Clippings 2012

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ghariton
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Re: Clippings 2011

Post by ghariton » 29 Dec 2011 23:52

Opacity in the banking system is not a bug, it's a feature:
Finance has always been complex. More precisely it has always been opaque, and complexity is a means of rationalizing opacity in societies that pretend to transparency. Opacity is absolutely essential to modern finance. It is a feature not a bug until we radically change the way we mobilize economic risk-bearing. The core purpose of status quo finance is to coax people into accepting risks that they would not, if fully informed, consent to bear.

Financial systems help us overcome a collective action problem. In a world of investment projects whose costs and risks are perfectly transparent, most individuals would be frightened. Real enterprise is very risky. Further, the probability of success of any one project depends upon the degree to which other projects are simultaneously underway.

<snip>

Like so many good con-men, bankers make themselves believed by persuading each and every investor individually that, although someone might lose if stuff happens, it will be someone else. You’re in on the con. If something goes wrong, each and every investor is assured, there will be a bagholder, but it won’t be you. Bankers assure us of this in a bunch of different ways. First and foremost, they offer an ironclad, moneyback guarantee. You can have your money back any time you want, on demand. At the first hint of a problem, you’ll be able to get out. They tell that to everyone, without blushing at all. Second, they point to all the other people standing in front of you to take the hit if anything goes wrong. It will be the bank shareholders, or it will be the government, or bondholders, the “bank holding company”, the “stabilization fund”, whatever. There are so many deep pockets guaranteeing our bank! There will always be someone out there to take the loss. We’re not sure exactly who, but it will not be you! They tell this to everyone as well. Without blushing.

If the trail of tears were truly clear, if it were as obvious as it is in textbooks who takes what losses, banking systems would simply fail in their core task of attracting risk-averse investment to deploy in risky projects. Almost everyone who invests in a major bank believes themselves to be investing in a safe enterprise. Even the shareholders who are formally first-in-line for a loss view themselves as considerably protected. The government would never let it happen, right? Banks innovate and interconnect, swap and reinsure, guarantee and hedge, precisely so that it is not clear where losses will fall, so that each and every stakeholder of each and every entity can hold an image in their minds of some guarantor or affiliate or patsy who will take a hit before they do.

<snip>

A lamentable side effect of opacity, of course, is that it enables a great deal of theft by those placed at the center of the shell game. But surely that is a small price to pay for civilization itself. No?

<snip>

Financial systems are sugar pills by which we collectively embolden ourselves to bear economic risk. As with any good placebo, we must never understand that it is just a bit of sugar. We must believe the concoction we are taking to be the product of brilliant science, the details of which we could never understand. The financial placebo peddlers make it so.
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Re: Clippings 2011

Post by Bylo Selhi » 30 Dec 2011 08:26

Financial systems are sugar pills by which we collectively embolden ourselves to bear economic risk. As with any good placebo, we must never understand that it is just a bit of sugar. We must believe the concoction we are taking to be the product of brilliant science, the details of which we could never understand. The financial placebo peddlers make it so.
Carrying the analogy further it seems opacity may be over-rated: Placebo effect works even if patients know they're getting a sham drug | Science | guardian.co.uk
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Re: Clippings 2011

Post by CROCKD » 03 Jan 2012 12:16

Considered posting this in the Kindle, Android or Playbook threads but these are really Economics stories.

How Sony gouges consumers in Australia some of whom fight back by setting up US proxy browser redirect, US postal addresses through friends etc.

Sony's $200 Tablet S price gouge

Seems that Sony is fond of playing this regional game. I have a travelogue DVD of Connemara which my cousin who lives in Galway Ireland gave me which will not play on my Sony DVD player - restricted because the DVD is from Europe.

Tracing the history and demise of the HP TouchPad.

HP TouchPad was doomed from the star
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Re: Clippings 2011

Post by Shakespeare » 03 Jan 2012 12:34

I have a travelogue DVD of Connemara which my cousin who lives in Galway Ireland gave me which will not play on my Sony DVD player - restricted because the DVD is from Europe.
That's a DRM issue, not a Sony issue. An inexpensive DVD player like my Philips 3560 can easily be set up region free and will play Region 2 (Europe) and PAL disks.
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Clippings 2012

Post by kcowan » 05 Jan 2012 07:57

Analysts pick top four tech companies
In the 1990s, Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Dell (DELL, Fortune 500) and Cisco (CSCO, Fortune 500) were the so-called "four horsemen of tech" -- the high-profile public technology companies that were sure to return strong growth to investors year after year. For nearly two decades, all four held keys to technology's growth engine: the personal computer. Intel made the processors, Microsoft made the software, Dell made the PCs and Cisco networked them together....

We also polled thousands of our readers.

The results are clear: Apple (AAPL, Fortune 500), Google (GOOG, Fortune 500), Amazon (AMZN, Fortune 500) and IBM (IBM, Fortune 500) are the new four horsemen of tech. Unsurprisingly, all four companies are leaders in mobility or cloud computing...

With 40% of experts' votes, IBM edged out Microsoft (37%) to become the fourth horseman.
For the fun of it...Keith

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Clippings 2012

Post by ghariton » 05 Jan 2012 12:41

The large U.S. banks have all paid back their TARP bailouts. Some small and medium-sized banks still have TARP money outstanding, but the U.S. Treasury is asking them how they intend to pay it back. The stick is that, in a couple of years, they will have to start paying Treasury 9% on any remaining bailout funds:
The letter cited recoveries so far of $258 billion, out of $245 billion it originally awarded through both the CPP and special bailout packages to top money-center banks. Meanwhile, commercial banks that hold on to their investments more than five years after the initial TARP issuances will see their dividend rate increase four percentage points to 9%.
So, as far as the large banks are concerned at least, the U.S. taxpayer is on the hook only for foregone earnings while the money was lent to the banks.

George

Added: Oops. I hadn't noticed Keith's thread. Could a moderator please merge the two? Thank you.

Done
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Re: Clippings 2012

Post by brucecohen » 05 Jan 2012 13:16

ghariton wrote: So, as far as the large banks are concerned at least, the U.S. taxpayer is on the hook only for foregone earnings while the money was lent to the banks.
According to this July report, taxpayers have already made a $10 billion profit on TARP though there's no indication of how much Uncle paid to borrow the money that was loaned to the banks.

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Re: Clippings 2011

Post by parvus » 05 Jan 2012 23:50

ghariton wrote:
Yes, I found the book to be excellent. But then I'm a big fan of Tyler Cowen. (Warning: He's a "squishy" libertarian and teaches at a university full of fellow libertarians.)

The biggest problem with his argument is the role of the Internet. He does discuss it, but too briefly to do it justice, IMHO. The problem is that the Internet's presence does not really show up in GDP, or in personal disposal income. But it brings utility (a technical term), pleasure and satisfaction to millions. Instead of shelling out $100 this evening to go to a hockey game, here I am at my keyboard, exchanging with people. Others are playing video games, either alone or with others online. Yet others are reading free material, browsing, and other things (some unmentionable here, I suspect). None of this gets counted in GDP. None of this gets counted in folks' income. (Well, maybe some broadband charges, but those are tiny in the order of things.) And no jobs are created.

But I for one am getting an enormous amount of satisfaction from the Internet. I'm better off with the Internet than without it and, say, $10,000 a year instead. GDP and PDI woefully underestimate how much better off people like me are. And Tyler Cowen doesn't really come to grips with this.



George
I wouldn't measure the Internet just in terms of utility. It was a new source of jobs, in Schumpterian fashion. I think Tyler underestimates this effect, which was extraordinarily important in late 1990s. People went out and created apps. Many had very useful productivity consequences -- e.g., I can find archived news at my fingertip rather than going through a newspaper morgue; I can erase typos without physically applying white-out; I can get closer to perfect ... erm, well, one can always hope.

Now, however, the effect is waning. Tyler is quite right to suggest that the American kitchen has seen little improvement in the past fifty years, that the appliances, better though they may be, are basically the same as they have always been. Curiously, that's a bit of a demand cycle approach, as if there are no new things for consumers to buy, except as upgrades to what they already have. Hedonic adjustments.

Then again, who knows if supply creates its own demand?
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Re: Clippings 2012

Post by skepticus » 06 Jan 2012 06:51

Uh-oh! "Brain function can start declining as early as 45".

http://www.bbc.co.uk/news/health-16425522

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Re: Clippings 2012

Post by EmperorCoder » 10 Jan 2012 23:07

Flaherty’s tax credits cost Ottawa billions

Am I the only one getting depressed when I read this :
The review of tax records found that nearly 42 per cent of Canada’s 24.9 million tax filers paid no tax at all once credits were claimed. As a result, Canada’s personal tax base in 2008 came from 14.3 million Canadians who sent a combined $107.8-billion to Ottawa.
I can soooo tell that all the dividend tax credits and tax shelters will be abolished before I could really take advantage of them. But just after the boomers did.

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Re: Clippings 2012

Post by AltaRed » 10 Jan 2012 23:48

EmperorCoder wrote:I can soooo tell that all the dividend tax credits and tax shelters will be abolished before I could really take advantage of them. But just after the boomers did.
The dividend tax credit is tied to corporate tax rates, so the lower the corporate income tax rate goes, the lower the dividend tax credit goes, and potentially the higher the dividend yield 'might' be. What would you like that would be different?

The only tax credit I see that is boomer/age/wealth related is the old age credit and I would agree that it should be eliminated.

What stands out is the number of Canadians who pay no tax at all. That would seem to be where some action needs to be taken.
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Re: Clippings 2012

Post by ghariton » 11 Jan 2012 01:35

AltaRed wrote:The dividend tax credit is tied to corporate tax rates, so the lower the corporate income tax rate goes, the lower the dividend tax credit goes.
Yes. This is seldom mentioned by advocates of corporate income tax increases. Those increases should be accompanied by increased dividend tax credits, to respect the integrity of the overall tax system.
What stands out is the number of Canadians who pay no tax at all. That would seem to be where some action needs to be taken.
Look at it on the bright side. 15.5 million Canadians (out of 34.6 million) do pay some tax.

Added. From the Finance Canada report:
The tax system also changes the distribution of income among different groups of taxfilers, in particular to the benefit of women, youth, seniors and members of single-parent families.
So it's middle-aged men who are getting screwed, not young people.

I also found it interesting that the average federal tax rate is minus 22% on average for people with income from $0 to $10,000, and minus 5% for people with average income between $10,000 and $20,000.

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Re: Clippings 2012

Post by newguy » 11 Jan 2012 08:38

AltaRed wrote:The only tax credit I see that is boomer/age/wealth related is the old age credit and I would agree that it should be eliminated.
And pension income credit and income splitting and maybe a deal on drug insurance(just another tax).
What stands out is the number of Canadians who pay no tax at all. That would seem to be where some action needs to be taken.
I think you mean "pay no income tax at all", because they all pay some other kinds of tax.

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Re: Clippings 2012

Post by Bylo Selhi » 11 Jan 2012 08:46

AltaRed wrote:What stands out is the number of Canadians who pay no [income!] tax at all. That would seem to be where some action needs to be taken.
Perhaps this is more of a symptom of how many Canadians live in poverty or near-poverty.

TFA says, "Canada’s personal tax base in 2008 came from 14.3 million Canadians who sent a combined $107.8-billion to Ottawa." As I recall, Ottawa takes in at least twice that much. The other half must therefore come from other types of taxes, e.g. GST, so even those who pay no income tax are hardly getting away without paying any tax.
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Re: Clippings 2012

Post by scomac » 11 Jan 2012 08:58

Bylo Selhi wrote:
AltaRed wrote:What stands out is the number of Canadians who pay no [income!] tax at all. That would seem to be where some action needs to be taken.
Perhaps this is more of a symptom of how many Canadians live in poverty or near-poverty.
Agreed. Probably more of a reflection of economic circumstance than of the proliferation of tax avoidance.

For those who complain about the segments of our society that aren't paying tax, especially those who pay little or no income tax, I would ask you: Do you really want to trade places with those people? Paying tax isn't really such a bad thing; your making money, remember. It's better than the alternative.
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Re: Clippings 2012

Post by newguy » 11 Jan 2012 09:07

Bylo Selhi wrote:As I recall, Ottawa takes in at least twice that much. The other half must therefore come from other types of taxes, e.g. GST, so even those who pay no income tax are hardly getting away without paying any tax.
I also think all the regulations and ownership rules increase costs that are passed on to the consumer. The money then goes to the capital owners or to bureaucrat's salaries. I think of those as taxes.

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Re: Clippings 2012

Post by AltaRed » 11 Jan 2012 09:49

newguy wrote:
AltaRed wrote:The only tax credit I see that is boomer/age/wealth related is the old age credit and I would agree that it should be eliminated.
And pension income credit and income splitting and maybe a deal on drug insurance(just another tax).
What stands out is the number of Canadians who pay no tax at all. That would seem to be where some action needs to be taken.
I think you mean "pay no income tax at all", because they all pay some other kinds of tax.

newguy
Yes, I recognize there are more age related credits. I was responding narrowly and specifically to EC's comment.

And yes, I did mean income taxes. People of all stripes pay a range of other taxes albeit low income earners get a number of credits such as HST/GST credits.

I made the comment about being surprised at how many did not pay income taxes because the tax tables start at almost poverty level income. We do not have that large of a segment in poverty and not many will have arranged their affairs to have almost exclusively dividend and/or cap gains income. There has to be a significant number of people taking big tax write offs or part of the underground cash economy. Do the numbers not strike anyone else as odd?
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Re: Clippings 2012

Post by newguy » 11 Jan 2012 09:54

AltaRed wrote:There has to be a significant number of people taking big tax write offs or part of the underground cash economy. Do the numbers not strike anyone else as odd?
I get it. There are very detailed spreadsheets available. I'll look at it later, but they're for earlier years.

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Re: Clippings 2012

Post by Bylo Selhi » 11 Jan 2012 10:38

AltaRed wrote:There has to be a significant number of people taking big tax write offs or part of the underground cash economy. Do the numbers not strike anyone else as odd?
The claim that 42% of Canadians who file tax returns but pay no income taxes does seem suspect. Could it be that when the G&M says [my bold], "The review of tax records found that nearly 42 per cent of Canada’s 24.9 million tax filers paid no tax at all once credits were claimed" they include the credit that almost everyone claims: income taxes already paid by way of withholding or instalments? I can believe that 42% of tax filers either owe no tax at filing or get a refund.

As for big tax writeoffs and underground economy, I'd imagine that the vast majority of Canadians work in situations where T4 slips are generated and income tax gets withheld at source. That's one reason why so many people get refunds when they file. But CRA keeps a careful watch on contractors and waiters, etc. where income hiding opportunities are greatest and can estimate income where it seems unusually low, e.g. by imputing, say, n% of a waiter's receipts as cash tips.
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Re: Clippings 2012

Post by brucecohen » 11 Jan 2012 12:02

AltaRed wrote:There has to be a significant number of people taking big tax write offs or part of the underground cash economy. Do the numbers not strike anyone else as odd?
I didn't read the article but the cited percentage doesn't strike me as odd. It's a bit below the level for the US. Remember that govt low-income benefits are administered through the tax system. Even if you have $0 income you have to file a tax return.

A retiree on GIS, which is tax-free, plus CPP and a bit of other income would probably not earn enough to owe tax but would have to file a return.

Similarly, parents who read and heed personal finance books have their teenagers filing returns to report income from babysitting and working part-time at McD's. They don't pay tax but file to create RRSP room for future use. More likely, there are probably thousands of university students who don't earn enough to pay tax but still file returns.

Many sole proprietors lose money in their first year or two of business, so they'd be filing without necessarily owing tax.

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Re: Clippings 2012

Post by IdOp » 11 Jan 2012 12:10

For people who receive dividends from common stocks, they own (parts of) companies, which presumably often pay taxes. The dividend investors are then paying tax out of the "other pocket".

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Re: Clippings 2012

Post by Norbert Schlenker » 11 Jan 2012 12:23

Bylo Selhi wrote:TFA says, "Canada’s personal tax base in 2008 came from 14.3 million Canadians who sent a combined $107.8-billion to Ottawa." As I recall, Ottawa takes in at least twice that much. The other half must therefore come from other types of taxes, e.g. GST, so even those who pay no income tax are hardly getting away without paying any tax.
Details can be found at the Finance website, for example the most recent fiscal reference table which shows time series of revenue by category. Roughly in 2008, Ottawa got $110b from personal income tax, $30b from corporate taxes, and $30b from GST. (Plus $60b from many other sources, the biggest single one being $18b in EI premiums.)
Bylo Selhi wrote:The claim that 42% of Canadians who file tax returns but pay no income taxes does seem suspect.
Here too one can check and reproduce the G&M's figures back of the envelope from actual numbers (the link is to 2009). Note the 25.8m total returns, 42% of which would be about 11m. Then look through the lowest income bands, say up to $20k in total income, which adds up to about 10m returns.

Total income received: $94.2 billion
Total federal income tax liability: $0.7billion
Effective tax rate: Under 1%

You can add in the $20-25k category if you like, where there are another 2m returns, i.e. cumulatively past the G&M's 42%.

Total income received: $43.3 billion
Total federal income tax liability: $1.2 billion
Effective tax rate: Under 3%

Let's lump in the $25-30k category too, which is another 1.7m returns and, if added to the previous categories, bumps the cumulative number to over 50% of all tax returns.

Total income received: $45.7 billion
Total federal income tax liability: $2.0 billion
Effective tax rate: Under 5%

If you put all three together, i.e. everyone who files a tax return and declares an income under $30k per year, it's 53% of all tax filers (arguably represents 65%+ of the total population), there's total income of $183 billion, $4 billion in federal income tax, about a 2% income tax rate.

Broad brush, the G&M figures are correct. If anything, they're a little kind.
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Re: Clippings 2012

Post by ghariton » 11 Jan 2012 13:01

Norbert Schlenker wrote:Broad brush, the G&M figures are correct. If anything, they're a little kind.
Boy, I must be on a lot of people's ignore list.

Uphread I gave a link to the specific Department of Canada study that the Globe and Mail is quoting. No calculations needed. Just read the numbers off the page.

For convenience I repeat the link here. Look at the bottom of page 37.

Actually, 42% sounded on the high side to me. Remember that a lot of people file income tax returns solely to obtain credits of various kinds. Thus, 25 million out of a total population of 34.6 million filed. Note that the labour force is only 18.7 million. So 6 million not in the labour force filed. (I note that these are not necessarily the most disadvantaged. For example, it's usually much more pleasant to be a student than a worker.)

Another interesting fact from the Finance report. Of the 15 million paying no tax, or actually getting money back (paying a negative tax), 3.6 million are in the top 40% of incomes. Another 8 million are in the next 40% of income receivers. Only 3.5 million are in the bottom 20% of incomes.

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Re: Clippings 2012

Post by Bylo Selhi » 11 Jan 2012 13:30

ghariton wrote:Boy, I must be on a lot of people's ignore list.
Another possibility:

Bylo's theorem of posting: Let the number of posts between a reply and the post to which it refers be n. Let the probability that the poster read and comprehended the post to which they replied be p.

Theorem: p = 1/(n+1)²

Proof: left as an exercise for the (non)reader

(And yes, I plead guilty as charged.)
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Re: Clippings 2012

Post by Norbert Schlenker » 11 Jan 2012 13:31

ghariton wrote:Thus, 25 million out of a total population of 34.6 million filed. Note that the labour force is only 18.7 million. So 6 million not in the labour force filed. (I note that these are not necessarily the most disadvantaged. For example, it's usually much more pleasant to be a student than a worker.)
Or retired. 5.9 million filers were over the age of 65 in 2009.
scomac wrote:For those who complain about the segments of our society that aren't paying tax, especially those who pay little or no income tax, I would ask you: Do you really want to trade places with those people? Paying tax isn't really such a bad thing; your making money, remember.
A very good point. I should also point out that, if one uses the above cutoff of less than 5% federal income tax as essentially none, other tax preferences such as on capital gains and Canadian dividends, most of which are collected by upper income taxpayers, allow much higher incomes before breaching those sorts of percentages. The taxtips.ca calculator, for example, says the rentier realizing $50k in capital gains and $40k in Canadian dividends pays only about 5% of it in personal federal income tax. That might just stick in the craw of the poor schlub who grosses $20k/year, pays more than 5% of it in income tax, and then ponies up for CPP and EI too.
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