PeakTrader.com Forum Index PeakTrader.com
Economics, Portfolio Optimization, and Technical Analysis
 
 FAQFAQ   SearchSearch   MemberlistMemberlist   UsergroupsUsergroups   RegisterRegister 
 ProfileProfile   Log in to check your private messagesLog in to check your private messages   Log inLog in 
Log inFast Charts

Financial Markets - Government Employees - Tax Cuts

 
Post new topic   Reply to topic     PeakTrader.com Forum Index -> Articles
View previous topic :: View next topic  
Author Message
administrator
Site Admin


Joined: 28 Dec 2005
Posts: 11966

PostPosted: Sun Aug 17, 2014 6:50 am    Post subject: Financial Markets - Government Employees - Tax Cuts Reply with quote

PeakTrader:

It’ll likely be quite a while before there’s another spectacular structural bull market like 1982-00.

And, I wonder how much upside there is in bond and stock prices at this point?

U.S. and global economic growth will likely be slower in the future.

Of course, there may be a Biotech Revolution that rivals the Information Revolution.

****

Everyone wants to outperform the market.

Yet, everyone is the market.

****

Shifting to 401(k)s hasn’t caused households to save too much for retirement.

Public employees need to receive less or pay more, and governments need to spend less or tax more.

It’s easier to spend and borrow than to save, particularly with low prices and low interest rates.

However, do we really want high prices and high interest rates?

****

2slugbaits, you’ve responded by changing the subject from overcompensated government workers, supported by undercompensated non-government workers, to economic growth.

I stated before, U.S. consumers bought foreign goods and foreigners bought U.S. Treasury bonds. The federal government rather than “refunding” those dollars back to consumers in the form of tax cuts, to allow the spending to go on, spent them instead.

To spur economic growth, a big “middle class” tax cut was needed for households to pay-down debt and raise discretionary spending, the cost of living needed to be reduced, temporarily, through deregulation, rather than raised, and the minimum wage should’ve been increased, to correct a market failure and reduce inequality.

Low prices and low interest rates induce demand, through spending and borrowing. Moreover, lower input prices and a lower cost of capital raise production, ceteris paribus.

****

2slugbaits, job security is one factor why government employees, in general, are overpaid.

So, if your debt level is high, with high monthly debt payments, a tax cut wouldn’t help you much? How would a $5,000 refund from the government be used? Maybe, pay-off high interest rate credit card debt, catch-up on bills, or pay-off the remaining balance on a car loan, to lower monthly payments and raise monthly discretionary income. Almost all of it, if not all of it, would be spent each month, since your debt payments have been so high with little discretionary income left over.

Interest rates are low, because private demand remains weak. The boost in government spending, with the small and slow tax cuts, failed to generate a self sustaining consumption-employment cycle. Clearing the market of excess private goods, e.g. through tax cuts, would’ve generated faster growth than creating a bigger market in public goods.

Household debt levels are high, because of low prices and low interest rates. It’s perfectly rational to spend and borrow, rather than save, when prices and interest rates are low.

****

baffling, government workers are less likely to be laid-off, including in a recession, and government entities rarely go out of “business.”

Well, if $5,000 doesn’t clear up the debt, they can spend it. Why would anyone make payments in advance, for example, without paying-off a loan or reducing their monthly payments?

Everyone uses money the best way they can, and that fit their needs.

And, higher asset prices contributed to the high level of consumption and borrowing in the disinflationary 1982-07 “long boom” with declining interest rates.

---
Back to top
View user's profile Send private message
Display posts from previous:   
Post new topic   Reply to topic     PeakTrader.com Forum Index -> Articles All times are GMT - 8 Hours
Page 1 of 1

 
Jump to:  
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum


Powered by PeakTrader 2.0.8 © 2001, 2002