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Congress has a new deal ... for corporations
by Mr. Chuckles
| Apr. 6, 2008 |
Those poor, pathetic, inept Congress critters just can't help themselves! When they see corporations suffering their hearts overflow with compassion and generosity. After all, as Herbert Hoover famously claimed, "The business of America is business."
And since Americans love to live indoors, rewarding companies who have continued to build homes during this entire time that an excess of homes threatens to implode the American Way of Life is obviously something that requires little debate in Congress...
(((Side note: This explains, partly,
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The more we spend on the military and police state the less secure the country is, and the sooner the police state will collapse.
I believe China is more free now than America.
They are certainly more capitalistic than we are. |
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why real estate/property ETFs mentioned here jumped around 8% last week.)))
US Senate leaders agree on pro-industry housing bill| |
Excerpt: On Thursday, the Senate rejected an amendment that would have allowed judges to alter mortgage terms for individuals in bankruptcy court. On Friday, it added an additional tax break for corporations, on top of what was already included in the Dodd-Shelby agreement. ...
The Act is itself misnamed the "Foreclosure Prevention Act of 2008."
An article in the Associated Press on Thursday noted, however, that the bill "showers money-losing businesses with $25 billion in tax relief in the next few years but offers just $3 billion to homeowners, according to estimates released Thursday by Congress' Joint Tax Committee." The Associated Press commented that the Congress study "lends credence to accusations that the measure helps businesses like home builders while doing little to help millions of families threatened with foreclosure."
The major tax break will allow those companies hit by the housing slump, including home builders and banks, to credit losses against taxes paid in the previous four years, essentially giving them a major tax rebate. On Friday, the Senate voted 76-2 to include another tax provision that would benefit other companies not directly impacted by the housing slump.
The Senate by a vote of 58-36 defeated an amendment that included the major provision touted by Democrats to help homeowners giving judges greater ability to alter mortgage terms. Eleven Democrats joined Republicans in defeating the measure after heavy lobbying from the banking industry. The Mortgage Bankers Association issued a statement praising the move.
The principal measure included in the bill that would apply directly to those who have had their homes foreclosed is a paltry $100 million for foreclosure counseling. Even this is half of what Democrats had initially proposed. ... |
Mr. Noland's latest Credit Bubble Bulletin is both alarming and satisfying. It is satisfying to know that I did not waste my time reading his weekly essay every weekend for the last 5+ years. He has been correct on just about everything, except the critical issue of timing -- these bubbles seem to go on far, far longer than anyone can ever imagine!
I am alarmed especially by the last 4 paragraphs of the essay under the sub-heading, 'Economic Structure and the "Liquidationist Thesis"', which is, not coincidentally, the title of the entire essay ...
This information is Actionable, though, as usual, the critical issue of timing is unknown. Historically, massive events take years to play out, his predictions won't happen all in one day or week (unless Bush bombs Iran, in which case I don't know...) I do believe the brainy but lovely Aden Sisters are giving us extremely sound advice.| |
Excerpt: Yet as long as Wall Street alchemy was capable of creating sufficient money to fuel the boom -- and the world was content in accumulating (increasingly suspect) dollar claims -- our Bubble Economy Structure remained viable. It is, these days, increasingly not viable. The wholesale and open-ended government backing of U.S. mortgage debt -- and financial sector liabilities more generally -- will prove a decisive blow to already shaken dollar confidence. And it is today's reality that the massive scope of Credit growth necessary to sustain the current Bubble Structure will correspond to Current Account Deficits and dollar outflows that will prove (as we're already witnessing) only more destabilizing in markets and real economies around the world.
Government backing of our debt does not substitute for a sound Economic Structure. And it is the current Structure that is incapable of the economic output to satisfy domestic needs and generate sufficient exports to exchange for our huge appetite for imported goods and energy resources. Today's services-based economy will no longer suffice. Examining today's job data, one sees that 93,000 goods producing jobs declined in March after falling 92,000 in February and 69,000 in January. At the same time, Education, Health, Leisure and Hospitality jobs increased 178,000 during the first quarter. Yet it is more obvious today than ever that we need to consume less and produce much more.
Back to the liquidationists. It is my view that our economy will require a massive reallocation of resources. We will have to create much less non-productive (especially mortgage and asset-based) Credit and huge additional quantities of tradable goods. In the services sector, there will no choice but to liquidate labor and redirect its efforts. Throughout finance, there will be no alternative than to liquidate bad debt, labor and insolvent institutions -- again in the name of a necessary redirecting of resources. After an unnecessarily protracted boom, there will be scores of enterprises that will prove uneconomic in the new financial and economic backdrop. Liquidation will be unavoidable.
Recent extraordinary government measures to back U.S. finance will likely delay the adjustment process -- what I will be referring to as a depression. This reprieve, however, comes with a cost. It will ensure significantly greater damage to the core of our monetary system, as well as requiring a more onerous real economy liquidation. |
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Mr. Chuckles
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P.S. Mr. Noland is apparently apolitical, or at least astute enough to never talk about the elephant in the living room, which is our imperialist adventures. When he speaks of "consumption", the is nothing more consumptive than government expenditures on the military/police state.
More than $1 TRILLION a years is spent on our national "defense" spending for bases in 100+ countries around the world, featuring major permanent occupying forces in Japan, South Korea, Germany, Iraq, and Afghanistan.
The total actual cost is incomputable, cannot even be estimated because 1) so much science and technology R&D is misallocated into war toys instead of useful goods; 2) literally EVERY major US weapon invention and technology has been lost via espionage to our "enemies", so that we are actually in the business of paying for the military R&D of the rest of the world; 3) everything we destroy overseas becomes a liability of one sort or another, so that for every $1 we spend on destruction abroad, another $10 or $100 will be spent later.
Soooooo ... obviously, the present situation wherein the US spends more than all other countries put together on "defense" is totally unsustainable, and every dollar we spend on the military abroad and the police state at home simply accelerates the destruction of our economy and, paradoxically, weakens us militarily.
The more we spend on the military and police state the less secure the country is, and the sooner the police state will collapse. I believe China is more free now than America. They are certainly more capitalistic than we are.
P.P.S. Congress is "chronic". They are incapable of leading the country ... backwards from the Bush abyss. The Constitution is set up that way! America requires a competent president to provide good leadership, and to veto bills which are unsuitable. Right now we have these imbecilic things going on:
1) Plan to give home builders at least $6 billion in loss-carry forward tax credits. These companies are still adding new homes to the inventory, making a bad situation worse, and Congress wants to stimulate their businesses? It would be cheaper for Congress to pay them to deconstruct vacant homes than to pay them to construct new vacant homes.
2) At the same time Congress is rewarding home building companies for their stupidity and massive losses, Congress is also continuing to provide massive tax breaks to oil companies, who are reaping huge profits unheard of in the history of the USA. Can we at least divert those tax breaks to solar and wind power companies? Or ask Exxon and Chevron to spend the money on solar and wind power systems? Jeez!
3) Congress committed us to ethanol fuel which has created a global shortage of food and skyrocketing prices. Burning corn in our gas tanks doesn't save money overall, it doesn't help the environment, and it is creating a horrible mess for the world -- where more than a billion people are on the edge of poverty! But since 2008 is an election year it is not feasible to take this away from the farm states, no matter how destructive it is for the overall economy.
4) Congress determined to halt the decline of real estate prices, no matter the cost, or the fact that American real estate is valued conservatively at upwards of $40 trillion -- obviously, the only way to prop up the market is to debase the dollar and take money from the future to pay for today's re-election campaign. Forget Social Security and Medicare if Congress continues to pander to the wealthy...
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