To see the fiscal impact of the finance-induced recession, look at changes in the CBO’s baseline projections over time. In January 2008, the CBO projected that total government debt in private hands—the best measure of what the government owes—would fall to $5.1 trillion by 2018 (23% of GDP). As of January 2010, the CBO now projects that over the next eight years debt will rise to $13.7 trillion (over 65% of GDP)—a difference of $8.6 trillion.
Most of this fiscal impact is not due to the Troubled Assets Relief Program – and definitely not due to the part of that program which injected capital into failing banks. Of the change in CBO baseline, 57% is due to decreased tax revenues resulting from the financial crisis and recession; 17% is due to increases in discretionary spending, much of it the stimulus package necessitated by the financial crisis; and another 14% is due to increased interest payments on the debt – because we now have more debt.
In effect, a dangerous financial system – prone to major collapses – creates a hidden contingent liability for the federal budget in the United States.
It's Hard to Take the Fiscal Hawks Seriously
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Jeremy Siegel, professor of finance at the Wharton School (University of Pennsylvania), on why he thinks stocks are undervalued. What do you think? Let's discuss.
Jeremy Siegel Interview in Advisor Perspectives
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If you're a business owner with a company retirement plan, and you enjoyed our earlier posting about "Retirement Plans from Hell", we encourage you to read our "7 Questions to Ask Your Broker About Annuity-Based 401(k) Plans". Just click on the link below for a PDF document:
7 Questions to Ask Your Broker About Annuity-Based 401(k) Plans
Maas Capital offers innovative 401(k) solutions that are high-quality, low-cost, transparent and efficient. As an independent, fee-only Registered Investment Advisor, we act as fiduciaries to your plan, and we place the interests of your plan participants first.
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An excellent summary of a recent book "Crisis Economics" co-authored by Nouriel Roubini - the economist known as "Dr. Doom".
Review of Crisis Economics by Nouriel Roubini
Even if you don't read the book, read this summary - it will provide you with some insight into the problems we face in reining in the excesses of the financial services industry.
Buy the book here.
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The decision to convert your traditional IRA to a Roth IRA is not as clear as many suggest. IRA expert Ed Slott explains why in this article.
Avoiding a big Roth conversion mistake [Investment News article]
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A thought-provoking article by Professor Moshe Milevsky on personal risk capacity for investing.
How to Think Smarter About Risk [Wall Street Journal 14 June 2010]
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The Senate removes provisions requiring disclosure of fees in 401(k) plans from finance legislation.
Senate Moves to Keep 401(k) Fees Hidden
Just more confirmation that your elected representatives have Wall Street's best interests at heart.
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