Tax Cuts Must be Permanent

                  

Business psychology is not a political liberal’s strong suit. From time to time the Administration, for example, has offered tax cuts but only as temporary measures.

                       

Such temporary, half-hearted tax reductions have little

effect because business people plan for years ahead. Temporary cuts are not only meaningless, they are a trap.

                       

For instance, a cut in payroll taxes for a short time is another version of failed Keynesian economics. It adds some money to the economy for a time and sounds good because it appears it will add to consumer spending. But experience shows it has no business multiplier effect for producing jobs. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

College Earnings Advantages?

                  

Education marketers compare apples and oranges when making earnings comparisons about the financial advantage of attending formal college. That skews career choices of too many kids.

                       

Numbers thrown out by college administration snake oil salesmen, are usually off-the-mark. They often include janitor jobs, in comparison with high tech. Their figures are prejudiced with regard to higher-paying, non-college trades, such as electricians, plumbers, or computer techies.

                       

You are successful because of your skills and enterprise, not a framed piece of paper from a college. Get a marketable ability, whether it comes from a college or a technical school. Many technical school graduates earn far more than college grads. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Franchisers” Financing

                  

I am not an advocate of most franchising, both for a franchiser, and someone seeking to buy a franchise.

                       

My comments today are from the perspective of someone selling a franchise. But it ought to be understood by both franchiser and franchisee.

                       

The franchisee usually finds it difficult to get financing these days, so any help from a franchiser is welcome. But, I find it dangerous for a franchiser to offer financing to a franchisee unless there is firm collateral. Despite the rosy marketing and promotional material. A franchise is, after all, small business, and that entails risk.

                       

The only type of financing that makes sense is backed by account receivables. It actually ties the franchisee more closely to the franchiser. Construction, real estate and general financing does nothing that applies similarly. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Problems of State and City Pensions

                   

State and city pension problems are severe enough to affect ratings of government by credit agencies. The lower the ratings, the higher the cost of running state and local entities.

                       

We know that state and local pensions are underfunded. That is, there are not enough earnings to warrant the amount of pensions and benefits promised.

                       

You cannot assume you will earn 8% or more on pension investments when you can safely get only 3% or 4% from those investments. So politicians will have to learn to promise less and even reduce pensions or invite bankruptcy. The latter will perform the necessary reduction whether the pensioners like it or not, so why not have everyone come to a voluntary decision to get pension matters settled? (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Meaningless Bank Regulations

                    

Further to my previous comments about U.S. government regulation of banks with the Dodd-Frank Act, I have an observation that differs a good deal from much of media comments. (I speak as a former senior bank analyst for a major Wall Street firm.)

                       

The banks have added substantially to capital in recent years, as advised by domestic and international banking regulators. All those strengthening actions will mean nothing if banks are forced to mark their assets to the market on a daily basis, as was the case during the 2008-09 financial debacle. You cannot price illiquid assets during a financial meltdown. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Environmentalist Meddling

                   

Americans in the past created farmland out of forests, swamp and deserts.They produced the world's most widespread and inexpensive agriculture. They also built dams and canals when needed.

                       

Today, the population is growing by natural and immigration means. Yet many hundreds of thousands of acres of productive land is pushed out of use. At the same time we have chronic water shortages, particularly west of the Mississippi River.

                       

We are also taking too much productive farmland away from food supplies. As well as making food more expensive.

                       

Professional environmentalists stop irrigation wherever they can. Too often it’s to save threatened species of fish

and other organisms they view on the same level with human needs. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Independent Federal Reserve and Treasury Policies?

                   

The role of the Federal Reserve has to do with monetary policy of the U.S. Treasury should be fiscal policy. Both are supposed to be independent of each other. However, they work hand-in-glove these days by political design.

                       

Both are making basic errors to suit questionable short-term goals that have long-term danger.

                       

One mostly hidden error both are guilty of, has to do with keeping reported governmental deficits artificially lower by stealth. In other

words, the deficit picture is actually worse than is being shown. The Fed, by selling short-term bonds to hold longer-term bonds. The Treasury, by offering too large a percentage of short-term bonds to finance its outlays, when the longer-terms are now so artificially cheap.

                       

In the future, Treasury costs to manage the deficit will therefore have to be far greater and the present deficit cost will prove even more

humongous. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Poor Bank Regulation

                                       

Amidst all the fanfare about bank regulation by government, there is an assumption being made by the unknowing public that the supposed overseers know what to look for. That the regulators are fully qualified to do their work.

                       

That’s an easy assumption to make with all the noise from government that’s echoed by the media.

                       

As just one example. Government regulators haven’t the foggiest idea of how much volume there exists in the so-called “repos” market which they have erroneously insisted was one of the major causes of the 2008-09 financial meltdown. It might be $10 trillion, or more. It cannot be measured, or the types of participation involved determined; so it certainly cannot be controlled. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Unnecessary Federal Agencies?

                      

Do we need an Energy or Education Departments, when their functions are state and local matters?

Do we need commerce subsidies for sugar farmers and ethanol production? All are just ruses for more, larger government. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter)

Save Taxpayer Dollars With Less Inept Regulation

                   

Over-regulation of the U.S. economy is estimated to cost at least $2 trillion in extra costs that taxpayers will pay in one form or another. These costs come in varying disguises: Wind power, solar panels. battery operated cars. All of which are worthy goals, but not yet commercially feasible.

                       

They belong in research labs where they can be studied more deeply before being made commercial, and not subsidized by taxpayers as they are today. Any product that is commercially viable will be brought to market by an entrepreneur seeking profit. Only Big Government believes in the principle of losing money with taxpayer assistance.   (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)   

Bank Strength Indication

                  

I mentioned in a previous blog the Dodd-Frank Act of 2010, which was supposed to make banks stronger, among its other panacea provisions, and banking credit-rating downgrades.

                       

There is yet another way to measure the fact that big banks are not deemed as secure by investors as they were before the Dodd-Frank Act. Look at the cost of insuring bank debt.

                                           

The cost of insuring $10 million of debt for five years is an excellent indicator that’s available with regard to the credit standing of major banks. And it’s been high, at least as an investors’ perception of that

risk. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)  

Bank Credit Amidst Politics

                                 

Many smaller banks have relatively few sound loans on their books. They are under constant pressure to clean up their financials and/or add to basic capital.

                       

Unfortunately, politicians in their area usually put pressure on bank examiners to allow these banks with questionable standing to make loans which ordinarily should not be made.

                       

Unfortunately, banks are not making sufficient loans to small business even if they have the ability to do so, The truth is, they make more money these days by borrowing cheaply from the Federal Reserve and investing in government bonds.

                       

This unhealthy environment is perfect for the likes of meddling politicians in Washington.

                       

Solution? Supervise banks gingerly but independently of politics. Permit banks to make riskier small business loans and restrict their tendency to borrow cheaply from the Fed, in order to invest in

government bonds. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

Unsure Bank Regulators

                    

The public has no idea how unsure regulators are about the rules they lay down for the banks they regulate. No one has a standard that makes common sense to all concerned.

                       

What securities, for example, should make up a bank’s net assets? Are a government’s bonds really safe if that government is on the verge of bankruptcy? What should measure a bank’s liquidity during a financial emergency?

                       

My argument with bank regulators: Allowing mark-to-market accounting during the 2008-09 financial meltdown, when daily bank net worth was marked down simply because there was no real market to determine those bank asset values. Securities market short-sellers were therefore able to take advantage of the unreal lower values that resulted. (See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)

The Volcker Rule

                 

Regulators in Washington have little idea of what they do. They are often wrong. And they are not penalized for their errors.

                       

Under the so-called Volcker Rule, banks are not supposed to trade

with their own money. That sounds good to politicians because it appears simplistic enough to sell to voters who haven’t a clue about banking.

                       

But funds are intermingled and the extent of supervision depends on size. There are simply too many “ifs” in the picture. Political influence

thus often rears its ugly head.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)