Hedgehog Party

Dimensions of the Credit Crisis

This article by Paul McCulley of PIMCO Bonds is both a good review of recent credit market action, and a preview of unfolding events.  While this subject is not directly related to taxation, it tells a story of the potential for inflation.

Inflation along with open ended entitlements are the big sources of unlegislated taxation.  Anyone trying to understand future implications of tax and spend should read and understand this lengthy piece.

Lightening Up

Below are a few quotes on taxes by historical figures.  It is interesting that the complaints are timeless.  These issues will remain unsolved until we focus on a level playing field that cannot be easily mainipulated by the well-connected rats.

Plato:  When there is an income tax, the just man will pay more and the unjust less on the same amount of income.

Albert Einstein:  The hardest thing in the world to understand is the income tax.

Will Rogers:  The difference between death and taxes is death doesn't get worse every time Congress meets.

Martin A. Sullivan:  There may be liberty and justice for all, but there are tax breaks only for some.

State Corruption

The Rezko trial in Illinois has national overtones because of the ties to Obama.  Hopefully, that political firestorm will not obscure the breadth of the corruption in the state.  In this Chicago Tribune article by John Kass, he coins the term "Illinois Combine" to describe the bi-partisan corruption in the control of pensions funds and contract awards.

For the moment, we do not have a "Congressional Combine" involved in a lurid trial.  But the routine fiscal mis-mangement and vote buying is there to see.

Corruption is the insidious disease that destroys democracies and undermines the economic health of our country.  Read how Hedge Hedgehog overcomes the well-connected rats in "The Rats are in the Cheese."

More Fed Lending

This Newsmax.com article describes the frenzy of lending at the Fed.  Investment banks are lining up to convert their "Pretend Collateral" for dollars courtesy of the US taxpayer.  This is an example of "Morton's Fork"...banking meltdown now, or inflation later.

The coming search for miscreants and scapegoats will soon begin.  Unfortunately, that is only  a diversion from looking at the basic problem.  The real source of this trouble is the over use of leverage...by everyone...from Congress, to central banks to credit card holders.

A Bull Market!

Jim Cramer says "there is always a bull market someplace."  He is right this time.  There is a bull market in "Pretend Collateral."  We previously noted that Fed loans on subprime collateral had exceeded $50 billions in just a few weeks.  Now the bull market is really blasting off. 

This Marketwatch article reports that the europeans are jumping on the bandwagon.  Soon you won't be able to buy a sub-prime mortagage package for love or money.  We taxpayers are just insatiable.

The Tax Code Corrupts Absolutely

This short comment on American Thinker is yet another example (among thousands) of the corrupting influence of the Tax Code.  The Hedge Tax does away with this corruption, and it couldn't happen a moment too soon.

Campaign finance is a separate issue.  Our current system is simply a sheltered form of bribery.  The Hedge Tax can't end that practice completely, but it can end bribery related to the Tax Code.

Universities need to pay taxes like the rest of us

Here's a New York Times editorial criticizing institutions of higher learning with out-sized endowments.  According to the editorial, 76 colleges and universities now have endowments in excess of $1 billion, which they have been able to build and maintain tax-free. 

Why aren't these institutions required to pay taxes like the rest of us?  If they did, the tax bill the rest of us pay would be lower.  Isn't that fair? 

Risk Management

This Financial Times article is a good summary of the role of modern risk management in our current financial crisis.  The underlying points are: 1) Risk management works, but it also enables more risk taking. 2) Excesses in risk taking always come home to roost.  Too bad this author didn't have a better voice a few years ago. 

Retirement Tax Traps

This Market Watch Article by Robert Powell warns about 5 tax traps that are waiting for unwary retirees.  The sad truth is that you could find five cogent articles per week warning you about pitfalls created by the tax code.  There is no solution to this problem via our current tax regime.  Special interests of all types endlessly complicate the tax code to line their pockets.  Only the Hedge Tax offers a viable option to break out of these tax traps.

Leverage is a Dirty Word

A lot of forces have converged to produce the subprime crisis.  The frenzy stage is in full swing.  This Market Watch article on the collapse of the Carlyle Fund is instructive.

A few paragraphs into the article, it is revealed that the Fund had leveraged its assets 32 times.  What makes the current crisis so frightening the the realization that our entire financial system is over leveraged.  It is a time when the addition of greed and malfeisance has created a very toxic stew.

The Hedge Tax could have been an aid in deflecting these poor financial judgements by our finest financiers and regulators.  The Asset Tax would have progressively taken the profit out of over leverage and weakened the incentive to engage in these activities.