Weakonomics

Weakend: Intelligence Squared

The Weakonomist — Sat, 13 Mar 2010 17:06:39 +0000

Nowadays I spend a lot less time in my car than I used to. This means I listen to a lot less podcasts than I used to. This is partially because I lost my iPod and don’t like using my iPhone in the car as an MP3 player.

Now I only listen to a few podcasts, most of them technology related. But there is one that has nothing to do with technology, finance, or any one subject. It’s called “Intelligence Squared.” For the record, it comes in many forms not just podcasts.

Intelligence Squared is a formal debate with a motion for or against a topic. For example: America is to blame for Mexico’s drug war. An audience is present during the debate and they vote at the beginning based on their current thoughts. There is a vote at the end to see how many minds were changed, the side that moved the most people wins.

The debates usually have 6 well-informed individuals, 3 on each side, debating the topic. They are smarter than you (and I suppose me too). The debates are usually very good, and though I don’t usually have my mind swayed, I at least learn more about why I should feel the way I do.

Here’s a list of past and future topics. Something is bound to interest you:

California is the first failed state
Obama’s economic policies are working effectively
Good riddance to the mainstream media
It’s wrong to pay for sex
Organic food is marketing hype

Check out the Intelligence Squared website for videos and audio streaming. You can get the podcast on itunes. It will make you smarter, and if you read this blog that’s obviously a goal of yours.

Related posts brought to you by Yet Another Related Posts Plugin.

Weak Ways to Pay Off Debt

The Weakonomist — Fri, 12 Mar 2010 15:37:25 +0000

The following is a sponsored guest post by Jeremy Cabral. Jeremy writes for Credit Card Finder an Australian credit card comparison site that helps you compare no annual fee and balance transfer credit cards. See here for additional information about guest posts.

When you are faced with any sort of debt, it can be tempting to find the quickest and easiest solution of the day to pay it off. However, these are actually weak ways to deal with your debt, and can result in more problems and sometimes even more debt down the track. Unfortunately, if you are struggling with debt, you may not be able to see which strategies are the weak ones, so here is a list of some weak ways to pay off debt, that you should avoid.

1 Using your balance transfer card

Signing up for a balance transfer card is a very financially sound way to get control of your debt as it allows you to transfer the balance from a credit card charging you high interest, to one which charges you a low or 0% interest rate so more of your payments go towards your debt, and you have a fighting chance of paying down your balance.

However, this debt payment strategy is weakened when you spend on your balance transfer card. Purchases made on a balance transfer card don’t usually enjoy the same low rate as your transferred balance, instead they attract a higher purchase interest rate; an interest rate you will be paying until you have repaid your balance because credit card payments go towards the oldest balance first. Therefore, you won’t even be able to benefit from interest free days because you won’t have paid down you transferred balance before your new purchases start accruing interest.

2 Consolidating your debts

Consolidating all your credit card and personal loan debt into one new loan can seemingly make the payments easier to manage. However, a debt consolidation loan usually has a higher interest rate than what you were paying on your debts individually so a consolidation loan is actually costing you more. Plus, by consolidating debts such as a credit cards into your mortgage when you open a home loan account wipes out your credit card debt for now, but also means you are now repaying that debt over thirty years, which is much longer than you would be repaying your credit card debt for if you paid it off alone.

3 Declaring bankruptcy

Clearing your debts by going into a chapter 11 bankruptcy wipes out a lot more than just your bills. When you go into chapter 11, you have to wait an additional seven years for your debts to be cleared from your record for you to start fresh. This means it is almost impossible for you to get any form of credit from a mobile phone contract or electricity provider, to a car loan or credit card. Therefore, try and remember that chapter 11 is not only a weak option, but one which should only be used in extreme situations.

4 A payday loan

Getting a loan against your next pay check to pay your bills is a weak way to pay off your debt because you are essentially using one form of debt to pay another. Instead of borrowing against your pay check to make a credit card payment, try and negotiate with the credit card provider if you are unable to make a payment. A bank or credit card company is a lot more likely to be understanding and lenient – even setting up a payment plan where you pay a little each week – as compared to the companies which offer payday loans. Realistically, if you can’t pay the bills you have now, taking on the debt of a payday loan will be hard to repay too and the companies which issue payday loans are usually a lot less understanding if you can’t pay, charging you very high interest rates and taking any measures necessary to get their money back.

5 Using a high interest savings account to save up for your debt

You may think you can accumulate enough money in a high interest savings account to repay your credit card balance, but the interest rates on most high interest savings accounts are nowhere near as high as those you are paying on your credit cards. Therefore, you’re still paying more interest on your debt, than you’re earning on your savings, so you would be better off directing the money destined for your savings account to your debt to pay it off sooner and stop paying interest all together.

6 Paying off someone else’s debt

It is possible to have someone else’s debt transferred into your name, so you can make the repayments for them. It may be a friend or family member who has gotten into financial trouble, but taking on the responsibility of their debt is not going to help anyone. Firstly, if you become legally responsible for someone else’s debt, and you fail to make the repayments it affects your credit file, not theirs; plus if the relationship becomes strained or breaks down, the debt is still officially yours. Secondly, point out to your friend or family member that having someone else pay their bills is a weak way to pay off debt, so rather than helping them by taking on their debt, you’ll help them find a strong way to repay it.

7 Ignoring your debt

This is possibly the weakest option of them all, because nothing is ever gained by denial. If you ignore your mounting debts and fail to make repayments on those debts, the people you owe money to will keep a record of your behavior. If the situation continues your creditors are likely to report your failed payments and that report goes into your credit file. This puts a nasty black mark on your credit report and anyone you do business with in the future will see you are marked as someone who doesn’t pay their bills and meet their obligations. Having a blackened credit file can affect you now and into the future, in situations you may not even have imagined; for example, what if you get married and want to buy a new home with your new spouse but have a bad credit rating, or what if your children need you to be a guarantor on their home loan in the future?

These weak ways to pay off your debt are simply short term solutions to bigger problems and taking any of these paths will create more issues in the long term than it solves. Instead, talk to a financial advisor or accountant, who can help you find a strong solution that can go the distance.

Photo: Andres Rueda

Related posts brought to you by Yet Another Related Posts Plugin.

What We’re Learning From the Forbes List of Richest People in the World

The Weakonomist — Thu, 11 Mar 2010 15:29:07 +0000

Last year, I looked at the list of Forbes richest people and concluded a few things. A lot of billionaires lost huge percentages of their fortunes (up to 90%). Many of these people are very wealthy, but a large portion of their wealth is tied up in less liquid assets. For example, if Bill Gates all of a sudden sold all his Microsoft stock, there wouldn’t be enough buyers for the demand. Oversupply of shares with no change in demand will result in a drop of value so much he’d be half wiped out. Same goes for Warren Buffett. The guys that started Google are slowly selling off a few share here and there, because any big move would be deemed as insider trading or have a similar effect as Gates.

But for 2010, we’re throwing out all these crappy summaries and instead getting a little dirtier.

One of my very first posts on Weakonomics (March of 2008; to give you an idea of how long ago that was, unemployment was 5.1%) was about the guy who is now the richest man in the world. Was I foreshadowing? No. His name is Carlos Slim and he’s juggled the richest man in the world title with Buffett and Gates for the last few years. Slim is a telecom mobile in Mexico. That’s right, the richest man in the world is Mexican. Not American, Mexican. And to make matters worse, aside from Gates and Buffett, there’s only one other guy in the top 10 from the US. A total of 4 hail from emerging economies: Mexico, India X2, and Brazil. If there’s ever been a sign of dwindling US economic influence it’s this list.

There are other trends too. Most of the billionaires are old. Of the top 25, only one is below the age of 52, and that’s one of the guys that started Google. He’s 36. What had you accomplished by 26? Probably not amassed $17.5 billion in wealth. This is the perfect tribute to how important Google has become to the economy. The two guys that started Google are together worth $35 billion. Powers combined that puts that at the 4th wealthiest. Google is THAT big. The younglings don’t stop there either. Some of you will have heard of this next guy, most of you won’t. Mark Zuckerberg is the founder of Facebook (I know you’ve heard of that). Mark is 25. Yeah, the guy behind Facebook is TWENTY-FIVE. He’s worth $4 billion.

Facebook has plans to go beyond just their own website. They intend to basically become the internet for certain users. Zuckerberg could sell his stake in the company and retire as the wealthiest 20 something ever. But this guy has ambition. Because Facebook isn’t a publicly held company, its value can’t be certain, but estimates are around $10-$15 billion. The company will go public in the next few years, that’s a fact. But Zucker’s ambition is about legacy. Facebook has the potential to be larger than Google. Zuckerberg could very easily become the first person to break $100 billion and stay there (Gates was first, but it was brief). This is in large part due to the fact that again most of the billionaires are old and the rate their wealth is growing has slowed.

Here’s another interesting note. Aside from Buffett, you have to get to #35 on the list before you find an American that made his billions from finance. If you want to be a billionaire, your best chance to do it is by starting a company. You likely won’t get there investing, and you sure as hell won’t get there by being just a simple fat-cat CEO. They are simpletons in this crowd.

One last observation before my biggest revelation. Let’s go back to Carlos Slim-Shady. His net worth is exactly $500 million more than Gates’. This number is so close that a small change in the peso/dollar exchange rate will change it. Furthermore, like most of the big guys, their wealth is no longer tied up in just the companies that made them. They’ve diversified and invest in tons of things impossible to track. In other words, I’m convinced Forbes, a struggling magazine and dying media brand, “allowed” Slim’s “estimated” net worth to just edge out Gates for the media attention. It worked, bastards.

Finally, I saw in a news story yesterday where I guy interviewed said that after $500 million these people don’t see much of a change in lifestyle. This means that one you crest a half billion then there aren’t many more things that are incrementally more expensive. Said in another way, Bill Gates can’t really live much better than Oprah (worth about $2 billion). I see a business opportunity here. I’ve already got a list of potential clients thanks to Forbes, I just need to figure out how to charge outrageous amounts of money for stuff that still has a perceived value. To date, only one group has figured it out, yachts. There has to be something else, something.

Related posts brought to you by Yet Another Related Posts Plugin.

Comparative Advantage: Why You’re Not A Plumber

The Weakonomist — Wed, 10 Mar 2010 15:01:45 +0000

My wife says I’m not very handy. I’m just as handy as the rest of the world. I have two hands. I just don’t know how to use them for much more than typing or lifting a coffee mug. But I also believe my lack of handiness is because I’ve never owned a home. Most people pick up these skills working on their own houses. I can hang a picture, build furniture, and naturally dominate a Philips screwdriver. But I suspect that once I do own my own home I’ll probably pick up some more skills.

But most things I cannot do. And most things you cannot do. You probably aren’t going to redo the roof on your house. You don’t have a clue how to knock down a wall to open up the downstairs. If the commode stops working and the plunger and Drano don’t work, you’re calling the plumber. Likewise, you pay someone to work on your car because you either don’t know how to or you’d rather have a professional do it. One of the pillars of frugalism is doing things yourself to save money. Don’t hire a maid, don’t go out to eat, don’t pay someone to do your yard. Do it yourself and save money.

Whatever.

I say outsource everything you can possibly afford to outsource and focus on making your own money. It’s not only good for you, it’s good for the world economy. It’s called “comparative advantage” and it’s why you aren’t a plumber.

Let’s say you’re a blogger and are capable of writing 1 post per hour or answering 10 emails per hour. Your hire an assistant capable of writing 1/2 posts per hour or answering 15 emails per hour. Left to your own devices and splitting your time, the two of you would write 6 posts and answer 100 emails per 8 hour day together. But, if each of you specialize, you can get more done. If you spend your entire day writing and the assistant spends the whole day emailing, you get 8 posts and 120 emails. Specialization allows each of you to be more productive by working on your strengths.

In other words, focus on what you’re good at, and pay people to do what you aren’t good at for you. Comparative advantage goes beyond the basic person to person synergies. It’s the entire nature of our economy today. It’s why every doctor in the world doesn’t dabble in each specialization. It’s why Kobe Bryant probably doesn’t mow his own lawn. It’s why I don’t change my own oil (even though I know how), and it’s why you aren’t a plumber

Economists like to make “assumptions”. In the strictest sense, comparative advantage assumes that you can always go be productive in your specialty. Look back at the blogger example. Maybe you only need to write 4 posts per day. If you do more you receive diminishing returns (in other words it’s not worth your time to do more than 4). So you could spend the rest of your day answering emails and not need the assistant. Said differently, if you have spare time, comparative advantage may not work for you.

Some people have the time or the motivation to do things other people would outsource. I know plenty of guys that just like to change their car’s oil. But I also know people too busy to mow their own grass. So you have to decide what aspects of your life are worth outsourcing in the name of comparative advantage. Personally, I hope make it possible that I’m so productive I have to outsource just about everything. Said differently, I want to just work and blog and pay people to do everything else for me.

If you’re interested in learning more about comparative advantage and its implications/applications on the world stage, check out the hottest economist on the planet and her two-part video on the subject.

How Much Is Your Time REALLY Worth?

Related posts brought to you by Yet Another Related Posts Plugin.

Six Lessons Jack Bauer of 24 Can Teach Us About Money

The Weakonomist — Tue, 09 Mar 2010 15:06:45 +0000

There aren’t many shows I’m addicted to, but 24 is probably one of them. And even though the current season is boring and the show has lost some of its fire, Jack Bauer is the most badass dude on TV. Chuck Norris can sit down, the Jack Bauer jokes are much more hardcore:

Jack Bauer has been to Mars, That’s why there’s no life on Mars

When you come face to face with Jack Bauer, you can do things the easy way or the hard way. The easy way is ingesting your cyanide pill.

Chuck Norris is a Texas Ranger only because Jack Bauer won’t allow him to be a federal agent

In kindergarten, Jack Bauer killed a terrorist for Show and Tell

Jack Bauer got Helen Keller to talk

Jack Bauer played Russian Roulette with a fully loaded gun and won

If everyone at CTU listened to and did everything Jack Bauer said, the show would be called 12

For those of you that don’t know, 24 is an action TV series on FOX. Jack Bauer is its main character, and he’s kind of like a cross between James Bond and MacGyver. What makes the show unique is that an entire season takes place over a 24 hour period. Each 1 hour show is 1 hour in real time in the story. Needless to say, Jack kills a lot of people in the name of protecting the United States from terrorists and thugs. Some of the most gruesome scenes are when he’s getting tortured or when he tortures someone. The man tortured his own brother for information and regularly breaks laws to achieve the goal of saving the country. A recurring theme within the show is whether or not to do what’s right even if its illegal. Jack does what’s right.

But enough of endorsing my man-crush on Jack. We’re here to do my favorite thing, take pop-culture items and pick them apart until we have six financial lessons. And don’t worry reader, if you don’t watch the show I give plenty of lead in so even you’ll understand the lessons:

1) Sunk Costs
Situation: Jack is regularly put in situations where he suffers in ways we could not possible imagine. For example, in this season alone he was tied to a chair and beaten by a cop, stabbed by his love interest (on accident), and then had live jumper cables attached to his stab wound as he’s tortured. Despite the fact that the rest of us would take the day off after this, Jack gets right back on his feet each time and acts like the situation didn’t happen.
Lesson: This is because Jack understands what a sunk cost is. If you put $1000 into fixing your junker of a car and then it breaks down again, you cannot factor the $1000 already put in into your decision. That $1000 is a sunk cost you will not get back. Focus on the present, forget the past, and make decisions with only current information. Those that focus on sunk costs are always doomed to make bad decisions.

2) Teamwork
Situation: Jack is very much an “in the field” kind of guy. But much of his success comes from the support of the nerds and geeks that feed him information. This is usually CTU (a fake government organization called Counter-Terrorist Unit), but it’s also been the FBI and just someone that managed to hack into government databases. These people send him information to his cell-phone or relay into a headset as he breaks into buildings or infiltrates crime syndicates. He relies on these people to succeed, and with teamwork, they wouldn’t.
Lesson: You can’t achieve financial success on your own. You need the help and the support of others. If you’re married, you and your spouse must work together and set goals. You will rely on financial advisors, friends, and industry knowledge to succeed and make the best decisions. This team is based around you, YOU are Jack Bauer. You have to surround yourself with the right people if you want success.

3) Negotiation
Situation: Many times Jack finds himself in situations in which he must give up something to get what he wants. Many times he must get approval from the president of the United States in order to grant immunity to a criminal. The immunity comes in exchange for information which could lead to saving the country. In another example, he recently bargained to help out CTU (he’s not under their employ) if they would clear a friend of some potential legal issues.
Lesson: Though you don’t have the power of immunity, you do have the power of your wallet. In many situations, this is a very good thing. It’s a buyer’s market out there for homes and cars. If you aren’t negotiating then you’re giving up thousands of dollars. Get the seller to cave on closing costs and a home inspection, get the car salesman to cut the price near invoice or lower. If you’re in a situation where you have leverage, use it.

4) Diversity of Skills
Situation: Jack is a popular guy and he’s always being asked to help out in crisis situations. The reason Jack is in such high demand is because he can do a lot of stuff. He speaks at least German and Russian on top of English, he’s a negotiator, interrogator, pilot, great leader, and master of espionage; all this on top of his military and fighting skills. He never has to worry about finding work, his resume reads like the back of a
Lesson: The more you know the more valuable you are. An investment banker that’s also a master plumber will clearly do better in a recession in a recession than an investment banker and better in good times than a master plumber. Being flexible and able to do any number of jobs helps a lot when money is tight and you have to take what you can get.

5) Take Risks
Situation: On many different occasions, Jack is literally the guy running into a burning building as people are running out. At times, he’s had to jump out of buildings, go undercover with a criminal organization, and hundreds of other scenarios you and I would normally avoid. But he it’s always for the greater good, and he’s willing to do what others are not for success. Make no mistake, he gets scared, but he keeps the faith.
Lesson: Being a young guy, I’d always read that during times of uncertainty in the stock market it’s important to keep you eyes on the future and avoid thinking about the present situation. When everyone else is selling their stocks and mutual funds, you must stay the course. This recent recovery has shown exactly why you must keep the faith. The best returns come after the worst returns. In Jack’s world, running into a burning building is hardly the risk it seems to you and me. In your world, holding your stocks in a down market shouldn’t be scary either.

6) Trust No One
Situation: On average at least once per season Jack is betrayed by someone he trusts. Sometimes he kills them, sometimes they just get themselves killed. But after years of dealing with such traumas he’s learned there are very few people he can trust. Most of the people that know he exists want him dead. He’s always watching his own back, and is prepared to leave an old friend in a ditch with a bullet in their head if they go against him.
Lesson: Bankers, financial advisors, and the like always seem great at first. They’re there to serve you and make your financial life better. But if you don’t watch you back, they will turn on you as soon as they think they can get away with it. Don’t trust anyone any more than you need to. As soon as their behavior gets the least bit sketchy or you don’t think they’re looking out for you best interests, leave them in the ditch (don’t kill them though, that’s Jack’s job).

Related posts brought to you by Yet Another Related Posts Plugin.

Weaky 22: Rangel Me Up Some Controversy

The Weakonomist — Mon, 08 Mar 2010 15:39:04 +0000

Who is Charles Rangel? He’s just one of a series of controversial New-York politicians to make it into the media. Chuckie is being featured today for one reason only, to reinforce the notion that the career politician is an awful abomination that should be destroyed. Allow me to present you: Fat Bastard Congressman Charles Rangel of the 15th district of New-York, AKA Harlem.

Normally, I like to phrase my Weakies with a good backstory and build everything up, but Chuckie has been way too busy to do that. I will tell you he’s an NYU educated man, lawyer, and Korean War vet with a Purple Heart. He’s a hero, and he’s no moron. Which leads me to believe everything I list below was done deliberately.

He used Congressional letterhead to arrange meetings with potential donors to a center named after him at the City College of New-York. An ethics “no-no”.

Rangel rents 4 apartments in Harlem at below market rates. He paid $3894 per month for all 4 in 2007. The going rate was closer to $8125 per month. 3 are used for his “home” in Harlem while the 4th is used as a campaign office. City law requires that apartments of this type be used for living, not business. The building is owned by a company with one of the owners being a regular contributer to Rangel’s campaigns. The savings add up $50,000 a year, which far exceeds the $100 gift limit established by the House. Quid pro quo? Perhaps. Sketchy? You bet.

He owns some vacation property in the Dominican Republic which during the busy season rents for as much as $1100 per night. He bought the place in 1988 but mortgaged part of it. He was one of a few investors that had interest payments forgiven. In 2008, it was discovered that he had failed to report $75,000 worth of income on the property. Either our tax code is too complicated for a Congressman to figure out, or he was hiding it. Either is disgraceful considering he’s the chair of the House Ways and Means Committee, the House comittee that DESIGNS THE TAX CODE. Only last week did he take a temporary leave of absence amid all the scandals.

In January of 2009, another Congressman introduced legislation for the “Rangel Rule” a joke of a bill designed to forgive taxpayers on interest and penalties for unpaid taxes.

Discrepancies were found in the listed value of a property he owns in Florida. Values vary from $50,000 to $500,000. Not sure what this means, but do YOU have this problem?

Chuckie also uses a parking garage just for Congressmen as personal storage for his old Mercedes Benz. House rules forbid the use for any period longer than 45 days. It’s been there so long the plates are gone, at least a few years. The spaces are valued at $290 a month and could be considered income that would need to be taxed. The doesn’t even have the necessary permits to be in the garage.

He’s taken a homestead tax break on his house in DC, despite maintaining a residence in New-York. Again, no expert but it’s said this potentially violates laws in both areas.

There is a tax loophole that has allowed a corporation to save tens of millions of dollars by operating “in Bermuda”. The corporation has donated $1 million to a City College of New-York center, named after Rangel. Rangel promised to oppose closing the loophole after a meeting with the company’s CEO. 5 days earlier the company donated an additional $100,000 to the City College of New-York. This company is one of only 4 that benefits from the tax break.

In 2008, Rangel paid $80k in campaign funds to a company to develop his a website. The company he paid is run by his son. Sites like this are regularly designed for about $100. A representative of the Campaign Legal Center, a non-profit watchdog said “this is probably legal but definitely wrong.”

Rangel again teetered on the edge of ethics by taking trips to the Caribbean funded by a non-profit in NY, funded by a number of large corporations with lots of lobbying interests.

In 2009, Rangel amended his 2007 financial disclosure form to double his reported net worth. This included properties in NJ (again with back taxes), investment, and checking accounts.

Also in 2009, Rangel opposed legislation that would have stopped $2.9 billion (yes billion) in tax money that would go to bailout a rum company in the US Virgin Islands. Naturally, he received campaign monies related to the deal.

And that’s just the stuff we know about. This man is the perfect example of everything that is wrong in Washington. He’s been in office since the 70s, it’s time for him to go.

Wikipedia has more about all his bad deeds.

Related posts brought to you by Yet Another Related Posts Plugin.

Weakend: Monday Thru Friday

The Weakonomist — Sat, 06 Mar 2010 15:16:54 +0000

Work, sucks so you have to make the workday fun. With that, I give you: Monday Thru Friday

Related posts brought to you by Yet Another Related Posts Plugin.

Weakonomics Links: Honeymoon Scandal

The Weakonomist — Fri, 05 Mar 2010 15:05:11 +0000

It’s time for another roundup of links. My favorite this time goes to Debt Ninja of Punch Debt In The Face because he got raked over the coals by some debt fearing Ramsey worshipers over at Consumerist. He’s in a situation where he has a lot of cash, and a lot of student loan debt, and a $4000 honeymoon to pay for. Basically the commenter think he should give up on the honeymoon stuff and pay off the debt. Whatever.

As a newlywed, and fresh back from a honeymoon from Maui which cost a double digit percentage more than $4000, I have to side with my Ninja buddy. The Sheconomist and I wanted to have a phenomenal and memorable honeymoon in an exotic location. For one thing neither of us had ever done something like that. For another we were about to enter a period of tighter finances. And another we were confident in our ability to meet future obligations.

The main criticism of Ninja was that he has $15k in debt and $22k in cash. Common wisdom is that he should pay off the debt and be happy with the $7k he has left over. For the most part I can’t disagree with common wisdom. Assuming an interest rate of 7% on the debt, he is technically paying the bank 7% each year for the right to have his cash. But from another perspective, he’s paying the bank 7% each year for the right to have liquidity. If he pays off the loan then loses his job, he’s got just 7,000 in savings. But if he doesn’t and then loses his job, he can put the loans on hardship deferral and still have his $22k. What people always miss with debt is there is more than one kind. $15k in credit card debt at 20% is a completely different animal than $15k in student loan debt at 7%. And on top of that interest on student loans is tax deductible. If you’ve got the means and are relatively sure of your ability to meet future obligations, go have some fun.

Here’s the best of the rest I’ve been reading:

Moolanomy cites an interesting study about people that retire early die younger. Eesh.
Consumerism Commentary comments on how to handle requests for financial advice. Sometimes you just have to step back and not offer your wisdom.
Len Penzo does a mostly scientific test of bottled waters vs filtered tap. I drinking unfiltered tap and The Sheconomist drinks filtered tap. Either way we don’t pay for bottled water, which is simply ridiculous.
Five Cent Nickel dives into what the numbers on your credit card mean. This is great party conversation.
ManVsDebt talks about the lessons learned in 3 years of marriage. Again, as a newlywed it’s nice to read things like this. Ninja should read it too.

Related posts brought to you by Yet Another Related Posts Plugin.

TARP Tax: Taxpayers Getting Some Wall Street Bonus Money?

The Weakonomist — Thu, 04 Mar 2010 15:14:34 +0000

It’s been a while since I talked about my beloved banking industry. But we’re back in the news again with a proposed tax from Senator Webb of Virginia on bonuses to TARP banks.

Do you remember like a couple of years ago there was this huge financial crisis? The Treasury Secretary (Hank Paulson) and Fed Chair (Bernanke) orchestrated this $700 billion bailout program. They were going to use the money to buy the bad assets off of banks, freeing up capital to get the markets moving again. Instead they used it to just buy a bunch of stock in the companies, but no matter.

You, me, and of course the media were very much focused on how much money we might lose in this deal. As it turns out, we actually made a few bucks. The banks had to pay a little interest on the money we loaned them. But, billions of dollars were paid out in bonuses, causing a ruckus among the media and DC puppets alike. Personally, I didn’t care, and no I did not receive a TARP bonus.

But the media and DC were really convinced that this was a problem. It was a PR nightmare to receive billions of dollars to keep your company alive, only to pay some of those billions to managers that obviously didn’t do their jobs right.

Webb’s proposed tax aims to get some of that money back. For every dollar in 2009 bonus received over $400,000, the bonus is taxed at 50%. So if you got a bonus of $600,000, you’d be responsible for a new tax of 50% on that $200,000 extra. This tax revenue will be used to pay down the deficit. Yes, that’s what I said, he actually wants to use this to pay down the deficit. He might as well give up because even if Washington passes this bill, that money is going somewhere else.

I could love or hate this idea. On the surface it sounds alright. We essentially gave low interest loans to high risk borrowers, we should be compensated for taking on that risk. Despite being a politician, I watched Webb get raped by Maria Bartiromo on CNBC yesterday. He’s not good with words, but he meant to tell the people this is why he wants the tax.

After much internal debate, and a trip to the grocery store for Malt-o-Meal cocoa pebbles, I decided I love this idea. Go ahead and tax the TARP bonuses. I’m no socialist and I’m not interested in redistributing wealth, but Webb is trying to put an end to the whole Wall Street bonus crap. By introducing this bill we get one of two outcomes. Either we do this tax (which is a token tax if anything), or we don’t. Either way, the conversation about Wall Street bonuses will be over for the next half-decade.

Webb’s cronies estimate that this tax could bring in as much as $10 billion. I’d be surprised if it even brought in $1 billion towards paying down the deficit. Which leads me to assume that Webb is doing this for the publicity. It gives him good talking points when he goes back to his constituency (which he barely won over in the last election).

Whether for personal gain or simply because he wants to end the debate about TARP bonuses, I applaud Senator Webb for this attempt. Perhaps he’ll start a trend with paying down the deficit a smidgen. But I wouldn’t hold me breath.

Related posts brought to you by Yet Another Related Posts Plugin.

Putting the Unemployed to Work

The Weakonomist — Wed, 03 Mar 2010 16:19:05 +0000

Do you know anyone that’s unemployed? I do. You probably do too. They collect checks from the government and their only responsibility is to continue to search for work. The job options are few and far between. Many go for extended periods of time without finding work, especially if they do not have transferable skills. Many wish they could do something, and wish the government would help them out on that end instead of just cutting a check, according to the Huffington Post. Many probably feel guilty about getting a free ride from the government (of course some of them are very happy there).

I could probably make an argument about setting up a giant temp agency. The government probably needs bodies in chairs somewhere and these people could fill them and continue to be paid their unemployment. But I’d rather the government figure out a way to eliminate that position instead of perpetually filling it with unemployed people. However, there are other places where the unemployed could be valuable.

Thousands of charities and organizations are in need of volunteers to help their causes. From licking envelops to fundraising to cleaning. Anything a normal volunteer can do an unemployed person can do too. Call them “Municipal Volunteers” or “Mutineers” “Muniteers” for short. It would be a corp of volunteers ready and willing to contribute to society. Their unemployment wages do not change, nor does the duration in which they receive them. They are simply required to volunteer for 10 hours or so each week.

This benefits the Muniteers as much as the organizations. Many people have difficulty explaining the employment gaps on their resume but everyone would know what a Muniteer is and they could potentially gain some kind of new skills. Aside from that they get to feel somewhat useful to society, which for many people, is more detrimental than the loss of income.

All plans have downsides. How would an organization qualify to use the Muniteers program? Who is responsible for reporting the Muniteer’s hours? Is the Muniteer punished for not showing up at scheduled times? What if there are more Muniteers than there are open positions? All good questions which I don’t have answers to. I’d need a boardroom full of minds and a whiteboard to figure all that stuff out.

But there are a few other things to address. I don’t feel that at present, the unemployed should feel compelled to volunteer. Were I unemployed I’m not 100% certain I’d volunteer either. But then again I have this website to help me continue to feel useful. What bothers me is people that complain that they want something to do (such as the people in the HuffPost article), but don’t ever consider volunteering. If building roads is all you ever wanted to do, then go find a construction company and volunteer your time. If you don’t then what you’re really saying is you want someone to pay you to do what you want to do. It’s a big difference. I want to do what I want to do, but I do want someone to pay me. I won’t pretend it’s so important I would do it for free.

I’m all about the freedom to choose, but I’m not above taking that freedom away. The human brain needs to be nudged sometimes. A formal program with just a basic requirement for completion would nudge a few million people away from watching soap operas all day, and help many feel less like freeloaders. I know most of you unemployeds aren’t freeloaders, but I also don’t blame you for feeling that way.

The Muniteer Corp is a good way for at least some people to continue to feel useful and gain skills while in the unemployment line. The networking opportunities could even lead to a few getting off unemployment. Should it be required? I’m not sure. But I do want the unemployed to feel useful, and I want the ones that need to feel useful to have a formal program in which to do it.

Photo: Editor B

Related posts brought to you by Yet Another Related Posts Plugin.