Corporate Tax Loopholes

This past Sunday, 60 Minutes ran a fantastic and mostly factual story on how companies are hoarding money oversees to avoid paying taxes in the U.S.  Every American should watch this video, it is that important!



Emotions run very high on both sides of this issue.  Groups like USUncut recently protested against these companies and feel strongly that the government should close these tax loopholes.  Others feel that corporations are already paying too much in taxes and the rate needs to come down.  Let us provide some perspective on this situation.

Capital flows like water.   What that means is that water will flow downhill and look for the path of least resistance.  There is nothing anyone can do to change this basic phenomenon in nature.  Water will never flow uphill on its own.  Capital will always flow to wherever it can earn the highest perceived return on investment, period.  The key word is "perceived", because the end result is not always the choice that results in the absolute highest return.  However the capital will flow wherever the decision makers "think" it will earn the highest return.   This is how capital SHOULD flow, as it results in the most productivity and value for each dollar invested.  The end result is the world we live in today, where society moves forward with new discoveries, increased productivity, and a higher overall standard of living.  It is hard for anyone to argue against this, unless they feel we would all be better off riding horses, using the Pony Express to communicate, building fires to stay warm, or going without basic pain medicine or anesthetics.  Amazingly, there are some folks that feel this way, but for the rest of us, we like the way things have progressed over the last 200 years.

Obama Cartoons

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We can't help but laugh at these Obama cartoons! Cartoons have a way of capturing feelings and frustrations in a way that words alone cannot.   Much of the frustration in these cartoons seems to focus on his lack of any real leadership skills when it comes time to make tough decisions.  That certainly is not a label that any president should be happy with, especially one that will face re-election next year.

U.S. Involvement in Libya - Illegal, Immoral, Unaffordable

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We do our best to focus our commentary on economics and those issues that directly affect the economy and investing.  However, there are times when the seriousness of the issue warrants getting off subject and commenting on the events at hand.  The U.S. involvement in the Libyan crisis is one of those subjects that must be addressed.



First let us stick to the economic side of the story and discuss why, economically speaking, we should not be getting involved in Libya.  We are broke!  We should not be going out and trying to save others when we need to be focusing on saving ourselves.  Thanks to the earthquake in Japan, the Fed will now be purchasing the majority of new U.S. debt that is brought to market!  We are buying the majority of our own debt, which for decades has been the ultimate measure of a failing system.  We are on our last legs, and need to be slashing our federal spending across the board if we are going to avoid a fiscal disaster.  If we faced a real threat to our national security that required a full scale war to defend, we would not be able to afford to fight!  Literally, we could not fund a real war as it stands right now.

Second, we have absolutely no moral authority to get involved in Libya.  Show me what document gives us the power to intervene throughout the world as the single voice for keeping the peace.  Please don't tell me about the United Nations, NATO, or the coalition, because everyone knows the U.S. calls all the shots.  The world knows this and will hold us accountable for whatever comes as a result of our involvement in Libya, we all know that to be certain.  We are brainwashed into the thought process that if people are dying in Libya, and we have the means and power to stop it, then we must act.  We are told that standing by on the sidelines and watching would be wrong and immoral.   Folks, this is hypocrisy!  People are dying all of the world under tyranny and oppression, and we rarely get involved.  Just look at what is happening deep in the heart of Africa for example.  We allow it to happen when we do not have a vested interest in the situation.  However when we do have a stake in the game, we play the "moral obligation" card.

Inside Japan's Nuclear Reactors

POST UPDATE - March 20, 2011

We want to share two additional infographics that deal with how radiation affects the human body, and more details on what is going on inside Japan's Fukushima Power Plant.

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ORIGINAL POST - March 17, 2011

Well-timed infographic from LiveScience that helps us all understand what is going on inside the nuclear reactor in Fukushima, Japan.   These reactors are such complex and dangerous structures, and it really boggles the mind to consider the magnitude of their power.  Japan's nuclear reactors were built in the 1960's and as we know now, are located almost directly on a fault line.

Tags: Fukushima Reactor, Fukushima Infographic, Nuclear Reactor infographic,

Japan nuclear reactors, nuclear meltdown, japan crisis.

Who Will Buy U.S. Debt?

Simon Black at "Sovereign Man" put an article out yesterday that gives a quick overview of the U.S. debt situations and asks the question, "who will buy U.S. debt when Japan and the Fed stop buying"?  It's hard to say exactly what Japan will do, but that really is not the point.  The U.S. is quickly approaching a time when there will be a lack of buyers for our debt.   No worries, right?  The Fed has already primed the pump and taken steps to make it appear that there is nothing wrong with buying our own debt!  Of course, that was a very smart strategy from a PR standpoint.  Oh, and there are no signs of inflation anywhere, according to Mr. Bernanke, so no need to buy gold, silver, oil, agriculture, or any other commodities.  Just ignore the 10 year bull market in gold, it means nothing???

POSSIBLY THE LAST TIME TO GET OUT OF THE DOLLAR

by SIMON BLACK

March 15, 2011

Dallas, Texas, USA

It’s no secret that the United States government owes a pretty penny to foreigners. Certainly, what America owes to foreigners pales in comparison to what it owes to Ben Bernanke… but still, $4.45 trillion is no small number, even in these crazy times when terms like “kajillion bajillion” are more appropriate to quantify debt and entitlements. 

China is the largest foreign buyer of US Treasuries with around $1.15 trillion in holdings… Japan is the second largest at around $886 billion. Curiously, the trend for China has been down– the Middle Kingdom has been steadily reducing its position since peaking in October 2010. 

Japan, on the other hand, has been steadily increasing its Treasury holdings over the same period. Its government does have a long pattern of currency intervention, and there has been much grumbling in Tokyo about the effects of the strong yen on their exports.

Fast forward to this past weekend. Earthquake. Tsunami. Volcano. Nuclear radiation. Japan clearly has other things on its mind right now than to continue financing the ongoing largess in Washington DC. 

Earthquake Infographic

Sharing this very nice and appropriate infographic that illustrates many of the most notable earthquake hot spots around the globe.  There is no doubt that human beings are risk-takers by nature.  We have an incredible ability to put danger and risk in the back of our minds and focus on the hear and now.  That is probably why we have come so far over such a short period of time, because failure to ignore risk would result in fear and paralysis.  Nevertheless, those living on fault lines are putting themselves in considerable risk, there is no denying that fact.   It is one thing to live near a fault line, quite another to build nuclear power plants on one as well.  One thing is for certain, don't expect a mass exodus for the San Francisco area in the near future.

Tags:  Earthquake Infographic, Japan Infographic, Japan Earthquake

Fault lines, Earthquake Zones, Earthquake predictions, Danger Zones

Japan Earthquake Newspaper Coverage

Please help the victims and donate today at the American Red Cross!

The situation in Japan is deteriorating this morning and another earthquake has hit the country.  We want to take a look at how newspapers are covering this extremely scary and heartbreaking story this morning.  The earthquake today measured 6.0 and was felt as far away as Tokyo.   Although most people now get their news online and via other media, print newspapers still have nostalgic and historical significance and can provide a barometer for sentiment across the world.

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