Global Economy Bursting?

[Restrain]

Long-term rates are already at a historical low. And this is supposed to help us? Buying our own debt with printed money which will inflate the money supply, resulting in more inflation that the government will then ignore through its policies of "no inflation".

These people are flat out of touch with reality.

 

[Randolph Kinney]

Listening to CNBC this morning with Crammer interviewing Treasury secretary Geithner, there was a point made called "de-risking". De-risking is a term that was used to describe the selling of a type of security that carries risk in favor of securities that are less risky. The pileup of cash at zero return but least risky is the consequence of low interest rates, market volatility and lack of confidence in government policies. That is the problem. The plan going forward is to making holding cash a bad investment.

I can see where the continued quantitative easing will cause more cash to pile up since there will be little incentive to buy longer term debt at even lower interest rates.

If banks start to charge for holding cash accounts and money market funds can't pay the managers because there is not enough return, then people will pay down debt, extinguishing both cash and debt or de-levering. Borrowing for individuals at reduced rates may not be the incentive it once was. The consequence will be that banks will be holding largely defaulted debt as the performing debt is paid off, lowering their returns. That aggravates the bank's earnings potential and produces a solvency crisis anew.

So on the one hand, the government wants to force a refinancing of all mortgages so that consumers will have more money to spend. On the other hand, the government wants even lower long term interest rates so that consumers will buy houses, cars, boats, RVs, etc. Then there is tax policy that is part of the Obama Jobs program eliminating mortgage interest deduction and increasing tax rates on the "wealthy" that makes buying a house less appealing and more risky if you have to sell.

The best strategy for income is to file for Social Security as soon as you can. Any retirement savings cannot produce enough income to live on with these policies.

 

[EDWARD BERRY]

The Day Banks Start Doing This I Will Cash Out And Put It In Steel Fence Posts.
They Go Up Every Year, Will Not Rot Or Burn.

I Use Harp's Mo At 49 Cents. Hope The Usp Stays In Business.

Safe Storage Is Slight Problem.

 

[coolhandluke]

Then there is tax policy that is part of the Obama Jobs program eliminating mortgage interest deduction and increasing tax rates on the "wealthy" that makes buying a house less appealing and more risky if you have to sell.

The best strategy for income is to file for Social Security as soon as you can. Any retirement savings cannot produce enough income to live on with these policies.

RK-the tax policy you refer to as part of proposed tax reform would eliminate the mortgage interest deduction on second (3rd,4th,5th etc) homes and on primary residences with mortgages over $500,000.
This will hurt RE speculators who drove values through the roof with financing from greedy lenders during the bubble, and will also affect the
"wealthy" whose home has a large mortgage.
The average homeowner will not be so affected as the average mortgage is much lower than $500k; as noted here,
"The average mortgage balance, then, is just short of $172,000 (and, evidently 10% of the population have mortgages outstanding of over $250,000)."

There will be an affect in markets where the median home value is high, but typically in these geographic areas so are median incomes.

The average monthly pay out to a retired worker from SSI is $1,171.60. I don't think the "wealthy" will be in a big rush to retire and kick back on that pittance.

 

[Randolph Kinney]

RK-the tax policy you refer to as part of proposed tax reform would eliminate the mortgage interest deduction on second (3rd,4th,5th etc) homes and on primary residences with mortgages over $500,000.
This will hurt RE speculators who drove values through the roof with financing from greedy lenders during the bubble, and will also affect the
"wealthy" whose home has a large mortgage.
The average homeowner will not be so affected as the average mortgage is much lower than $500k; as noted here,
"The average mortgage balance, then, is just short of $172,000 (and, evidently 10% of the population have mortgages outstanding of over $250,000)."

There will be an affect in markets where the median home value is high, but typically in these geographic areas so are median incomes.

The average monthly pay out to a retired worker from SSI is $1,171.60. I don't think the "wealthy" will be in a big rush to retire and kick back on that pittance.

Once the mortgage interest deduction is successfully limited, it will be a no brainer to come back again for more revenues.

According to a published source on the current tax code for mortgage interest deduction:

The mortgage interest deduction reduces revenue to the Treasury by more than $100 billion a year or an estimated $1.5 trillion over the next decade. According to the nonpartisan Tax Policy Center, 70 percent of the benefits of the deduction go to households with incomes over $104,000 per year. The tax break is the same in places where housing costs and the cost of living are high or low. It is limited to interest on mortgage debt up to $1 million, but the subsidy, for that's what it is, applies to debt on vacation homes, and to home-equity loans, including those to finance a vehicle, a swimming pool or, if minimal requirements are met, a motor home or yacht.

The credit actually encourages people to buy bigger and bigger, energy-consuming homes.

So, what would be the impact of on home purchases and home values by limited the mortgage interest deduction?

The wealthy can retire; that is to say, their income (Warren Buffet) can be shifted at any time to whatever source makes economic sense and not collect on Medicare and Social Security.

The issue becomes on that income tier below $1 million. Why have a mortgage if the economics don't favor one? If you are going to be in the top income bracket and limited on your deductions, why pay 4% interest on a mortgage where the taxes paid on dividend, interest and ordinary income is taxed to the full? The wealthy don't mine paying all cash; 1/3 of home purchases here in California are all cash anyway.

Using that statistic that 30% of the mortgage interest deduction is utilized on incomes of under $104,000 a year, maybe a 4% mortgage makes economic sense. But who is going to buy a home today? Investors buy them who are typically renting the properties out at a 12% cash on cash return with or with a mortgage. Investors get to deduct all expenses associated with a rental home, including the mortgage interest and are not limited if they actively manage the rental.

According to another source on MID (mortgage interest deduction):

Almost two-thirds of those who claim the MID are middle-income earners, and 91 percent of people who claim the MID earn less than $200,000 per year.

So depending on how you look at that data on who gets the MID, some areas of the country are adversely affected, like California. The new limits on GSE & FHA mortgages goes into affect Oct. 1: $625,000 max mortgage amount. There are neighborhoods that are more than $625,000 value, today. After Oct. 1, those values on some properties will fall to the max loan amount and maybe under after further limiting MID.

The best advice is to sell now (California), move to a low cost state and retire.

 

[coolhandluke]

From those to whom much is given

Once the mortgage interest deduction is successfully limited, it will be a no brainer to come back again for more revenues.

According to a published source on the current tax code for mortgage interest deduction:

The mortgage interest deduction reduces revenue to the Treasury by more than $100 billion a year or an estimated $1.5 trillion over the next decade. According to the nonpartisan Tax Policy Center, 70 percent of the benefits of the deduction go to households with incomes over $104,000 per year. The tax break is the same in places where housing costs and the cost of living are high or low. It is limited to interest on mortgage debt up to $1 million, but the subsidy, for that's what it is, applies to debt on vacation homes, and to home-equity loans, including those to finance a vehicle, a swimming pool or, if minimal requirements are met, a motor home or yacht.

The credit actually encourages people to buy bigger and bigger, energy-consuming homes.

So, what would be the impact of on home purchases and home values by limited the mortgage interest deduction?

The wealthy can retire; that is to say, their income (Warren Buffet) can be shifted at any time to whatever source makes economic sense and not collect on Medicare and Social Security.

The issue becomes on that income tier below $1 million. Why have a mortgage if the economics don't favor one? If you are going to be in the top income bracket and limited on your deductions, why pay 4% interest on a mortgage where the taxes paid on dividend, interest and ordinary income is taxed to the full? The wealthy don't mine paying all cash; 1/3 of home purchases here in California are all cash anyway.

Using that statistic that 30% of the mortgage interest deduction is utilized on incomes of under $104,000 a year, maybe a 4% mortgage makes economic sense. But who is going to buy a home today? Investors buy them who are typically renting the properties out at a 12% cash on cash return with or with a mortgage. Investors get to deduct all expenses associated with a rental home, including the mortgage interest and are not limited if they actively manage the rental.

According to another source on MID (mortgage interest deduction):

Almost two-thirds of those who claim the MID are middle-income earners, and 91 percent of people who claim the MID earn less than $200,000 per year.

So depending on how you look at that data on who gets the MID, some areas of the country are adversely affected, like California. The new limits on GSE & FHA mortgages goes into affect Oct. 1: $625,000 max mortgage amount. There are neighborhoods that are more than $625,000 value, today. After Oct. 1, those values on some properties will fall to the max loan amount and maybe under after further limiting MID.

The best advice is to sell now (California), move to a low cost state and retire.

RK-I think we agree on this issue. I believe that the MID is a subsidy for avarice. The Obama proposition to limit it has been mis-categorized as a 'tax increase' by his political foes.

The tax code favors those with higher incomes and who have the resources to employ lawyers and accountants to limit or defer their tax liability.

As per;
http://www.moneychimp.com/features/tax_brackets.htm

Federal Tax Brackets
Your tax bracket is the rate you pay on the "last dollar" you earn; but as a percentage of your income, your tax rate is generally less than that. First, here are the tax rates and the income ranges where they apply:

Tax Year: 2011
Filing Status: Single
If your taxable income is between...
0 and $8,500 your tax bracket is: 10%
$8,500 and $34,500 your tax bracket is: 15%
$34,500 and $83,600 your tax bracket is: 25%
$83,600 and $174,400 your tax bracket is: 28%
$174,400 and $379,150 your tax bracket is: 33%
$379,150 and over your tax bracket is: 36%

To take an example, suppose your taxable income (after deductions and exemptions) was exactly $100,000 in 2008 and your status was Married filing separately; then your tax would be calculated like this:

( $ 8,025 minus 0 ) x .10 : $ 802.50
( 32,550 minus 8,025 ) x .15 : 3,678.75
( 65,725 minus 32,550 ) x .25 : 8,293.75
( 100,000 minus 65,725 ) x .28 : 9,597.00
Total: $ 22,372.00
This puts you in the 28% tax bracket, since that's the highest rate applied to any of your income; but as a percentage of the whole $100,000, your tax is about 22.37%.

Many here would unfailingly ask; 'How much more do you want (them,us,me) to pay? My answer would always be; your fair share.

 

[Big ole Boy]

Derisking fairness

One aspect of derisking .. is to increase police power over the masses .......

........ George Orwell in his book "1984" ... excemplify's the derisking of humanity by dumbing it down ....... and taking control over it ........

....................

... how do we derisk fairness?

..... certainly ........ only by taking the individual out of the equation by what ever means possible ...

.... and putting in its place ............... the Supreme All Knowing Tyranny of Truth and Justice .............

..................................... A RED STAR ...................................

 

[coolhandluke]

One aspect of derisking .. is to increase police power over the masses .......

........ George Orwell in his book "1984" ... excemplify's the derisking of humanity by dumbing it down ....... and taking control over it ........

....................

... how do we derisk fairness?

..... certainly ........ only by taking the individual out of the equation by what ever means possible ...

.... and putting in its place ............... the Supreme All Knowing Tyranny of Truth and Justice .............

..................................... A RED STAR ...................................

DRS-You sound like Ayn Rand, typing with her nose on an old Underwood with no punctuation keys except.........................................................

Meant to be an insult, but I know you'll take it as a compliment.
Cheers!

 

[Couch Potato]

Once the mortgage interest deduction is successfully limited, it will be a no brainer to come back again for more revenues.

According to a published source on the current tax code for mortgage interest deduction:

The mortgage interest deduction reduces revenue to the Treasury by more than $100 billion a year or an estimated $1.5 trillion over the next decade. According to the nonpartisan Tax Policy Center, 70 percent of the benefits of the deduction go to households with incomes over $104,000 per year. The tax break is the same in places where housing costs and the cost of living are high or low. It is limited to interest on mortgage debt up to $1 million, but the subsidy, for that's what it is, applies to debt on vacation homes, and to home-equity loans, including those to finance a vehicle, a swimming pool or, if minimal requirements are met, a motor home or yacht.

The credit actually encourages people to buy bigger and bigger, energy-consuming homes.

So, what would be the impact of on home purchases and home values by limited the mortgage interest deduction?

The wealthy can retire; that is to say, their income (Warren Buffet) can be shifted at any time to whatever source makes economic sense and not collect on Medicare and Social Security.

The issue becomes on that income tier below $1 million. Why have a mortgage if the economics don't favor one? If you are going to be in the top income bracket and limited on your deductions, why pay 4% interest on a mortgage where the taxes paid on dividend, interest and ordinary income is taxed to the full? The wealthy don't mine paying all cash; 1/3 of home purchases here in California are all cash anyway.

Using that statistic that 30% of the mortgage interest deduction is utilized on incomes of under $104,000 a year, maybe a 4% mortgage makes economic sense. But who is going to buy a home today? Investors buy them who are typically renting the properties out at a 12% cash on cash return with or with a mortgage. Investors get to deduct all expenses associated with a rental home, including the mortgage interest and are not limited if they actively manage the rental.

According to another source on MID (mortgage interest deduction):

Almost two-thirds of those who claim the MID are middle-income earners, and 91 percent of people who claim the MID earn less than $200,000 per year.

So depending on how you look at that data on who gets the MID, some areas of the country are adversely affected, like California. The new limits on GSE & FHA mortgages goes into affect Oct. 1: $625,000 max mortgage amount. There are neighborhoods that are more than $625,000 value, today. After Oct. 1, those values on some properties will fall to the max loan amount and maybe under after further limiting MID.

The best advice is to sell now (California), move to a low cost state and retire.

You can't just look at the amount of the MID claimed to evaluate it's "cost" in lost tax revenue nor can you look at the amount of the deduction claimed to see it's benefit to individuals. The cost/benefit is limited by the difference between the total deductions on Schedule A and the standard deduction that would otherwise be used. If a married couple filing jointly bought a house for $360,000 with a 4% loan and had nothing to put on Schedule A but the MID, they would be better off not using Schedule A and taking the standard deduction.

Another way to look at it is a person buying a $245,000 home (the median price in the northeast where the highest prices are) financing 100% of the value at 4% with an additional $1,800 in deductions gets zero benefit from taking the MID. The property tax deduction will likely fill that $1,800 gap and provide some MID benefit, but now where near the maximum potential benefit which is less than $3,300 for someone with enough income at the highest marginal rate.

With rates this low only high income people with high priced houses benefit significantly from the MID.

 

[Randolph Kinney]

RK-I think we agree on this issue. I believe that the MID is a subsidy for avarice. The Obama proposition to limit it has been mis-categorized as a 'tax increase' by his political foes.

The tax code favors those with higher incomes and who have the resources to employ lawyers and accountants to limit or defer their tax liability.

As per;
http://www.moneychimp.com/features/tax_brackets.htm

Federal Tax Brackets
Your tax bracket is the rate you pay on the "last dollar" you earn; but as a percentage of your income, your tax rate is generally less than that. First, here are the tax rates and the income ranges where they apply:

Tax Year: 2011
Filing Status: Single
If your taxable income is between...
0 and $8,500 your tax bracket is: 10%
$8,500 and $34,500 your tax bracket is: 15%
$34,500 and $83,600 your tax bracket is: 25%
$83,600 and $174,400 your tax bracket is: 28%
$174,400 and $379,150 your tax bracket is: 33%
$379,150 and over your tax bracket is: 36%

To take an example, suppose your taxable income (after deductions and exemptions) was exactly $100,000 in 2008 and your status was Married filing separately; then your tax would be calculated like this:

( $ 8,025 minus 0 ) x .10 : $ 802.50
( 32,550 minus 8,025 ) x .15 : 3,678.75
( 65,725 minus 32,550 ) x .25 : 8,293.75
( 100,000 minus 65,725 ) x .28 : 9,597.00
Total: $ 22,372.00
This puts you in the 28% tax bracket, since that's the highest rate applied to any of your income; but as a percentage of the whole $100,000, your tax is about 22.37%.

Many here would unfailingly ask; 'How much more do you want (them,us,me) to pay? My answer would always be; your fair share.

You forgot to mention the Earned Income Tax Credit or the EITC which is a refundable federal income tax credit for low to moderate income working individuals and families and a federal tax credit of up to 35% percent of the cost of day care. If the daycare provider is your son or daughter, he or she must not be your dependent and must be age 19 or older by the end of the year (relatives are not limited). This is how 49% of the taxable population has no federal tax liability (pay no income tax to the federal government).

I believe everyone should pay income tax. Even Social Security benefits are taxable by the federal government.

All those deductions and credits should be done away with. Lets see how much demand their is solar photo voltaic systems for homes.

The point I am making, the value of owning a home is proportional to your income, deductions and GSE - FHA - VA loan limits. If you get rid of the property tax deduction, the mortgage interest deduction, personal property tax deduction (ad valorem), charitable contribution deduction, and medical deductions, you may see the real value of your home. Every dollar of non-home related deduction and credits brings you closer to the zero backet so that home related deductions are dollar for dollar deduction against adjusted gross income.

The ideal case is to match your deductions and credits against AGI (adjusted gross income) to yield zero tax liability. This is how so many people don't pay federal income taxes.

If everyone had to pay, no deductions and no credits, the first thing that would go are the children. You need to feed, cloth, house, educate and provide medical services to those rugrats and future gang members.