Comments on: The problem with the economic stimulus package and what to do about it http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html Financial independence, frugality, self-sufficiency, ecology, capitalism, and voluntary simplicity Fri, 25 Jul 2008 16:05:03 +0000 http://wordpress.org/?v=2.6 By: nks http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-1608 nks Sun, 20 Jul 2008 09:56:33 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-1608 I filed jointly my USA tax'2008. When i filed the tax, i filed against my SSN & my wife's TIN. After a month, i filed a tax amendment with only change to my wife's SSN (previously TIN). So far i am waiting for the stimulus package. Below is my primary SSN falling in the range. SSN (10 through 18 ) =>> May 23 (stimulus package date from irs) Is there anyway to inquire about it? How & when to get it? Thanks for the suggestions. - nks I filed jointly my USA tax’2008. When i filed the tax, i filed against my SSN & my wife’s TIN. After a month, i filed a tax amendment with only change to my wife’s SSN (previously TIN).

So far i am waiting for the stimulus package. Below is my primary SSN falling in the range.

SSN (10 through 18 ) =>> May 23 (stimulus package date from irs)

Is there anyway to inquire about it? How & when to get it? Thanks for the suggestions. - nks

]]> By: mysticaltyger http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-1585 mysticaltyger Tue, 15 Jul 2008 23:16:36 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-1585 Jacob, I'm not sure I agree with your statement that Europe doesn't have that much more government than the US. If you look at the Debt to GDP ratios of some of the larger European countries (Germany, France, Italy), they're around the same as the US (or higher, in the case of Italy). Jacob,

I’m not sure I agree with your statement that Europe doesn’t have that much more government than the US. If you look at the Debt to GDP ratios of some of the larger European countries (Germany, France, Italy), they’re around the same as the US (or higher, in the case of Italy).

]]> By: Jacob http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-693 Jacob Sat, 08 Mar 2008 16:07:40 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-693 @Kyeann - I prefer to stay out of the currency game per se. Instead I buy foreign companies - and I prefer to use funds for that - in funds that do not hedge the currency exchange rate. Naturally this strategy has been quite good the past few years (as the dollar has dropped a lot compared to other major countries). @Kyeann - I prefer to stay out of the currency game per se. Instead I buy foreign companies - and I prefer to use funds for that - in funds that do not hedge the currency exchange rate. Naturally this strategy has been quite good the past few years (as the dollar has dropped a lot compared to other major countries).

]]> By: Kyeann http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-689 Kyeann Sat, 08 Mar 2008 09:41:03 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-689 Jacob -- Which foreign currencies do you recommend, and which countries? :) Jacob — Which foreign currencies do you recommend, and which countries? :)

]]> By: Jacob http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-342 Jacob Thu, 07 Feb 2008 02:48:57 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-342 @ lily - not to worry, I read everything at face value :-) @ adfecto - If government is viewed as some incredible large corporation subject to the same rules as corporation, then maybe you are right. Still such a government should adhere to much more conservative values than a typical corporation since a bankrupt government makes the country a very bad place to live in. In this regard the US pretty much operates its finances like a banana republic. With your numbers a doubling of the interest rate up to 8-10% would lead to delinquency. I see government more as an entity or a set of laws that take money from some people and give it to others. The money can either be taken from earners (taxes) or savers (through inflation). If the recipients grow the money better than the contributors, government helps - it unsticks the sticky parts. If not, the government is a drag on the economy. Does such central planning actually help? In other words this is not a question debt-equity ratio for the government but a question of ROE for different parts of the economy. I see that Soviet Union as an example of such planning that was pushed too far. Sweden anno 1990 was an example that was pushed just far enough (they had to devalue and restructure). Maybe the US does not push far enough or maybe they too are pushing too far. @ lily - not to worry, I read everything at face value :-)

@ adfecto - If government is viewed as some incredible large corporation subject to the same rules as corporation, then maybe you are right. Still such a government should adhere to much more conservative values than a typical corporation since a bankrupt government makes the country a very bad place to live in. In this regard the US pretty much operates its finances like a banana republic. With your numbers a doubling of the interest rate up to 8-10% would lead to delinquency.

I see government more as an entity or a set of laws that take money from some people and give it to others. The money can either be taken from earners (taxes) or savers (through inflation). If the recipients grow the money better than the contributors, government helps - it unsticks the sticky parts. If not, the government is a drag on the economy. Does such central planning actually help? In other words this is not a question debt-equity ratio for the government but a question of ROE for different parts of the economy. I see that Soviet Union as an example of such planning that was pushed too far. Sweden anno 1990 was an example that was pushed just far enough (they had to devalue and restructure). Maybe the US does not push far enough or maybe they too are pushing too far.

]]> By: Adfecto http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-320 Adfecto Mon, 04 Feb 2008 18:10:54 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-320 Jacob - I have written about this topic myself and I am certain that the current interest rate which our government is borrowing money is well below its justified level, as a result we are able to borrow at below market rates to invest in growth of our economy. Just like a private business there is an ideal capital structure for the government. When rates are artificially low it is in our best interest to utilize them to spur economic growth. At some point this trend will reverse and our borrowing rates will increase, at that point we should pay down debt; this is not that time! The limit on how much we should borrowed must be judged by the same standards applied to a corporation. I suggest reading this page about <a href="http://www.referenceforbusiness.com/encyclopedia/Bre-Cap/Capital-Structure.html" rel="nofollow">Capital Structure</a>. Using 2006 numbers (most recent I could find) the federal government spent $406 billion on interest payments and had $2,407 billion in tax revenues. So roughly 1 in 6 dollars in spent on interest payments. Our total debt is roughtly 8 trillion dollars with a GDP of 13 trillion. In 2006 the ratio for the federal government debt to cash flow was about 3.33. These metrics in the corporate world are no where near the levels where debt is considered risky (such as debt to EBDITA ratio of 7 or 8 or debt to equity ratio of great than .5 - <a href="http://www.winninginvesting.com/spot_impending_bankruptcy.htm" rel="nofollow">source</a>). Based on the historic return on capital for our domestic economy and our government tax revenue we could maintain solvency with as much as twice our current debt load. Future growth (and inflation) will also decrease the amount of our debt over time even without making any effort to pay it down. Again, I'll say you make some valid points but I think there is more to the analysis that needs to be considered. The fact that the average consumer makes poor money decisions does not change the fact that deficits are not evil and can in fact greatly benefit our economy. Jacob -

I have written about this topic myself and I am certain that the current interest rate which our government is borrowing money is well below its justified level, as a result we are able to borrow at below market rates to invest in growth of our economy.

Just like a private business there is an ideal capital structure for the government. When rates are artificially low it is in our best interest to utilize them to spur economic growth. At some point this trend will reverse and our borrowing rates will increase, at that point we should pay down debt; this is not that time!

The limit on how much we should borrowed must be judged by the same standards applied to a corporation. I suggest reading this page about Capital Structure. Using 2006 numbers (most recent I could find) the federal government spent $406 billion on interest payments and had $2,407 billion in tax revenues. So roughly 1 in 6 dollars in spent on interest payments. Our total debt is roughtly 8 trillion dollars with a GDP of 13 trillion. In 2006 the ratio for the federal government debt to cash flow was about 3.33. These metrics in the corporate world are no where near the levels where debt is considered risky (such as debt to EBDITA ratio of 7 or 8 or debt to equity ratio of great than .5 - source).

Based on the historic return on capital for our domestic economy and our government tax revenue we could maintain solvency with as much as twice our current debt load. Future growth (and inflation) will also decrease the amount of our debt over time even without making any effort to pay it down.

Again, I’ll say you make some valid points but I think there is more to the analysis that needs to be considered. The fact that the average consumer makes poor money decisions does not change the fact that deficits are not evil and can in fact greatly benefit our economy.

]]> By: Lily http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-316 Lily Mon, 04 Feb 2008 16:42:01 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-316 Jacob - your comment above for Ron is <i>brilliant</i>. (And since this is the Internet and things don't always come out as intended, that was not sarcastic.) The comment showed a real understanding of economics and the true purpose of the Fed - which is so refreshing because I don't think very many people understand recent economic movements, on either the monetary or the fiscal side. Jacob - your comment above for Ron is brilliant. (And since this is the Internet and things don’t always come out as intended, that was not sarcastic.) The comment showed a real understanding of economics and the true purpose of the Fed - which is so refreshing because I don’t think very many people understand recent economic movements, on either the monetary or the fiscal side.

]]> By: Jacob http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-302 Jacob Sun, 03 Feb 2008 00:29:51 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-302 @ron - I suspect that currently (and since Volcker) it is generally agreed that the federal reserve can control the direction of the market. I also suspect that this assumption is wrong. The feds determine or at least implement the monetary policy of the country or given the size of the US economy one might say the entire world. However, by itself monetary policy does not matter as long as it is stable. Monetary policy is all about perceptions of value which is why many people believe that it should simply not be touched. The real determinants are the market (the irrational exuberance deal) and the fiscal policy (lower taxes and run a continuous deficit while financing unproductive projects) of the government. I think the currently the federal reserve is caught between a rock and a hard place. The problem is that both the market and the government believes that the fed is in control of the economy even though they aren't almost to the point of worship. So I think the federal reserve is trying to a) do its real job which is to provide liquidity to the banks - a job it does well and b) try to boost the government statistics like GDP, unemployment numbers, etc. a job it does not do particularly well and should not be doing. As for the government: There are a lot of votes to be had by providing free money. I think they also have to worry about rolling over their massive debt at reasonable rates. This situation seems to be getting worse and worse. I don't think this really answered your questions, but this was the best I could do. @benjamin - Europe may have more welfare, but I'm not sure that they have that much more government. A lot of the US government is funded by inflation (debt) rather than taxes. This merely hides the size of the government. The ECB seems to be pretty conservative. I generally developed countries that don't speak English (or Icelandic ;) is a good rule of thumb ;) @ron - I suspect that currently (and since Volcker) it is generally agreed that the federal reserve can control the direction of the market. I also suspect that this assumption is wrong. The feds determine or at least implement the monetary policy of the country or given the size of the US economy one might say the entire world. However, by itself monetary policy does not matter as long as it is stable. Monetary policy is all about perceptions of value which is why many people believe that it should simply not be touched. The real determinants are the market (the irrational exuberance deal) and the fiscal policy (lower taxes and run a continuous deficit while financing unproductive projects) of the government. I think the currently the federal reserve is caught between a rock and a hard place. The problem is that both the market and the government believes that the fed is in control of the economy even though they aren’t almost to the point of worship. So I think the federal reserve is trying to a) do its real job which is to provide liquidity to the banks - a job it does well and b) try to boost the government statistics like GDP, unemployment numbers, etc. a job it does not do particularly well and should not be doing. As for the government: There are a lot of votes to be had by providing free money. I think they also have to worry about rolling over their massive debt at reasonable rates. This situation seems to be getting worse and worse. I don’t think this really answered your questions, but this was the best I could do.

@benjamin - Europe may have more welfare, but I’m not sure that they have that much more government. A lot of the US government is funded by inflation (debt) rather than taxes. This merely hides the size of the government. The ECB seems to be pretty conservative. I generally developed countries that don’t speak English (or Icelandic ;) is a good rule of thumb ;)

]]> By: Benjamin http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-297 Benjamin Sat, 02 Feb 2008 19:13:43 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-297 Other countries that don't believe in free lunches as strongly as this one...I'm having trouble coming up with some of those countries. Would you be looking at Gini coefficients? I still don't think I'd want to invest in Brazil. Most of Europe has more welfare in place than the US, yet their currencies are thriving at the moment. I'm just curious here. Other countries that don’t believe in free lunches as strongly as this one…I’m having trouble coming up with some of those countries. Would you be looking at Gini coefficients? I still don’t think I’d want to invest in Brazil. Most of Europe has more welfare in place than the US, yet their currencies are thriving at the moment.

I’m just curious here.

]]> By: Ron http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-296 Ron Sat, 02 Feb 2008 16:54:40 +0000 http://earlyretirementextreme.com/2008/02/the-problems-with-the-economic-stimulus-package-and-what-to-do-about-it.html#comment-296 Jacob, another interesting post. My question is this: Why did Greenspan do what he did? What was his motivation and why did Bernacke do what he just did? Do you think that their actions were intended for the good of the real estate market? Or, even, the general economy? I think both acted to protect the interests of the those invested in the stock market. And whose interests is the government trying to protect with the mortgage bailout? Your thoughts? Jacob, another interesting post. My question is this: Why did Greenspan do what he did? What was his motivation and why did Bernacke do what he just did? Do you think that their actions were intended for the good of the real estate market? Or, even, the general economy?

I think both acted to protect the interests of the those invested in the stock market. And whose interests is the government trying to protect with the mortgage bailout?

Your thoughts?

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