 39.6%
Higher taxes on marriage and family. The “marriage penalty” (narrower tax brackets for married couples) will return from the first dollar of income. The child tax credit will be cut in half from $1000 to $500 per child. The standard deduction will no longer be doubled for married couples relative to the single level. The dependent care and adoption tax credits will be cut.
The return of the Death Tax. This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement account could easily pass along a death tax bill to their loved ones.
Higher tax rates on savers and investors. The capital gains tax will rise from 15 percent this year to 20 percent in 2011. The dividends tax will rise from 15 percent this year to 39.6 percent in 2011. These rates will rise another 3.8 percent in 2013.
Second Wave: Obamacare
There are over twenty new or higher taxes in Obamacare. Several will first go into effect on January 1, 2011. They include:
The “Medicine Cabinet Tax” Thanks to Obamacare, Americans will no longer be able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin).
The “Special Needs Kids Tax” This provision of Obamacare imposes a cap on flexible spending accounts (FSAs) of $2500 (Currently, there is no federal government limit). There is one group of FSA owners for whom this new cap will be particularly cruel and onerous: parents of special needs children. There are thousands of families with special needs children in the United States, and many of them use FSAs to pay for special needs education. Tuition rates at one leading school that teaches special needs children in Washington, D.C. (National Child Research Center) can easily exceed $14,000 per year. Under tax rules, FSA dollars can be used to pay for this type of special needs education.
The HSA Withdrawal Tax Hike. This provision of Obamacare increases the additional tax on non-medical early withdrawals from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs and other tax-advantaged accounts, which remain at 10 percent.
Third Wave: The Alternative Minimum Tax and Employer Tax Hikes
When Americans prepare to file their tax returns in January of 2011, they’ll be in for a nasty surprise—the AMT won’t be held harmless, and many tax relief provisions will have expired. The major items include:
The AMT will ensnare over 28 million families, up from 4 million last year. According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to an explosion of AMT taxpaying families—rising from 4 million last year to 28.5 million. These families will have to calculate their tax burdens twice, and pay taxes at the higher level. The AMT was created in 1969 to ensnare a handful of taxpayers.
Small business expensing will be slashed and 50% expensing will disappear. Small businesses can normally expense (rather than slowly-deduct, or “depreciate”) equipment purchases up to $250,000. This will be cut all the way down to $25,000. Larger businesses can expense half of their purchases of equipment. In January of 2011, all of it will have to be “depreciated.”
Taxes will be raised on all types of businesses. There are literally scores of tax hikes on business that will take place. The biggest is the loss of the “research and experimentation tax credit,” but there are many, many others. Combining high marginal tax rates with the loss of this tax relief will cost jobs.
Tax Benefits for Education and Teaching Reduced. The deduction for tuition and fees will not be available. Tax credits for education will be limited. Teachers will no longer be able to deduct classroom expenses. Coverdell Education Savings Accounts will be cut. Employer-provided educational assistance is curtailed. The student loan interest deduction will be disallowed for hundreds of thousands of families.
Charitable Contributions from IRAs no longer allowed. Under current law, a retired person with an IRA can contribute up to $100,000 per year directly to a charity from their IRA. This contribution also counts toward an annual “required minimum distribution.” This ability will no longer be there.
Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0sXQBdtlX
Saturday, March 13, 2010
Dollar Weakens on Reports of Obama's Potential Fed Picks - WSJ.com
EXCERPT:
"NEW YORK—The dollar weakened broadly amid concerns that U.S. monetary policy may stay loose for a while.
The buck reacted to White House confirmation that Federal Reserve Bank of San Francisco President Janet Yellen is the "top contender" to succeed Donald Kohn as Fed vice chairman. To help the economy recovery, Ms. Yellen favors keeping interest rates low, and the prospect that the Fed's loose monetary policy would stay in force longer pressured the greenback. Mr. Kohn is set to retire in June.
The dollar slumped 0.9% against the U.K. pound and the Swiss franc, while the euro touched $1.3796, the strongest point since Feb. 11. The greenback also plunged to a 19-month low against the Canadian dollar at C$1.0157.
Investors will be watching the Federal Open Market Committee's rate-setting meeting on Tuesday for policy clues in the statement following the rate announcement. The Fed is widely expected to leave rates unchanged near zero.
"NEW YORK—The dollar weakened broadly amid concerns that U.S. monetary policy may stay loose for a while.
The buck reacted to White House confirmation that Federal Reserve Bank of San Francisco President Janet Yellen is the "top contender" to succeed Donald Kohn as Fed vice chairman. To help the economy recovery, Ms. Yellen favors keeping interest rates low, and the prospect that the Fed's loose monetary policy would stay in force longer pressured the greenback. Mr. Kohn is set to retire in June.
The dollar slumped 0.9% against the U.K. pound and the Swiss franc, while the euro touched $1.3796, the strongest point since Feb. 11. The greenback also plunged to a 19-month low against the Canadian dollar at C$1.0157.
Investors will be watching the Federal Open Market Committee's rate-setting meeting on Tuesday for policy clues in the statement following the rate announcement. The Fed is widely expected to leave rates unchanged near zero.
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