Mayor Bloomberg: currently the only politician that understands basic finance

[soupcxan]

When you have a person, or a business, or a government, who is spending more money than they are earning, that's a problem. You can finance the deficit by borrowing for a while, but you have to pay it back eventually, and in the meantime the interest payments are a real drag. Long term, revenue < expenses isn't sustainable.

That's the situation New York City is in due to declining tax receipts. So Bloomberg says: look, things are tough, we're going to have to cancel some tax rebates we planned and scale back on government services until we get through it. And of course, everyone is up in arms against him now. The city council is outraged. Citizens say "I need that tax rebate to make ends meet." Unions say "we didn't cause this mess so our members shouldn't pay for it." And while both of those perspectives are not surprising, they fail to address the fact that money doesn't grow on trees. If (money in) < (money out) then you have a problem! It can't be solved by ignoring it or wishing it away!

I point this out because it seems to mirror the situation the entire country is in, except there is no one at a national level that wants to acknowledge this fact, let alone start trying to fix it. Everyone is promising more government services and more bailouts (to companies, individuals, whoever shows up). Maybe we can get the "rich" to pay for it, but more likely we'll just keep borrowing the funds, so it will actually be future generations that foot the bill.

http://www.nytimes.com/2008/11/06/ny...budget.html?em

[dex]

The last time NYC was going bankrupt in the 70s and it asked for Fed help - the NYC Daily news reported it Fords decline of help as: "Ford to NYC: Drop Dead"

This time around NBC will get it - and why not - everyone is getting one - homeowners; banks; companies. Also, with a demo congress and Hilary; how could anyone say no?

[Texarkandy]

"scale back on government services" ? Who would campaign on that platform?

I rather suspect most Americans actually do know the basic rules of finance and that:
"You can finance the deficit by borrowing for a while, but you have to pay it back eventually, and in the meantime the interest payments are a real drag. Long term, revenue < expenses isn't sustainable."

They just don't want it to apply to their personal situations. Somebody else needs to pay for it. So we have elected a President and Congress who have promised us just that.

Had I billions of dollars I would be looking for an offshore haven or moving offshore myself - cause the peasants are restless and they want my gold.

The net result of the new Robin Hood mentality will be to drive capital from the United States.

[haha]

[quote=Texarkandy;745577I rather suspect most Americans actually do know the basic rules of finance and that:
"You can finance the deficit by borrowing for a while, but you have to pay it back eventually, and in the meantime the interest payments are a real drag. Long term, revenue < expenses isn't sustainable."
[/quote]

I strongly doubt that this is even the dominant belief. I imagine most people never think about it. Why woiuld we expect deficits to get paid back? Is there any indication that our debt will ever be extinguished?

Ha

[chinaco]

Faced with the choice between immediate doom and future doom... most individuals would choose future.


NYC will have to cut expenses. That means laying people off and reducing services... no different than businesses.

Many states and cities are faced with this same problem... Since they cannot print money like the feds.... they have to belt tighten. With credit being tight, they would probably have problems borrowing.

I think the feds might loan money to states... but only after they have cut non-essential programs.

[. . . Yrs to Go]

Originally Posted by soupcxan

I point this out because it seems to mirror the situation the entire country is in, except there is no one at a national level that wants to acknowledge this fact, let alone start trying to fix it. Everyone is promising more government services and more bailouts (to companies, individuals, whoever shows up). Maybe we can get the "rich" to pay for it, but more likely we'll just keep borrowing the funds, so it will actually be future generations that foot the bill.

Most economists agree that the government should act counter cyclically, particularly during times of economic stress. Trying to raise taxes and cut spending in an attempt to balance the budget is exactly the wrong thing to do right now. In fact, that is what President Hoover did in 1932 . . .

Previous tax cuts, when combined with the sharp decline in incomes during the early depression, resulted in a serious deficit in the federal budget. Congress, desperate to increase federal revenue, enacted the Revenue Act of 1932. The Act increased taxes across the board, and the percentage increased with income, to near pre-1928 levels for top income earners. It also implemented a 13.75% tax on corporations.

I don't think anyone would look at this as a model for navigating out of the current situation.

[FUEGO]

Originally Posted by Texarkandy

Had I billions of dollars I would be looking for an offshore haven or moving offshore myself - cause the peasants are restless and they want my gold.

Just curious - could you name the top three or four foreign jurisdictions that you would flee to?

I know the Bush-haters of 2000 and 2004 vowed to flee to Canada. Where would you flee to?

This is a serious question. I can't really think of anywhere that I would flee to that would present better opportunities than the US. Maybe Singapore/Hong Kong/Taipei??

[dex]

Originally Posted by FUEGO

This is a serious question. I can't really think of anywhere that I would flee to that would present better opportunities than the US. Maybe Singapore/Hong Kong/Taipei??

You could park your money in an offshore account and live wherever you want - Canada, Italy, South America, Mexico, Australia, Thailand - you might not be able to become a resident but, so what.

The USA taxes its citizens on global income. So if you remain a citizen you would have to pay taxes on Social Security income, pension, and investment income you have in the USA plus the offshore account income - if you tell the IRS about it.

[haha]

Originally Posted by dex

So if you remain a citizen you would have to pay taxes on Social Security income, pension, and investment income you have in the USA plus the offshore account income - if you tell the IRS about it.

And if you don't, they will likely find you and rub thallium on your nose.

Ha

[FUEGO]

Originally Posted by dex

You could park your money in an offshore account and live wherever you want - Canada, Italy, South America, Mexico, Australia, Thailand - you might not be able to become a resident but, so what.

I understand this, and I think any of those countries/areas present great opportunities to live a nice life. But those same countries present a number of problems that we have in America and some that are worse than in America.

But what country do you want your money residing in? Which country is least likely to lose your money than the US? Either through theft, negligence, corruption, inflation, expropriation, etc.? I'm just not seeing a lot of options necessarily better than the US at this point. But I'm certainly open to reasoned suggestions.

[eridanus]

Originally Posted by Texarkandy

The net result of the new Robin Hood mentality will be to drive capital from the United States.

New?

[dex]

Originally Posted by FUEGO

But what country do you want your money residing in? Which country is least likely to lose your money than the US? Either through theft, negligence, corruption, inflation, expropriation, etc.? I'm just not seeing a lot of options necessarily better than the US at this point. But I'm certainly open to reasoned suggestions.

I'm no expert - how about Switzerland or England

[FUEGO]

Originally Posted by dex

I'm no expert - how about Switzerland or England

Are these countries particularly better than the US? Maybe equal or close to it. I could see "spreading the wealth" (to borrow a phrase from a great man) between multiple countries as a risk/diversification measure (collapse risk, not currency risk). But are Switzerland or England any less likely than the US to allow your money to be expropriated or finagled out of your account in some way? Maybe if you have billions of dollars it is worth the hassle of holding accounts in foreign jurisdictions, but for the run of the mill millionaire on these boards?

[OAG]

I do not profess to one of the "run of the mill millionaire on these boards", but if you are diversifying your holdings between different countries are you not thinking one or more of them will "steal it" but you would have the rest? Keep it here (USA), but be sure to join some viable special interest group so you can get a "bail out", if the need arises.

[clifp]

I'd think that Switzerland or one of the Scandinavian countries, like Sweden or Norway would have a slightly lower risk of having a catastrophic failure over the next 50 years,

I think both the people and the government are significantly more risk adverse than the US and hence have a lower chance of completely screwing everything up. I don't have any data to support but that is my gut. They are way way too cold for me, so I'll take my chances in the good old USA.

[haha]

Originally Posted by clifp

I'd think that Switzerland or one of the Scandinavian countries, like Sweden or Norway would have a slightly lower risk of having a catastrophic failure over the next 50 years,

I think both the people and the government are significantly more risk adverse than the US and hence have a lower chance of completely screwing everything up. I don't have any data to support but that is my gut. They are way way too cold for me, so I'll take my chances in the good old USA.

The Scandinavian banks get themselves into trouble routinely. Look at Iceland today, or Sweden in the early 90s. Even today Sweden has some problems. balticbusinessnews.com - Is the Swedish central bank preparing for collapse of Swedbank?

Switzerland is a much cleaner story. Their Banks, especially Credit Suisse have come through very well so far. I think Switzerland is one of the few countries where they take a hard line on economic issues, even when it is difficult.

Ha

[Texarkandy]

Originally Posted by FUEGO

Just curious - could you name the top three or four foreign jurisdictions that you would flee to?

I know the Bush-haters of 2000 and 2004 vowed to flee to Canada. Where would you flee to?

This is a serious question. I can't really think of anywhere that I would flee to that would present better opportunities than the US. Maybe Singapore/Hong Kong/Taipei??

Originally Posted by dex

You could park your money in an offshore account and live wherever you want - Canada, Italy, South America, Mexico, Australia, Thailand - you might not be able to become a resident but, so what.

The USA taxes its citizens on global income. So if you remain a citizen you would have to pay taxes on Social Security income, pension, and investment income you have in the USA plus the offshore account income - if you tell the IRS about it.

what Dex said

[Texarkandy]

Originally Posted by FUEGO

.... Maybe if you have billions of dollars it is worth the hassle of holding accounts in foreign jurisdictions, but for the run of the mill millionaire on these boards?

The premise of my statement re: moving wealth out of the U.S. if you recall was "billions"

As far as I can see run of the mill millionaires are pretty much stuck.

[Urchina]

Originally Posted by soupcxan

When you have a person, or a business, or a government, who is spending more money than they are earning, that's a problem. You can finance the deficit by borrowing for a while, but you have to pay it back eventually, and in the meantime the interest payments are a real drag. Long term, revenue < expenses isn't sustainable.

...there is no one at a national level that wants to acknowledge this fact, let alone start trying to fix it. Everyone is promising more government services and more bailouts (to companies, individuals, whoever shows up). Maybe we can get the "rich" to pay for it, but more likely we'll just keep borrowing the funds, so it will actually be future generations that foot the bill.

Well, Peter DeFazio (4th Congressional District in Oregon) has been refusing pay raises since the late 80s because he thinks Congress shouldn't take a pay raise until the federal budget is balanced. He gets the raises anyway (because Congress votes them in) and gives them away as scholarships. See here, a quote from his website:

"I also put my money where my mouth is. I have funded 177 need-based scholarships at community colleges in my district from $290,000 in Congressional pay raises I refused to accept until the federal budget is balanced."

from:Home

Oh, he's a Democrat, by the way.