Category Archives: Finance

little know facts about high frequency trading

When is a tax increase not?

When is a tax increase not?

Keeping in mind, from the prior weeks post, that borrowing money to decrease taxes does not always result in a financial benefit the opposite can also be true. If the increase in tax is used to lower the deficit, or even better create a surplus, this accrues to the financial benefit of the tax payer. Thinking about your family unit it is akin to making a payment on a loan which reduces debt and also the amount of interest.                                                                                      A good example of this was the tax increase that was put into place by President George HW Bush. Keep in mind that as a Republican this action was political suicide. Not only did it set the table for his failed bid for re-election, it also created a significant split in his party. So why did he take this unpopular action? The simple answer is that it was in the best interest of the American people.                                                                                                                                             The economy was suffering and the national debt was rising. The action taken by President Bush initiated economic recovery and started the trend toward reducing the deficit. The unfortunate political outcome was that the results bore fruit during the tenure of President Clinton. The downward trend in deficit actually resulted in several years of surplus and a financial benefit to taxpayers.

                                     FY       Deficit   Increase in Debt   Deficit/GPD      Significant events

1991 $269 $432   4.3% Recession.
1992 $290 $399   4.4%  
1993 $255 $347   3.7% Clinton signed Balanced Budget Act.
1994 $203 $281   2.8% First Clinton budget.
1995 $164 $281   2.1%  
1996 $107 $251   1.3% Welfare reform.
1997 $22 $188   0.3%  
1998 ($69) $113  (0.8%) LTCM crisis.
1999 ($126) $130  (1.3%) Glass-Steagall repealed.
2000 ($236) $18  (2.3%) Surplus.
2001 ($128) $133  (1.2%) 9/11 attacks. EGTRRA.

When a tax cut is not?

When a tax cut is not?

In order to have a perspective on this you need to view our country like you would your family. Admittedly the country is a quite large “family”. You are wanting to have more disposable income available but you can’t figure out where you can cut back on your current expenses. You hope that your income will increase over time, but you really do not have any guarantees. You decide to borrow money to fund this desire and you count it as extra disposable “income”. Is it really? Remember that you will eventually be required to pay back loan and to make matters worse you will have to pay interest on this “income”. You also decide that since you are the primary earner in your family that most of this extra income should be at your disposal and you will only share a small portion of this windfall with your remaining family members.        This is exactly how the tax reduction measure of 2017 worked for our larger family.  We decided to reduce our taxes by approximately $140 Billion a year, but we did not address reducing any of our expenses. The theory was that this money would be used by investors and consumers in a way that would boost the economy and offset this “loan” through new taxes on “incremental” income (resulting from a vibrant economy).  Initially it appeared that this theory might hold water (it did not when President Reagan made a similar effort). The GDP rate picked up during 2018 and actually reached 4% during one quarter. However, that appears to have been a very short-term reaction and 2018 should end up at 3%. This is a very good rate and at the top end of what most economists believe is sustainable. The 2 – 3% range is considered “healthy”. Higher rates have not been sustainable without fueling higher rates of inflation. The trick is to maintain a moderate, sustainable (2 – 3%) rate of growth. The projection for 2019 is 2.5% and 2.0% for 2020. While this is good is would be inaccurate to assume that it is the result of the tax rate adjustment.                                                                 “President Trump promised to increase economic growth to 4-5 percent. That’s faster than is healthy. Growth at that pace leads to an overconfident irrational exuberance. That creates a boom that leads to a damaging bust. The factors that cause these changes in the business cycle are supply, demand, capital availability, and the market’s perception of the economic future.” The average rate from 2000 to 2017 has been 2.25%, despite the 2008 disaster which was the result of prior loose banking regulations fueling a glut of unreasonable loans.            One other noteworthy item regarding the tax cut is the distribution of the approximate $140 billon of annual savings (actually borrowings). Who got the money? Middle & lower class tax payers (incomes under the $183,000) only received 1/3 of the total with the remainder going to the wealthy. Like my small family example, the wealthy have received the same benefit as my head of household! 010

Internet provider options (landline options, cellular, cable & satellite and relative costs)

Internet provider options (landline options, cellular, cable & satellite and relative costs) Typical minimal speed Land Line Internet (3 MPS) runs in the $35 – $40 per month range. We have already discussed the costs for cellular data, which also includes phone & text. Most new cell phones also include a mobile hotspot which functions in the same way as a Wi-Fi unit. Some companies will charge an extra $5 – $10 per month to activate it, but it can be a good deal if you want to completely stay away from land line use. There are also android apps that allow you to bypass the monthly charge for a onetime fee (usually only a small fee.) If you plan to go this route for all of your Internet use you will want to use the type of service plan that allows for unlimited highest speed access. One other less publicized method of by passing the “hot spot” charge is to use the Bluetooth functions on your smart phone and laptop to “pair” the devices.

–         Broadband speeds, how much do you need? If you are a casual user I would recommend staying with the low-end service (3-5 MPS). This actually works ok for most streaming (Netflix, Premium, Hulu, etc.). My recommendation is to always start with the basic service as you can always upgrade later if you feel the need.

End 12/01