Thursday April 29 2010
Just a round of various thoughts on the blogs this morning.
At Franklin Templeton, Mark Mobius suggests it would be best to let whatever happens, happen to Greece. They wont' default but will do a self imposed bankruptcy. Greece has been in default about half of the last 150 years. They pay less than what is owed to the bondholders, they do not get a bailout, Spain, Portugal, take note.
Former junk bond king Mike Milken at his own conference suggests this is THE time to sell stock and junk bonds to investors as demand is high. No kidding.
Dave Rosenberg, economist at Gluskin Sheff in Canada, notes that WMT is still cutting prices. WMT sees its customers as very price conscious.
Dave goes on to suggest that most of the 8 M jobs lost in the US are not coming back. This means a long term high in unemployment. Again it is the 1970s all over once more. All of this is deflationary, not inflationary.
And so states and cities here are not going to default altogether but pay less than what is owed to both pensioners, workers, and debt holders, again, deflationary.
Dave also noted that Obama actually said, at some point you have earned enough, ie, it is then the govt's money. Here is a picture of top tax rates in the 1930s. This was an attempt then as now to soak the rich. This is of course completely counterproductive. Large earners will re work their incomes to avoid such taxes. Individuals will not begin enterprises if they believe they will not reap the rewards of their efforts. Again, my belief is that this explains the lack of innovation in Europe, a nice place to visit but where is the Steve Jobs of Europe? By the way such confiscatory tax rates were also part of the 1970s, our preferred comparison of long term economic stagnation.
We suggest that students re read our post from two days ago about crowd sourcing. All these taxes are going to increase the number of jobs going overseas. Today I read one observation that accounting services are still here simply because business has not managed to safely store the information somewhere else where it can be accessed by lower cost workers. They have of course done this in terms of assembling lap tops....Which is to say that higher minimum wages, endless unemployment taxes, higher required benefits are all discouraging to new job growth.
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