..."Between 2008 and 2012, several of the developed world's most fiscally challenged nations (including the United Kingdom, Ireland and Spain) increased top personal income tax rates by an average of 8%. In the United States, the expiration of the Bush tax cuts pushed the highest federal income tax bracket to 39.6% from 35%.
What the IMF calls "revenue-maximizing top income tax rates" may be a good indication of how much further those rates could rise: As the IMF calculates, the average revenue-maximizing rate for the main Organization of Economic Cooperation and Development countries is around 60%, way above existing levels.
For the U.S., it is 56% to 71%—far more than the current 45% paid in federal, state and local taxes by those in the top tax bracket. The IMF singles out the U.S. as the country where raising top rates toward 70% (where they were before the Reagan tax cuts) would yield the most revenue—around 1.25% of GDP. And with a chilling candor, the IMF admits that its revenue-maximizing approach takes no account of the well-being of top earners (or their businesses).".... read more in The Wall Street Journal
Keywords: Over-indebted Nations, Wealth Taxes
In Scotland, residents will vote next September on whether their homeland should become an independent country or remain part of the United Kingdom. In Catalonia, Spain, provincial president Artur Mas has called for a referendum on whether Catalonia should become a sovereign state. And in the Belgian province of Flanders, the leader of the ruling party has called for negotiations that would “enable both Flanders and French-speaking Wallonia to look after their own affairs.”
Although the economic integration of Western Europe has proceeded at a rapid pace in recent decades, the political borders of the region have remained almost entirely unchanged since the end of World War II. And yet, “there is the real possibility of one or several national divorces being initiated in Western Europe in 2014,” notes Nicholas Siegel, senior program officer at the Transatlantic Academy, a U.S.-European think-tank based in Washington, D.C. read more on Knowledge Wharton
Keywords: Europe, Secession, Scotland, Catalonia, Flanders
Is it time for the Federal Reserve to start its exit from the extraordinary set of policies it has pursued over the past few years? That crucial question is on the minds of the nation’s central bankers, as well as the stock and bond traders who follow the Fed’s every move. read more in the New York Times
Keywords: Monetary Policy, Fed, Exit
US Public Pension Funds would have to achieve "impressive" future returns to close the funding gap. The US is definitely not alone. Other nations' public pension funds would show similar pictures. A 20-year snapshot of BlackRock shows that such returns are hardly achievable in a well diversified portfolio. Only top quartile private equity funds would systematically come close to such returns.
Keywords: US Public Pension Funds, Pension Funds Funding Gap
Charts of the article in The New Yorker come from Emmanuel Saez, of Berkeley, which shows the share of pre-tax income enjoyed by the top one per cent of earners over the period from 1913 to 2012. The data, which comes from the Internal Revenue Service, is for market income: it includes realized capital gains but excludes government transfers. see charts and article in The New Yorker
Keywords: Income Distribution, Wealth Distribution, Gini Coefficient
The euro area may be facing renewed deflationary pressures. Inflation measures are now near multi-year lows and falling. see some interesting charts on CPI, French employment, monetary base etc. on Sober Look
Keywords: Europe, European Crisis, European Recovery
This article reviews the mechanics of the Bitcoin currency and offers some thoughts on its characteristics. read the article on the Chicago Fed homepage
Excerpt from the authors conclusion:
..."Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed. Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable. That said, it represents a remarkable conceptual and technical achievement, which may well be used by existing financial institutions (which could issue their own bitcoins) or even by governments themselves."
Keywords: Bitcoin, Private Currency, Alternative to Money Monopoly of Government
A lot of serious stuff explained in a convincing, funny way. Some explanations could certainly be questioned.
Keywords: Europe, European Crisis, ECB Monetary Policy
Keywords: Wealth, Middle Class, Liberalization
Nobel Laureate Edmund Phelps, author of the book "Mass Flourishing - How Grassroots Innovation Created Jobs, Challenge, and Change"
Keywords: Wealth, Growth, Mass Flourishing
Keywords: Economy, Economic Basics
More realistic CBO assumptions show that it is very difficult to get out of the debt trap:
....A very striking feature of the latest CBO report is how much worse it is than last year's. A year ago, the CBO's extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year's long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year.....
Most CBO scenarios do not show how debt can be reduced:
...Only in three of 13 scenarios?two of which imagine politically highly unlikely spending cuts or tax hikes?does the debt shrink from its current level of 73% of GDP...
Keywords: US Government Shut Down, US Debt
It’s time to gore another collectivist sacred cow. This time it’s the popular idea that the successful are obliged to “give back to the community.” That oft-heard claim assumes that the wealth of high-earners is taken away from “the community.” And beneath that lies the perverted Marxist notion that wealth is accumulated by “exploiting” people, not by creating value–as if Henry Ford was not necessary for Fords to roll off the (non-existent) assembly lines and Steve Jobs was not necessary for iPhones and iPads to spring into existence. read the whole article in Forbes
Keywords: Income, Wealth, Contribution to Society
Six months ago, I wrote that long-term interest rates in the United States would rise, causing bond prices to fall by so much that an investor who owned ten-year Treasury bonds would lose more from the decline in the value of the bond than he would gain from the difference between the bonds’ interest rate and the interest rates on short-term money funds or bank deposits. read more on Project Syndicate
Keywords: Interest Rate, Discount Rate
..."In innovation-based economies (as the Global Entrepreneurship Monitor classifies them), what governments really need to do is to encourage people – entrepreneurs and the equity investors who back them – to take risk and ensure that failure is seen in a positive light, rather than as some kind of stigma.
The message should be: Go out and start a business, based on your best idea. Find a technology with a new application or develop a different way to make customers happy. If it doesn’t work out, you have still developed important skills and made a major contribution to society." Source: NYT
Keywords: Entrepreneurial Activity, Risk, Failure
Great infographics on the Eurozone crisis:
Keywords: Eurozone Crisis, Infographics on Eurozone Crisis
Great chart! Coming years to follow.
Keywords: CPI, Inflation, Monetary Policy
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