[Rhodes22-list] Question for Brad about capital shortages (Economic question about politics)

[Brad Haslett]

Ben,

Your reference to Swiss bankers reminds me of a story from my
economics professor in grad school.  An economist visited a small town
high in the Swiss Alps and asked the locals what their economy was
based on.  "We do the laundry for the next town across the valley".
He visited the neighboring village and asked the same question.  "We
do the laundry for the next town across the valley". Moral of the
story - there has to be some underlying beneficial activity in
economy, ie, you have to produce something of value.

My source of information for all things related to banking, my
backyard neighbor and commercial loan portfolio manager for a regional
bank, returned to Chicago recently to get back to his first love,
energy lending (mostly coal mines) so I'll have to wing it on my own.

You probably understand the federal reserve system as well as I do,
but basically, it was an evaporation of required reserves (equity)
that caused the current meltdown.  Mark to market accounting (an
over-reaction to Enron) dried up bank reserves and a loss in
confidence in other banks slowed lending to a crawl.  Banks aren't
"hoarding" cash in their vault - they don't have cash to begin with,
that's the problem.

I posed an interesting theory to my wife last week that someone was
"toying" with our equities markets to generate so much volatility. My
sister-in-law, the former CFO for greater Asia for a large American
company, said out of the blue this weekend, "someone is jerking the
American stock market around".  Neither she nor I are conspiracy
theorists, just sane and rational people trying to make sense of an
irrational world.

What's going on here?  Please look into your crystal ball Ben and tell
me first.  This is starting to hurt.

Brad

On Thu, Oct 16, 2008 at 5:11 PM, ben
<benonvelvetelvis at theskinnyonbenny.com> wrote:
> Do you guys really think that the hundreds of billions of dollars that
> companies used to put in the commercial paper market is now being sent to
> swiss bank accounts, because lending to American banks for a week at a time
> is too risky?
>
> It's not.  Banks are keeping their money in their vaults rather than put it
> on the commercial paper market.  Smaller investors (100s of millions) are
> lending their money to Uncle Sam, so they can turn around and buy bank stock
> (which is much better than the original plan of buying bad assets), which
> will then hopefully open the commercial paper market back up.
>
> Ben S.
>
> -----Original Message-----
> From: rhodes22-list-bounces at rhodes22.org
> [mailto:rhodes22-list-bounces at rhodes22.org] On Behalf Of Tootle
> Sent: Thursday, October 16, 2008 3:11 PM
> To: rhodes22-list at rhodes22.org
> Subject: [Rhodes22-list] Question for Brad about capital shortages (Economic
> question about politics)
>
>
> Brad,
>
> How much of the so called capital shortate is really capital moving offshore
> because of potential Obama win?  That is how much is global capital seeking
> a safe haven? from being socialized? from coersive lending compelled by
> Congress?
>
> Ed K
> Greenville, SC, USA
> special attachment for Andrew:
> http://www.nabble.com/file/p20016650/Obama%2Badvocates.gif
> Obama+advocates.gif
>
>
> Ed,
>
> I've been out flying for the last few days.  Judging by the number of
> people partying on the Riverwalk in San Antonio, the economy's doing
> fine.
>
> Ben is mostly correct, most small business income flows directly
> through the owners tax return.  The Obama bullseye is on those making
> over $250,000 per year.  That sounds like a lot of money to some
> people but it really isn't.  We've been down this road before with
> Jimmy Carter and luxury taxes.  It will be 10 times worse under Obama.
>  The proper description is INCOME REDISTRIBUTION!  That's what the
> whole guys career has been about when he wasn't directing public money
> to his friends private businesses. I still can't believe people are
> stupid enough to believe this crap, but then again, there are lots of
> stupid people in the world. You can't give 95% of wage earners a tax
> cut when the bottom 40% don't pay federal income taxes.  What he
> doesn't say in the fine print is that low income people will get a
> check.  In some parts of the country we have a name for that, it's
> called WELFARE.  In other parts it is called "fairness". Call it what
> you want, it is income redistribution.
>
> Raising the capital gains rate will be economic suicide.  We could
> eliminate our current "flight of capital" issues by suspending the
> capital gains tax altogether for a few years. This whole candidacy of
> Obama has been wishful thinking.  Who really knows what the guy will
> do?  He's hung around Marxists his entire life, you can bet most
> decisions will have a Marxist patina to them.
>
> Frankly, I'm not too worried.  One, his getting elected is not a sure
> thing.  Two, if elected, his Chicago shenanigans can't be kept hidden
> forever. Remember this name - State Street Bank.  I'm guessing that
> will be the smoking gun.  Three, even if he dodges impeachment, he'll
> only serve one term.  Four, I'll move much of my money overseas, so
> will lots of others.  That's not very patriotic but necessary.
>
> I remember selling airplanes during the Carter administration with
> high inflation, ultra-high interest rates, and high marginal tax
> rates.  You could put together some pretty creative (read stupid) tax
> deals with a buyer that would make an airplane positive cash flow for
> the first year.  It was counter-productive in the long run for the
> economy but you did what you had to do.  Some people are too young to
> remember those years, others are just dumb.
>
> Brad
>
>
>
>
> --
> View this message in context:
> http://www.nabble.com/Tax-Question-for-Brad-tp19960487p20016650.html
> Sent from the Rhodes 22 mailing list archive at Nabble.com.
>
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