Ten years after the crisis

Bloomberg, my favorite opinion site, had a bunch of reflections on the 2008 financial crisis and what has happened since then. Some of it makes me worried. We might have avoided a worldwide depression then, but have we just delayed an inevitable reckoning. Or have we learned the intricate methods needed to deal with financial crises, so that we're probably safe?

Just to review, the Great Depression in the US in the 1930s was rather horrid. Unemployment at 25%, wages low, people hungry, in worn shoes and clothes, living off the kindness of family, scratching out a living. However, many more people lived on farms back then, so they could provide susbsistence living. Should a depression occur now, we'd have that many more people totally dependent on others, with no means to even feed themselves. (And we have a lot more weapons now too. Will crime be a horrendous problem if we have another depression?)

One author is optimistic that emerging economies won't have a crisis like we did in 2008. That was sparked by too much savings chasing risky investments in pursuit of return. Emerging markets are riskier and give higher returns, so they might seem vulnerable to fright-and-flight in a crisis. But that's less likely for two reasons: 1) Emerging markets are now a standard part of large portfolios, not just a high-risk high-return asset, and 2) local investment pools are larger and will grow even more as pensions become important in emerging countries.

Another article isn't optimistic. It's about a world swimming in debt, with little hope to pay it off. Somehow I'm overly worried about this. I figure everyone takes a haircut, tightens their belts, and lives, though less lavishly.

Image: en.actualitix.com

Blunt words for the crappy tax plans

A Bloomberg editorial points out the mathematical impossibilities in both Romney's and Obama's tax plans.

Briefly, Romney promises to maintain the Bush tax cuts and reduce rates 20% more. However, to remain revenue-neutral, he has to claw back two-thirds of the deductions people take. If you're middle-class, you're probably taking a mortgage deduction and other itemized deductions that greatly lower your tax bill, much more than a 20% rate reduction would. So many middle-class earners would see their tax bills rise just as high-earners get another tax break.

The problem with Obama's tax plan is that the rich don't have enough money to pay for all deficit spending that's been occurring for the past 12 years or is anticipated in the future. Doubling their tax rate, even raising it to 100%, doesn't collect enough money.

As I've said before, the deficit spending, and especially the marshmallow-soft taxes of the Bush II era, had a terrible effect on our expectations of what government can do and how much it will cost. We have been spoiled by having our cake and eating it too, and we are still being spoiled. It is high time for a reality check, but it isn't happening because (eye-roll) ... It's Election Season, the season of impossible promises. I'm going to stop now before my head explodes from the frustration.

But first, a big thank you to Bloomberg for a short, readable summary of these tax plans and their fundamental dishonesty. Please, read it, forward it, get it out there.