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Global Economy Bursting?

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Census shows over 200,000 small businesses closed between 2008 and 2010, loss of over 3 Million job.

http://www.breitbart.com/Big-Government/2012/07/26/Census-shows-200000-small-businesses-shut-down

Q2 GDP came in at 1.5% which translates into very little job creation. Next Friday is the day the employment report for June will be released.

There are consequences to having negative real interest rates. Yet that is not creating the increased demand for borrowed money. That's because banks won't lend to small businesses; small businesses had used their credit cards and homes to tap for needed money. But with falling sales and their homes under water, credit has been cut off. Growth and job creation has been cut.

Savers are punished while speculators and debtors are rewarded.
 
Retirement means having to work in current economy

http://www.mybudget360.com/retireme...retirement-survey-higher-yield-pension-plans/

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“This is a rather dramatic shift in events over the last 30 years. In 1983 62 percent of working Americans had some sort of defined benefit plan. In 2004 it was down to 20 percent and today it is lower. Americans have been forced to play the stock market game through their 401ks. This has actually turned out worse for average Americans as they try to compete with high frequency swindlers and investment banking crooks. Clearly someone is making profits as investment bankers pull down million dollar bonuses all the while the stock market has gone into reverse over a decade.”
 
Savers are punished while speculators and debtors are rewarded
exactly which leads to two potential outcomes

A - the retirees will have to become savvy speculators in the equities markets (i.e.- a high percent lose even more than sticking with cash making zero return)
B - Retirees act as road blocks to younger people either getting better jobs or getting promotions. Think of the 70 year olds that are still middle managers...there are a lot of them.
 
World's Biggest Pension Fund Sells Japan Bonds to Cover Payouts

http://www.bloomberg.com/news/2012-...pension-fund-sells-jgbs-to-cover-payouts.html

Japan’s public pension fund, the world’s largest, said it has been selling domestic government bonds as the number of people eligible for retirement payments increases.

“Payouts are getting bigger than insurance revenue, so we need to sell Japanese government bonds to raise cash,” said Takahiro Mitani, president of the Government Pension Investment Fund, which oversees 113.6 trillion yen ($1.45 trillion). “To boost returns, we may have to consider investing in new assets beyond conventional ones,” he said in an interview in Tokyo yesterday.

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The demand for higher returns is what helped propel the CDO securities (non-conventional) in the housing run-up because the federal reserve kept interest rates too low for an extended period of time.

As pension funds the world over have the same problem with an aging population, the need for higher yield wil become destabilizing once again.
 
Indiana company scraps plans for expansion over ObamaCare device tax

http://www.foxnews.com/politics/201...lans-for-expansion-over-obamacare-device-tax/

An Indiana-based medical equipment manufacturer says it's scrapping plans to open five new plants in the coming years because of a looming tax tied to President Obama's health care overhaul law.

Cook Medical claims the tax on medical devices, set to take effect next year, will cost the company roughly $20 million a year, cutting into money that would otherwise go toward expanding into new facilities over the next five years.

"This is the equivalent of about a plant a year that we're not going to be able to build," a company spokesman told FoxNews.com.

He said the original plan was to build factories in "hard-pressed" Midwestern communities, each employing up to 300 people. But those factories cost roughly the same amount as the projected cost of the new tax.

"In reality, we're not looking at the U.S. to build factories anymore as long as this tax is in place. We can't, to be competitive," he said.

The Affordable Care Act imposed a 2.3 percent tax on medical devices beginning in 2013. It is projected raise nearly $30 billion over the next decade.

But the Cook Medical spokesman said the impact is greater than just a 2.3 percent uptick in taxes. He said the impact on actual earnings is another 15 percent, and he projected the company's total tax burden next year will rise to over 50 percent.

"The tax will not cause manufacturers to shift production overseas. The tax applies equally to imported and domestically produced devices, and devices produced in the United States for export are tax-exempt," the study said.
 
Is California the welfare capital?

http://www.utsandiego.com/news/2012/jul/28/welfare-capital-of-the-us/

When Gov. Jerry Brown and the Legislature overhauled the state’s welfare program last month, some people learned a jarring fact for the first time: California has one-third of the nation’s welfare recipients.

That California has a lot of people on welfare was not a secret. In addition to its size, the state has a long history of heavy focus on social services, in part because of years of Democratic dominance in Sacramento.

But the size of California’s welfare rolls is disproportionate when you consider the state has only 12 percent of the nation’s population. Some of it has to do with the benefits being more generous than in many other states, but experts also point to various economic and social factors.

There’s more to support the notion that this is the welfare state.

California:

• Pays out one of the highest maximum monthly cash grants to the average family on welfare, $638.

• Continues aid for children even when the parents lose eligibility.

• Provides benefits even to some who find a job and helps with child care and transportation while attending school or training.

On the flip side, California is not the land of endless “Cadillac” benefits:

• The actual average cash grant for the typical family of three is $463.

• Welfare payments have been cut twice since 2009 while 18 states have provided nominal increases.

• The high cost of housing eats up more of the aid than in other states with smaller grants.

The figures for the states do not include other support, such as food stamps, known as CalFresh in California, or Medicaid, known as Medi-Cal in California.

The amount California spends and the level of its benefits have been central to the long-running debate over why so many people here are on welfare.

It’s notable that California proportionately spends more on direct cash aid than noncash assistance than most other states. Nationally, 31 percent of benefits are direct cash while 69 percent are noncash services. California is somewhat the reverse: 56 percent cash, 44 percent noncash. Noncash aid includes such programs as child care, job training and transportation.

California, with Democrats in the legislative majority, held fast in shielding recipients from deep cuts for years. But lawmakers reluctantly started to turn to welfare for savings as the state began to sink deeper into the Great Recession and its deficits forced economies in spending on schools, parks and public safety.

California’s family of three in 2008-09 could draw as much as $723 a month in direct cash aid. Today, that same family gets a maximum of $638.

Take Texas for example. For every 100 families below the poverty line there, only six receive assistance, she said. In California, 66 of those below the poverty line are helped.

“I don’t call that ‘Texas doing better than California.’ In Texas there are still 94 poor families who need assistance,” Schott said.

Overall, when state and federal commitments are combined, California’s $6.67 billion is far and away the most spent by any state.

No other state breaks the $2 billion mark and only six others top $1 billion.
 
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Take Texas for example. For every 100 families below the poverty line there, only six receive assistance, she said. In California, 66 of those below the poverty line are helped.

“I don’t call that ‘Texas doing better than California.’ In Texas there are still 94 poor families who need assistance,” Schott said.

Overall, when state and federal commitments are combined, California’s $6.67 billion is far and away the most spent by any state.

No other state breaks the $2 billion mark and only six others top $1 billion.
That $6.67 billion versus $2 billion looks huge until you look at the underlying numbers such as cost of living in California versus other states. For instance spending $6.67 billion in Los Angeles would be equivalent to spending just over $4 billion in Huston when the cost of living is factored into the equation. In other words LA has to spend $1.67 to match the effect of spending $1.00 in Huston due to the high cost of living there.

Then there is the population to consider. What about the spending per person. California has over 5 million people below the poverty line which is more than the entire population of 28 of the states. In the California/Texas comparison adjusting for cost of living and population would mean Texas would have to spend $3.4 billion to match California on per person spending on people below the poverty line.

Of course that is using the same number for the poverty line in both California and Texas. If the poverty line in California is adjusted upward for the cost of living as compared to Texas the population below the poverty line in California more than doubles. A family of four in Los Angeles needs to have an income of about $38,500 to match the standard of living of a family of four in Huston with an income at the poverty line of $23,050.

Note that while the cost of living in Huston is 40% less than Los Angeles, the wages paid are only 8.9% less. Why in the world are so many people still living in California? :shrug:
 
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