Investors now see Australia as a better place to invest than the USA or Germany.

[Guard Dog]

I would be buying fur coats if I paid 10-35%. Don't really need fur coats, but I could totally buy them. If I paid somewhere in the middle, say 20%, I would only have to work a few days a week to stay afloat. We start at 48% and the highest bracket is 60- something percent.

Aha, remember Gorgon, we are just talking about Federal tax here. Most states also charge an income tax, ususally between 3-10%, sales tax on all transactions ($.03-$.10 on the dollar), property is taxed by state and municipalities, services are taxed like cable and cell and home phone service, etc. The actual tax burden on the American tax payer is a lot more than just what income tax bracket they fall in. In some states like California and New York the aggregate exceeds 60% for middle income families. And yet these states are still failing financially. Go figure.

[Guard Dog]

Frankly, reading the latest news (as of a few hours ago), with stock markets plummeting, commodities too, I would probably start considering canned tuna a viable investment for a post collapse society. Only half joking

I actually agree with you here. It would be foolish in the extreme not to make some preperations to that end. I've cleared parts of my property to get two vegtable gardens going (even if the world does not collapse I still am trying to grow the perfect tomato) and I do have a pretty big store of canned and dry goods. Plus I have around 5000 rounds of ammo for my firearms. I live literally right next to a small river and less than a mile from a big one. An the Hatchee wildlife management area is just a few hundred yards from my back door. If I could just learn how to make moonshine I'd be totally self sufficient.

[Gorth]

Frankly, reading the latest news (as of a few hours ago), with stock markets plummeting, commodities too, I would probably start considering canned tuna a viable investment for a post collapse society. Only half joking

I actually agree with you here. It would be foolish in the extreme not to make some preperations to that end. I've cleared parts of my property to get two vegtable gardens going (even if the world does not collapse I still am trying to grow the perfect tomato) and I do have a pretty big store of canned and dry goods. Plus I have around 5000 rounds of ammo for my firearms. I live literally right next to a small river and less than a mile from a big one. An the Hatchee wildlife management area is just a few hundred yards from my back door. If I could just learn how to make moonshine I'd be totally self sufficient.

I would lie if I didn't admit to just a little bit of envy

[Calax]

Frankly, reading the latest news (as of a few hours ago), with stock markets plummeting, commodities too, I would probably start considering canned tuna a viable investment for a post collapse society. Only half joking

I actually agree with you here. It would be foolish in the extreme not to make some preperations to that end. I've cleared parts of my property to get two vegtable gardens going (even if the world does not collapse I still am trying to grow the perfect tomato) and I do have a pretty big store of canned and dry goods. Plus I have around 5000 rounds of ammo for my firearms. I live literally right next to a small river and less than a mile from a big one. An the Hatchee wildlife management area is just a few hundred yards from my back door. If I could just learn how to make moonshine I'd be totally self sufficient.

WOOHOO! I have your location plotted into my gps's.

[Wrath of Dagon]

That said, the government is in a bind right now, as there really aren't any good options (and haven't been since the '08 crash became inevitable around '05 or '06). Increasing federal debt will hurt the economy. Raising taxes will hurt the economy. Cutting spending will hurt the economy. Letting the Fed quietly inflate the dollar to reduce the real value of the nation's debts will hurt the economy. It's a question more of relative efficacy of these options and of whose ox gets gored. As I've said before, America is looking somewhat screwed over the course of the next decade-- we'll end this with a lower standard of living than we started with.

That was what Jimmy Carter used to say before his ass made a great big thwack being kicked out of office. All we need is some strong leadership. If US made it through the Great Depression and WW2 it can get through this as well. The deficit reduction commission came up with a really good bipartisan plan which would actually help economic growth greatly, there just has to be some political courage to pass it.

[Morgoth]

That was what Jimmy Carter used to say before his ass made a great big thwack being kicked out of office. All we need is some strong leadership. If US made it through the Great Depression and WW2 it can get through this as well. The deficit reduction commission came up with a really good bipartisan plan which would actually help economic growth greatly, there just has to be some political courage to pass it.

The US emerged as a winner out of the depression because of WW2.

 

What will drag us out this time around? WW3, old-style Dune no-nuke policy warfare?

[Enoch]

That said, the government is in a bind right now, as there really aren't any good options (and haven't been since the '08 crash became inevitable around '05 or '06). Increasing federal debt will hurt the economy. Raising taxes will hurt the economy. Cutting spending will hurt the economy. Letting the Fed quietly inflate the dollar to reduce the real value of the nation's debts will hurt the economy. It's a question more of relative efficacy of these options and of whose ox gets gored. As I've said before, America is looking somewhat screwed over the course of the next decade-- we'll end this with a lower standard of living than we started with.

That was what Jimmy Carter used to say before his ass made a great big thwack being kicked out of office. All we need is some strong leadership. If US made it through the Great Depression and WW2 it can get through this as well. The deficit reduction commission came up with a really good bipartisan plan which would actually help economic growth greatly, there just has to be some political courage to pass it.

Well, in the Carter example, the answer the next admin brought was to ignore the federal debt. Combined with Volcker's actions at the Fed, the result was a pretty harsh recession, but with a pretty quick recovery. But that was a different kind of downturn than the one we face now-- most evidence indicates that financial-induced recessions are more stubborn and troubling than the more commonplace inventory-overhang, exogenous-shock based recessions. And letting the debt grow at the pace that the Reagan folks did probably isn't an option anymore. On the example of the Depression, recall that it took a decade's worth of stagnation and false starts before we really got anywhere.

 

Also: The deficit reduction commission was exactly that-- designed to reduce the deficit. That's a quite different goal than helping economic growth. That said, I agree that some kind of bipartisan grand bargain in that area, with re-write of the tax code and a hard look at both defense and entitlement spending, would be a useful step. But with the House of Representatives holding an effective veto on anything that smells at all like an increase in federal revenues, I don't see it going very far. (Senator Baucus has been hinting at independently introducing tax reform legislation, though, so something might come of that.)

Edited August 5, 2011 by Enoch

[Hurlshort]

Frankly, reading the latest news (as of a few hours ago), with stock markets plummeting, commodities too, I would probably start considering canned tuna a viable investment for a post collapse society. Only half joking

I actually agree with you here. It would be foolish in the extreme not to make some preperations to that end. I've cleared parts of my property to get two vegtable gardens going (even if the world does not collapse I still am trying to grow the perfect tomato) and I do have a pretty big store of canned and dry goods. Plus I have around 5000 rounds of ammo for my firearms. I live literally right next to a small river and less than a mile from a big one. An the Hatchee wildlife management area is just a few hundred yards from my back door. If I could just learn how to make moonshine I'd be totally self sufficient.

WOOHOO! I have your location plotted into my gps's.

 

That's why he has the ammo

[Walsingham]

That was what Jimmy Carter used to say before his ass made a great big thwack being kicked out of office. All we need is some strong leadership. If US made it through the Great Depression and WW2 it can get through this as well. The deficit reduction commission came up with a really good bipartisan plan which would actually help economic growth greatly, there just has to be some political courage to pass it.

The US emerged as a winner out of the depression because of WW2.

 

What will drag us out this time around? WW3, old-style Dune no-nuke policy warfare?

 

Pike blocks.

 

Only way to go.

 

*gasp*

 

We could have celebrity raised regiments like back in the old days when regiments were raised by gentry.

 

Anne Robinson's Hussars...

[Gorgon]

Jeremy Clarkson's rifles. Not known for either physical prowess or cunning.

[Guard Dog]

S&P Downgrades US credit for the first time...ever.

 

And Obama wants to introduce new spending measures next week including a new round of "Quantative Easing" which is political speak for "Print more money and spend it". And the collapse is comng closer. Tick tock tick tock.

 

As I sit here drinking my fine Kentucky bourbon I find myself thinking of a fateful October Thursday in 1929.

 

I also find myself thinking of the words of Abraham Lincoln "America will never be destroyed from the outside. If we falter and lose our freedoms, it will be because we destroyed ourselves."

[Enoch]

S&P's actions are a political statement. The ratings agencies essentially represent the interests of the elites of the financial industry.

 

And what is the point of the ratings agencies opining on Treasuries, anyway? The role that ratings agencies fill is as shorthand information providers-- you go to them when you need a quick supposedly-objective check on the creditworthiness of a company or asset that you don't have the time to investigate yourself. But no asset on the planet is as visible as Treasuries are. Everybody who has any business making serious investment decisions has seen the data on them, has an opinion on their reliability, and has already built this opinion into the projections upon which they base their investment decisions. Why would anybody care what the ratings agencies say?

 

Plus, even if you take their recommendations seriously, their concern is more with those cavalier folks on the right (including a number of presidential candidates) who were against raising the debt ceiling at all and who were willing to induce a federal default for no better reason than to embarrass the current administration. In a sense, this downgrade is less about any particular policy than it is about the statement that the Republicans in the House have made that playing politics with the Full Faith and Credit of the United States is no longer off the table. Which is something that any sane investor would be at least a little concerned about.

 

Lastly, it's still a game of relative, rather than absolute, risk. If the risk on Treasuries is less than AAA, what investment could be AAA? Certainly not any dollar-denominated investment, when the primary effect of any U.S. Gov't default would primarily hit the currency overall, rather than Treasuries in particular. And how can the risk on Euro-denominated investments be better, given that there's a meaningful chance that the Euro currency union could still break apart at the seams?

 

 

(By the way, any new rounds of Quantitative Easing (which would be QE3, at this point) are in the hands of the Federal Reserve, rather than the Administration.)

Edited August 6, 2011 by Enoch

[Meshugger]

Hasn't the US had a AAA rating since 1917? It means that it has endured the great depression, WWII, Korea, Vietnam and 9/11.

 

Simply put, the US should do what a nation being number 1 does. Blow up or burn the S&P HQ to the ground this sunday and raise a statue of hulk hogan holding the flag upon the rubble.

 

"That our rating of YOU, suckers"

[Meshugger]

Oh, what did S&P think about the sub-prime mortage CDCs? "AAA" perhaps?

[Nepenthe]

S&P's actions are a political statement. The ratings agencies essentially represent the interests of the elites of the financial industry.

^^

 

Also, applaud your consistently well-founded posts. Too many people (myself often included) let themselves be blinkered by ideology into finding "easy answers".

[Nepenthe]

And to lower the level of discussion to a more normal level:

[Malcador]

S&P was the agency that put out a statement saying they wanted change in the Irish government too, no ? Was funny to read the news here, user comments are awash with the Illuminati/Bilderberg/NWO stuff.

[Meshugger]

It is still sad to see how the media treats these rating agencies as serious entities when they have proven that they can't rate for **** to begin with. Manipulating financial bubbles are more their kind of territory.

 

I am not saying that the US government should treat their budget problems any less lightly, but they should not be treated as the only source for financial stability.

[Walsingham]

It is still sad to see how the media treats these rating agencies as serious entities when they have proven that they can't rate for **** to begin with. Manipulating financial bubbles are more their kind of territory.

 

I am not saying that the US government should treat their budget problems any less lightly, but they should not be treated as the only source for financial stability.

 

I symptahise with your point, but ultimately Joe Public (and I largely include myself except for particularly good days) don't understand the complexity of what is happeneing. Having BIg MOney People Say Things Not Good is at least possible to understand.

[Humodour]

It is still sad to see how the media treats these rating agencies as serious entities when they have proven that they can't rate for **** to begin with. Manipulating financial bubbles are more their kind of territory.

 

I am not saying that the US government should treat their budget problems any less lightly, but they should not be treated as the only source for financial stability.

 

Um, ratings downgrades mean higher borrowing costs - which is something that will have a tangible impact on all Americans. This isn't some non-issue the media is hyping up (OK, so they probably ARE hyping it up).

[Morgoth]

What's with all this panick-y reaction anyways? Other rating agencies (from China) have downgraded the US a long time ago, and guess what, were just ignored.

 

It seems only US RA's are being taken seriously. This alone is proof enough that they're just unrealiable financial tools.

[Nepenthe]

What's with all this panick-y reaction anyways? Other rating agencies (from China) have downgraded the US a long time ago, and guess what, were just ignored.

 

It seems only US RA's are being taken seriously. This alone is proof enough that they're just unrealiable financial tools.

No, it just means that chinese rating agencies have 0 impact on interest rates etc., unlike S&P.

[Guard Dog]

It is still sad to see how the media treats these rating agencies as serious entities when they have proven that they can't rate for **** to begin with. Manipulating financial bubbles are more their kind of territory.

 

I am not saying that the US government should treat their budget problems any less lightly, but they should not be treated as the only source for financial stability.

 

Um, ratings downgrades mean higher borrowing costs - which is something that will have a tangible impact on all Americans. This isn't some non-issue the media is hyping up (OK, so they probably ARE hyping it up).

This is exactly the concern. Although looking at other nations this has happened to it is not a sure thing interest rates will go up. They have significantly in some places but only a little in others. The real question is "how much?". The cost of borrowing in the US is certainly going to go up and that will have a depressing effect on an already weak economy and it will hit the consumer. But if it only increases a little it may be just a speed bump, not a wall.

 

I know the powers that be are clamoring for tax increases on the "wealthy" but the truth is the top three income brackets are paying 95% of the taxes now. What they should do is dump the current tax code and create a 15% flat tax that EVERYONE pays. No deductions, no write offs, no credits. If you earned one dollar or a billion your tax will be 15%. Do that, eliminate capital gains taxes (which essentially punishes investors for investing wisely) and our problems are solved inside of five years with some reasonable cuts to defense spending foreign aid, social welfare, etc.

 

Pigs will fly first I'm afraid. They will raise capital gains taxes which will cause fewer investors to put their money into stocks, make people less likely to sell their homes (which won't matter I guess if interest rates climb no one could afford to buy them anyway) and send more investors overseas. They will increase corporate taxes which will send more jobs to Mexico and China. And they will raise income tax which will mean less consumer spending which is the engine that drives the whole thing.

 

I think it was Winston Churchill who said "Americans will always do the right thing, but only after they have tried everything else." I just hope there is something left once we have tried everything else.

[Gorgon]

You would give the economy the death blow by cutting off most of the people who are employed by the government and then sit back and wait for the miracle of Capitalism to take place. It would make an interesting experiment that's for sure.

[Morgoth]

Yeah, if you enjoy Zero government and total free market, I recommend Somalia.