Category — The US Economy

Get ready for the latest attack on the U.S. dollar, courtesy of our Congress and the Administration.

On March 23rd, President Obama signed into law a sweeping rewrite of U.S. health-care policy.

Initially, at first glance, it seems good.

It supposedly gives an additional 32 million Americans access to basic health insurance by 2019.

One thing is certain. It’s the biggest change to the American health system since Medicare was enacted in 1965.

However, it seems there are a few unintended consequences coming from this groundbreaking bill.

First of all, this healthcare revolution will cost $938 billion. That’s almost $1 trillion on top of the $12.67 trillion the U.S. already owes.

Now, if you ask the average person where that’s going to come from, they don’t know and probably don’t care.

Keep in mind that the government’s income comes from the taxes that we all pay. So if they’ve got greater expenses, guess what that means?

Greater taxation…and not just for the wealthy either (even though that’s the way Obama pitched his plan to middle-income America who couldn’t care less if a few wealthy fat-cats pick up the bills). Most of these health care changes won’t even start to take effect until 2014. So we’ve got a while before they start taxing us, right?!? Wrong!

One New Tax Went into Effect
As Soon As Obama Signed the Bill!

Many increased costs will kick in next year. But some taxes have already started as a result of this! Since March 23rd, any American who uses a public tanning bed has had to fork over 10% tax for the privilege.

Obamacare Will Create 17,000 Jobs…
(at the IRS)

However, there will be one bright spot. Yes, one segment of our economy will be robust. Which is it? It’s the Internal Revenue Service. They are hiring 17,000 new agents.

The IRS is going to need that many more bodies to help them rake in all of the additional tax money that Obama needs to pay for this.

There’s more. Companies with 50 or more employees will have to pay a fine if their workers receive government-subsidized coverage.

Next on the “Obamacare loser list” is the wealthy.

Maybe you’re on that list. Maybe you’re not. But regardless, this new “tax the rich” policy still affects you. Here’s why.

As you may have noticed, poor people don’t hire employees! No, it’s “wealthy” entrepreneurs who need more workers. If you tax these rich business owners harder, they won’t have the cash they need to continue hiring.

Obama is not wasting any time.

Is it true that only wealthy Americans use tanning beds? Plenty of average people use tanning beds, especially in the dead of winter. That’s just one example of how we’re all picking up the tab for this new health care bill.

But once these changes start, you can bet that employers will initiate more layoffs, and will be inclined to hire fewer people. Why?

Companies with more than 200 workers will be required to automatically enroll all their employees in whatever insurance plan they offer. When those corporations have to maintain these higher costs, they’ll make cuts in payroll in order to preserve their profit margins.

The “rich” make about $200,000 – $250,000 a year, and they’re about to pay 0.9% more for Medicare Payroll Taxes.

By the way, calling someone who makes $200,000 a year “rich” is fair only if you live in a place with a low cost of living. Tell a Californian he’s “rich” because he makes $200,000, and he’ll laugh at you!

Also, these “rich people” will have an additional tax of 3.8% on investment income like dividends and capital gains beginning in 2013.

Have I mentioneed all of the “losers?” No! I won’t go into great detail on the rest, but here are a few other groups that will get hammered:

Believe it or not, within the health care reform, banks will lose the government backing/guarantees on education loans. So schools will have to go directly to the Department of Education for funding.

“The Insured” will also lose out. Experts say we could see “double digit” increases in some places like California (and that’s just for people who make above $88,000 a year).

We’ll All Be Paying for an Expensive
Program

When you put all the pieces of this together, you’re going to see higher taxes coming (and not just on the rich), higher unemployment and lower new employed rates, increased health care costs, etc.

All of this will be yet one more weight and hurdle placed upon corporate America, and many, if not all, of its citizens.

If you think companies are struggling now, wait until all of this comes to a head in a few years. You haven’t seen anything yet!

In the Long Run, “Obamacare”
Spells Trouble for the U.S. Dollar!

This will all take a huge toll on the U.S. economy. It will likely make our economy even more sluggish.

Consider: if consumers and corporations are taxed more and have higher costs, then they are not going to spend as much. When spending is restrained, the economy struggles.

So this long-term “ankle weight” that’s being placed upon the U.S. economy will end up eventually taking a long-term toll on the dollar as well.

It probably won’t affect the dollar immediately.

In fact, in the short run, if stocks, bonds, or commodities were to fall, it would actually help the dollar for now. But over longer periods of time, there’s no way that the dollar can prosper when the entire nation is hurting from the extra yoke placed on both consumers and businesses.

So take this as yet one more warning to get yourself out of the dollar! Use rallies in the dollar to get some long-term positions in foreign currencies and “hard currencies” like gold and silver.

The Obama administration keeps refusing to do what is really necessary to end the economic tradgedy that has the name U.S. stamped all over it. Instead of biting the bullet and letting economic forces do their job; instead of letting weak companies and weak banks fail, the administration keeps trying to reinflated the burst credit bubble in the hopes the economy will recover before the economy collapses entirely. The administration is living on hope.

By continuing to prop up the banks, the administration is placing into effect a plan by which the banks are buying time, rather than restructuring their bad loans. If restructuring those loans cause a bank to fail, so be it. Let’s face it the banks are not lending, and companies with too much debt are not hiring. And Mr. average is afraid to spend or invest, and is hoping he won’t be next in the unemployment line.

The stimulus package is a huge failure and in particular it has failed to create jobs. And you cannot for one minute believe what the BLS (Bureau of Lying Statistics) is telling us about jobs. This group of profound liars create jobs that don’t exist and plunk them into the employment report.

The Democrats, Obama, and his gang of criminal appointees cannot blame George Bush for this. It belongs entirely to them now. The administrations failure to act sanely will bring down the Obama house of cards, but we will all pay through the nose for it.

Nothing new about GM, not really. Not even the name “Government Motors.” The Govt., will own 70% of GM. Ah! Such hopes people have. Let’s play follow the leader, or is it leaders, who have now saddled the U.S. taxpayer wth ownership of a company that is doomed to fail, even under Bankruptcy reorganization.

The auto industry is running at about 40% of capacity. GM is running at about 34% of capacity, so even if half of the remaining factories shut down, it’s going to be a long hard struggle to reach as high as breakeven. GM will still be carrying a huge debt load, and how in the world is it going to compete with the non-union car makers like Honda and Toyota? Can you imagine the kinds of executive and economic decisions that will be made with the government as the major shareholder?

I just read an article in Business week where the author thinks we won’t have inflation coz the FED won’t raise interest rates. It seems to me that he is wrong on two counts: 1. The FED can’t control long bond rates which are rising. 2. The FED is trashing the dollar by printing so many. That mean all commodities that are priced in dollars will rise, giving us inflation.

Another point he seems to have missed is that in some areas inflation is already there, and it is the stated policy of Bernanke to inflate.

Capital Spending has fallen off a cliff. Higher prices for good used by businesses–computers and machinery are causing some companies to hold back. Capital expenditures have fallen in technology, telecom, materials, industrials, health care, financials and non-cyclical consumer goods. The only companies that haven’t cut global spending are energy and utilities.

I can only hope the Business Week writer is right and I am wrong. But I think we will inflation, probably in spades.

Due to layoffs, creditworthy and conservative borrowers simply can’t afford their mortgage payments. Moody’s macro website, Economy.com, predicts 60% of all mortgage defaults this year will be caused primarily by unemployment – up from 29% last year.

Economists are referring to this next round of foreclosures as the “third wave,” different from the first round, when speculators dumped property because of plunging prices, and the second wave, when subprime borrowers’ introductory interest rates reset. The “third wave” consists of your neighboor who lost his job and after sending out about 2,000 resume’s, can’t even get a single job interview.

What a horrible feeling that must be. Where do you turn? Who needs or wants you? Yet, there are over 3 million jobs going without someone to fill them. There is an actual shortage of qualified workers in the fields of accounting, and healthcare. The factory jobs have gone overseas.

Two houses down from me sits a lovely 2-story home. It has been empty for over a year. The single mom who owned it, lost her job and left in the middle of the night. Since then there has been water damage. Water damage in Central Texas soon turns into a major mold problem. The house may have to be gutted before it can be sold. Sad!

If you want to know when the economy might recover, pay attention to part-time employment figures. Since the fall of 2007, the number of employees forced to work part-time due to the economic slowdown has doubled to over nine million people – that’s two million more than at any time in 54 years of collecting the data. You can see the spike in the chart.

You can also see a close correlation between the start of a recession and a sharp shift to using part-time workers. And, conversely, that when an economy recovers, the use of part-time workers falls off quickly. From what you see on the chart, it doesn’t look like we are even close to an economic recovery.

Does the current stock rally have long legs? Not if you give meaning to corporate insiders.

Insiders at America’s publicly traded companies are selling stock at the fastest pace since October 2007 – the month the stock market peaked.

Why should we pay attention to what the insiders are doing? It’s because they know way more about their companies than we do. If insiders are selling, then why the heck should anyone buy? The reason is that we have to dig to find the truth, and there is nothing regulatory that compels companies to tell the truth.

The only thing we outsiders have to go buy is common sense along with being alert to legally reported insider trading, which is required by the regulatory authorities.

Timothy Geithner, who was head of the New York Federal Reserve Bank now claims he is not a banker. Then just what the heck is he?

Piecing together interviews with Treasury Secretary Tim Geithner we can find that he denies ever being a banker… a lawyer… or a regulator. Wouldn’t it be nice to know the expertise of the man in charge of saving our economy? After all, he is the man responsible for saving the economy!

The government did it again! They have pushed more money into AIG by purchasing preferred shares of AIG stock. It doesn’t matter, they are just printing the money and adding to the debt. The real and true U.S. debt is now over $70 trillion. We will never be able to pay that back, but it will be burden on future generations for as long as the U.S. exists. The administration is impoverishing the nation.

I getting sick of it, are you? American International Group Inc, which has received more than $150 billion in taxpayer support since last September, has closed a deal to access nearly $30 billion in additional federal funds. So here we go again, bailing out AIG with our, our kids, and grand kids money.

In a filing with the U.S. Securities and Exchange Commission on Monday, AIG said it would issue and sell to the U.S. Treasury 300,000 preferred shares, including warrants to purchase common stock, in exchange for up to $29.835 billion.

The original amount agreed in early March was $30 billion, but officials subtracted $165 million in retention bonuses paid to employees of the AIG Financial Products unit last month.

Big deal! Treasury is right there on your side, saving us another $165 million. Don’t you just love those guys?