Friday, April 30, 2010

Extra! Extra! U.S. Taxpayers Bail Out Greece... And EU Banks!

When a too-big-to-fail bank (or country) fails, the powers-that-be look around for someone with money they can tap to bail them out. The EU folks looked and looked locally for someone to bail out Greece, but eventually ended up where all other good bailouts end up: In the U.S. taxpayers pockets. From PragCap:

Most Americans probably haven’t connected the dots yet, but you’re going to be signing an enormous check over to Greece over this weekend.  That’s right, as the largest contributor to the IMF the United States taxpayer is on the hook for the Greek bailout.  The numbers aren’t set in stone quite yet, but the latest rumors are for a $160B bailout over three years.  Of course, the most despicable part of this whole thing is not just the fact that the U.S. is helping to bail out Greece, but that this bailout is actually another bank bailout!  That’s right.  This isn’t really about the people of Greece.  They are going to be forced into years of austerity and painful economic times regardless of the situtation.  What this is really about is the $189B in Greek debt that the European banks have on their books.  No one wants them to take a 70% haircut on the debt.  So, connecting the dots here for you – Americans are once again bailing out banks – this time via the IMF.

They are hiding it by having the "IMF" bail them out, but that's just a smokescreen. We are the largest contributor to the IMF and will end up losing a lot of $$$ to help Greece pay for a bunch of programs and public workers that have zero benefit for us and to make whole the banks that loaned them money (unwisely).  Nice.

Got gold?

Monday, April 5, 2010

The sound of inevitability: Deficits lead to higher tax rates

Interesting chart from comparing the size and timing of deficits in the U.S. and the inevitable result: large changes in tax rates to try to stop the bleeding:

This makes TONS of sense, especially when you combine it with the government's non-stop pushing of tax-deferred accounts for retirement. People will sure feel stupid when they find themselves paying 40-50% tax rates (fed) plus some serious state taxes on 401K and IRA monies they set aside at a time when tax rates were 20-30%.

Don't feel smug if you have your money in Roth IRAs, either. I predict a means-based test for whether or not these withdrawals are truly tax-free. It's not paranoia if they're really out to get you.

Friday, April 2, 2010

Combatting the high costs of college with... Loans?!?

One of the amazing things about college costs is that they go up, year after year, faster than inflation. I suspect this is due primarily to the ever-increasing ratio of administrators to teachers, and the pension and healthcare costs associated with all these non-student-facing folks, but that's neither here nor there. The fact is that college is becoming so expensive people cannot possibly save for it or work their way through it.

So, how does the government help? Pressure schools to reduce costs (like they do with some industries)? Encourage non-traditional education or alternatives to 4-year schools? Naw... They offer to loan students money. Lots and lots of it. Take a look at this chart:

Careful, that's not a ten-year chart, that's a two-year chart.

See this blog entry for some good information on this topic.
Colleges can keep raising prices, despite the recession, because the government keeps lending students more money to pay them.
According to a report cited by Anne Marie Chaker in the Wall Street Journal on Thursday, the government will lend students $75.1 billion to pay for college this year, up a spectacular 25 percent compared with last year.
But the extra credit isn’t benefiting students. It’s just inflating the price of their education, burying them under a bigger pile of debt despite stagnant wage growth and poorer employment prospects.

And remember, student loans are not discharged in a bankruptcy. Indentured servants had it better...