Casino economics and tax myths – media forgets that people pay sales, property, Social Security, and Medicare taxes. How the financial class robs from the American people legally.
As tax day passes us by, many in the public are realizing that the extremely wealthy especially in the financial industry know something they don’t. What they are finding is that the financial industry has access to massive government bailouts and in many cases does not pay their fair share of taxes. Like Atlas holding the world up some are carrying a heavier burden and it doesn’t appear to be the financial sector. Reports out from the secretive Federal Reserve show for example a $220 million loan to the wives of Wall Street executives merely for speculative purposes. A win-win gift from our central bank as a thank you for leading the nation into this economic ditch. Do you have access to cheap and plentiful loans? There is also this absurd notion that people don’t pay taxes and much of the ire has been on the poor. When you hear this in the media, they mean federal income tax. People need to take account of their lives and figure that they pay for Social Security tax, Medicare tax, sales tax, property tax, and automotive registration fees so this idea that average Americans don’t pay tax is a complete misnomer. In fact, it seems like the extremely wealthy in this country have designed a tax system that has shifted the burden to the majority. The media narrative revolves around the fact that you should shoulder the brunt of the economic problems caused by the financial industry while bailouts and handouts increase the bottom line at the top. The income inequality in our nation has never been so high.
Meet the new financial boss, same as the old financial boss – Commercial real estate bailout implicates Federal Reserve as Fed balance sheet balloons to $2.7 trillion. CRE values down $3 trillion from their 2008 peak.
Commercial real estate (CRE) is still benefitting from a large shadow bailout by the Federal Reserve. This isn’t some secretive move since the Fed actually publishes data on this and is available to anyone in the public with a desire to shuffle through the mounds of information. There has been virtually no media coverage on the CRE industry even though CRE values have lost close to $3 trillion from their peak. You would think a $3 trillion loss would garner some attention but the media would rather focus on squabbles over a few billion dollars. Residential real estate is very tangible and most can understand what a bailout in housing means; at least in theory they grasp it since the bailouts really at their core were about saving big banks and making sure they were not penalized by their past transgressions. The irony of CRE problems is also the interesting support Donald Trump is getting even though CRE and residential real estate speculation are at the core of the financial mess. We can argue about taxes and public policies but the real money and the grease that ground the system to a halt was banking and their speculation on the real estate markets. This is why the CRE coverage has been completely missing from the morning shows. Let us look at this closer once again.
Banks gone wild – The temporarily embarrassed millionaire syndrome. Bailout recipient JP Morgan Chase pays CEO what amounts to 843 times the median US household income.
It is a fascinating case study in human psychology that one of the top contenders for President is Donald Trump, a man who makes a living at least on his show by firing people. You would think that many Americans would want someone that hires people given our current economic predicament. Put aside the antics and showmanship, many Americans (the average per capita income being $25,000) somehow admire a person who grew up with a silver spoon and has made his public persona revolve around firing people and speculating in real estate (a sector that has led us into this mess because of speculation). Usually when I get asked why we have very few protests against the trillions of dollars handed out to the banking and investment class, I usually point to this mentality. Many feel that they are only one step away from being the next Trump. This perception might explain the growth in massive banks and why it is even allowed. Having giant banks is not a normal part of our economy. In fact, I went ahead and gathered banking data going back to 1934 showing that the growth of too big to fail really started in the 1980s.
The housing gamble: What if home prices remained stagnant until 2020? 6 charts laying out the argument for stagnant or declining home prices for another 10 years. Peak in dual income households, home prices still inflated relative to incomes, Federal Reserve unable to hold mortgage rates low forever.
What would happen if home prices remain stagnant for another decade? It is hard to imagine that the cornerstone of the American dream would somehow become a bad investment for the next decade. For decades every generation was conditioned into believing that housing was the best investment a family could make. For many it provided a stable home for retirement once the mortgage was paid off. One third of all homes in the United States that are owner occupied have no mortgage. Yet this mindset of buying and paying off a mortgage has largely been lost. No mortgage burning parties in the digital age. It may be making a comeback not because people want this but because there is no other financial choice. Given the current domestic and global trends, it is likely that housing will be suffering another troubled decade from 2011 to 2020 just like it experienced from 2001 to 2010. I want to lay out six charts as to why I believe housing will have difficulty moving up in price in the next ten years.