ALL time high in unemployment means higher taxes is a killer and a no starter, people have less money to invest–so what is left?!! Stay tuned, they are on the right track with the economic plans…watch them closely, but give them a chance…and give some thinking time to it.

First, I love your system and can’t wait to see the mac version.

I was reading this blog on the way into work on the train and then at lunch I saw this on cnbc.

http://www.cnbc.com/id/27477819.

The author claims that budget deficits don’t matter and are what people should want out of government. While I believe the theory goes that some budget deficits are needed in times of economic stress to grow the economy, I also believe there seems to be some serious flawed logic to say that huge deficits are OK. Maybe I’m just surprised at the audacity of the argument but I would be interested to here your thoughts on Cliff Mason’s article.

It did have some interesting side effects already particularly in the international aspect.

Further information can be found here
http://www.finfacts.ie/irishfinancenews/article_1014875.shtml
or any Irish news site.

One of the suggested counters to the blank check policy is to have government appointed representatives on the Bank’s board to ensure the levels of risk engaged in is managed.

The reaction to the announcement saw the four main Irish banks share price rise by between 13% and 67% depending on the bank.

The capital gains tax does not cost the taxpayer any more in taxes NOW, that’s certain. Your assumption that we’d run a deficit (no capital gains tax revenue) may be valid, which means we would have to eventually pay taxes to make up the deficit.

Then you have the supply-side camp that would say removing the capital gains tax would stimulate the economy and raise so much capital that we’d actually see the tax revenue increase overall. (In principle, I’m opposed to a capital gains taxes completely but that’s a discussion for another day).

Marking to market would basically be a break for the banks on paper and while we all admit that it’s hard to imagine why the paper results matters, there’s been a lot of research to show that the paper results do matter and that they affect stock price where it’s statistically significant. The banks would be allowed to not have to take the paper losses for these horrible, stupid loans they made and the market would reward them (eh, not punish them is probably a better way to put it).

I’m not sure where he got the $50B at all.

What I like about this plan is that we go into less debt (tax deficit possibly set aside as that’s kind of an unknown), and it doesn’t feel like nearly the knee-jerk reaction we’re at now.

First, by offering FHA-ish insurance on any loan issued by a bank, as long as the bank is willing to accept the two requirements, you’re basically issuing a blank check to the bank to issue any kind of loan it wants to for anyone regardless of credit-worthiness. The bank could then simply charge large fees for people with bad credit, ensuring that the bank gets their profit, then end up rewriting the loan as required to a 6% fixed rate after three missed payments, and eventually letting the government handle the default. Sounds like a pretty sweet deal for the banks. There are a reason that current FHA loans come with so many preconditions. Making any loan eligible for that insurance is not common sense.

Second, if my loan is at 7.5% and I’m paying it regularly, and I hear that my bank has accepted this government backing, you can bet I’ll miss my next three payments. I get a no questions asked rate drop to 6%, plus an extension back to 30 years presumably. I’d be a fool to keep paying my mortgage. While that proposal may appeal to the common man, I don’t think it qualifies as a common sense fix.

Third, dropping the capital gains tax does NOT cost the taxpayer nothing. The taxes that are no longer coming in from capital gains will have to come from somewhere else. Maybe Ramsey needs a little common sense on this one.

I have some other concerns that mostly stem from my ignorance.

How do you limit golden parachutes? I think businesses are quite adept at structuring corporate compensation around any existing laws, so you’d need someone extremely well versed in this to create the language to make it happen without loopholes. Plus, is the very fact that this company is taking this government-backed insurance evidence that the executives have been failing at their jobs? If so, you can bet they’ll take their golden parachute first and let the next guy apply for the government-backed insurance. They’ll be using their own common sense on that one.

I have no idea what mark to market is, or how eliminating it for certain loan types would help, or if it really would be no cost to the taxpayers or a stabilizing force in the market. That part isn’t common sense unless it can be explained in more common terms.

Where does he get the number of $50 billion for the FHA-ish insurance he proposes? That number is just as mysterious as the $700 billion amount the current plan is proposing.

Note that in principle, I’m opposed to the $700 billion bailout plan. But if the dire predictions are accurate (which I tend to doubt), I’d much rather sock it to the taxpayer than suffer through a 1930′s depression.