The Apple Tax Sideshow

Cash-Money
Can’t wait for iCoin to be developed

This week, the United States Senate has released a report detailing the types of international tax shelters Apple has used to avoid paying US federal taxes, as well as taxes in Europe. The amount of tax savings may be surprising to the uninformed; up to $74 billion over 5 years. It was not shocking to me when the panel also determined that the single largest US corporation did not break any tax laws to accomplish this. Yet, even though no laws were broken, Apple CEO Tim Cook is speaking before the congressional committee to explain the company’s actions.

The whole thing is a sideshow though. Independent journalists have been pointing out these loopholes for decades among all the largest United States corporations. The irony is these loopholes would not even exist if it weren’t for the very same people carrying out this investigation. And these very same people are not very likely to change anything, because lets face it, those who fund their campaigns earn the most from these loopholes in the first place (I’m not suggesting here that Apple is behind these loopholes either, although I wouldn’t be surprised if they had tax lobbyists like every other public company).

It’s always good when the media sheds some light on stories like this. However, without any serious changes to campaign finance laws, we are not likely to see any big changes. And on top of that anyway, multinational company taxes are complicated by the simple fact that they operate in multiple countries, and no country’s tax codes look alike. A real solution to this “problem” would need to be met with international support, and we all know how easy that is.

The Real Bitcoin Bubble – Third Parties

Anyone else find it ironic when they see a physical bitcoin?
Anyone else find it ironic when they see a physical Bitcoin?

We’ve spent a good amount of time on our podcast debating Bitcoin, the virtual currency – from the feasibility of it as a currency to the sustainability of it. Dick Sharpe believed the bubble popped when the US dollar value of a Bitcoin fluctuated from $240 down to $99 in just a week. I disagreed, thinking this fluctuation is more to do with a market that does not know how to value this strange new commodity. While some people believe in the long term sustainability of Bitcoin as a currency, I do not. Bitcoin has a maximum number of currency that can be generated in its lifetime, which creates its scarcity – so it’s more of a commodity than a modern currency. Unfortunately for our modern economy, a commodity makes a lousy currency for one simple reason – no central bank. Central bank’s are needed to help smooth the roller coaster ride that is capitalism. Without them, the world would be faced with times of runaway inflation and high unemployment – neither of which help sustain a great society.

Then if Bitcoin is destined to fail, who will get hurt the most? Like I said previously, I don’t believe the price fluctuations alone are enough to call the bubble burst. After all, who gets hurt the most during this volatility? Those looking to sell their Bitcoins – which at the moment would mostly be hobbyists and weirdo fringe investors. Also, even though the price did jump up momentarily, the value of Bitcoin has actually been trending up for a long period of time, regardless of the jagged edges. Hobbyists are mostly not interested in selling, because for them Bitcoins are all about the technical mining process.So in general, I don’t think too many people were hurt by the large swings in market values.

The real bubble is being inflated now, as Bitcoin popularity continues to trend upwards – the development of third party company’s hoping to bank on the sustainability of Bitcoin. For the past year, small start-up companies have been receiving venture capital and angel investor funds and are developing tools designed for efficient storage and transactions of Bitcoin. I say this is the bubble, because when these companies fail (and they will), real people will lose their investments in these start-up companies; but more importantly, real people will lose their jobs. The engineers, designers, accountants, IT people going to work for these companies don’t stand a chance. Most of the people that go to work for a start-up know this, but collectively, it could be a big problem when the rest of the market deems Bitcoin useless.

Collect Disability and Live Like a Bum

Have some money, it dosen't cost anything.
Have some money, it dosen’t cost anything.

“We who work through colds, bad backs and low moods — however liberal we might be — have permission to resent those who could hold a job but don’t, preferring to collect disability checks unto the decades. You see them at the coffee shop, refilling their cups in leisure, or even pumping iron at the gym.

And there are more of them all the time. More than 5 percent of eligible American adults are now receiving disability payments from Social Security. Twenty years ago, it was 3 percent.”

 

I got the above quote from a Froma Harrop, a Seattle Times opinion writer and complete waste of oxygen. This nut job is just stoking the fire of conservatives who believe that our nation’s Social Security Disability benefits program is a backdoor welfare system with no proof, and zero statistical justification. (Zero Point Zero)

First she points out that the percent of Americans claiming their disability benefits, which they have earned through payroll allotments, has risen from 3% to 5% in the last 20 years. The only logical conclusion that she can muster to account for this whopping 2 percent increase in the last two decades is that people are faking it. Stealing tax payer money, drinking coffee at leisure and pumping iron at the gym. At no time does she take into account the fact that the baby boom population has been ageing for the last 20 years thereby increasing the average age of Americans. This would make too much sense because the older  a person is the more likely they are to be disabled or become disabled due to injury. No, according to her we are all just pigs fighting to suckle at the government fat titty.

Second, living on Social Security benefits pays less than a part time minimum wage job, so no one is going to be sitting at Starbucks and shelling out their scarce greenbacks to an overpriced gym membership. For those few who do scam their way into the system and the fewer that are able to obtain benefits, due to the adminstrations backlogs andrigorous inquiries , it is not a lavish life style they lead. Often it is a decision made out of financial desperation and not one of laziness.

Third, the author exhibits several cases where disability claimants alleged phantom disabilities to obtain benefits. Every cases she cites is from a private insurer and not Social Security. She goes on to proclaim that other countries have tried to wean people off their disability benefits with vocational rehabilitation programs. These programs do exist in the US as well; they are administrated by the State and local governments.

Here is the link to the full Seattle Times article but instead of wasteing your time reading this waste of valueble internet space, go to the gym, get some coffee and take a survey of who many disability recipients sorround you.

Bitcoin Bubble Goes Boom

 bitcoin-cracked-smoke

 

Bitcoins, an online based currency developed four years ago by a nerd in his mother’s basement, has lost 75% of its value in 2 days.  In the last month the exchange rate for the digital currency skyrocketed, trade at 47 USD per Bitcoin in March to 266 USD last Wednesday. But that was as high as it may ever likely trade at again. The Bitcoin bubble is an excellent example of what a trading bubble is like on crack. The boom and bust of this all happened in less than a month, suggesting that the volatility of this currency is will spell then end of investors intrest in it.

130412083611-bitcoin-trading-halts-620xa

 

This doesn’t mean that Bitcoins are out of the market completely, or that anyone who traded with them is an idiot. In fact I am sure some people made a good chunk of change on this bubble. There are those who traded early last month and road the bubble to the peak or maybe a little below then sold which then caused the value to plummet from under his fellow investors. There are some very cunning individuals who might have used their coins to buy assets or stable commodities that can be traded back after the market stabilized or turned into another investment. Like this guy who bought a  Porche.

The good news here is that there is not a Bit nation where peasants will be suffering from this disaster. Usually when there is a currency crisis  a whole nation of people is left to suffer in the devastation caused by the hubris of the few. So luckily no children will be starving because mom dosen’t have enough Bitcoins to buy a loaf of digital bread. In this case the only losers are those invested large amounts in Bitcoin and now can’t find a buyer, like the guy that sold his Porche.

However there are those who still believe that there is utility and value in the Bitcoins, albiet not in the way investors hoped. As an investment Bitcoins turned out to be the 21 century answer to the tulip  bubble. As for the actual legacy of Bitcoins, the jury is out.

CNN Money

Sell Your Gold, Buy Wampum

 

http://mariopiperni.com

It’s time to sell your gold. At the height of the Great Recession investors and doomsday preppers alike flocked to dump all their assets in gold, the safest of all investments. It was perceived that gold was the soundest investment in the turbulent market since it has a consistently increase in value over the last decade. In fact it had gained 650% since 1999. This was once true of the real estate market as well. The thing is, gold has no real utility outside of its use in manufacturing certain electronics and its use in jewelry. So the price of gold is mostly fixed to what someone is willing to pay to own it. However, gold is on the decline losing 17% value since 2011. Big investors are pulling out of the market and ordinary citizens are seeing their once foolproof investment dwindle before their eyes.

Last call, you don’t have to go home but you can’t stay here.

It’s sometimes hard for some to accept that this was just a bubble that inflated beyond its true value and not a real consistently sound investment. There will be those who will say this is only a hiccup and gold is worth more than the market appreciates. However, I find in situations like this it’s best to look for the next big foolproof investment bubble. It’s Wampum.

OLYMPUS DIGITAL CAMERA
If you’re from India why are you white?

Wampum, cut sea shells woven together in strings or belts, was once a currency and jewelry of the East Coast Native American tribes. Today Wampum is still around mostly in Native American tourist traps and online retailers. But the real allure to an investment in Wampum is that it is a completely arbitrary item, just like gold. I personally predict that if you get in on the ground floor you stand to make a 1000% return on your original investment in as short as 7 years. At which time I predict the bottom will fall out in the Wampum market and the next new big investment will be these giant stones with holes in the center that early humans decorated their lawns with, doomsday preppers will love these.

Check out the latest addition to my investment portfolio.

 

New York Times

Dow Record High: Significant or Arbitrary?

Notice how the non-Dow news is far more important?
Notice how the single piece of non-Dow news is far more important?

So the Dow is at a record high, after five and a half years of a staggering recovery. What does this mean though? It means that corporate juggernauts are back to full growth potential at the price of high unemployment. The last time the Dow was this high, unemployment rates were between four and five percent, whereas today we are close to 8 (probably significantly higher too, as this doesn’t count long term unemployed. In fact, with the sequester going into full affect and a large number of people losing their federal assistance, watch and see how the unemployment numbers start to drop even more over the next couple of months – it’ll be magic!) So really what this means is that big company’s are making more, with less, and isn’t that just great?

Maybe. Large profits with no one to give it to makes big company’s fidgety, specifically the shareholders. It could prompt a new wave of investment and innovation, which would ultimately lower the real unemployment rate which is ultimately what is best for the economy.  At the same time though, nothing has really changed from a year ago – almost all the company’s on the Dow haven’t shifted strategies, and their profit potentials are exactly the same (which is what the Dow is a measurement of). While this record high may be the confidence needed to increase investment in this economy, it’s not a good measurement of anything really. We’re still a country with a debt crisis, we’re still looking at greater-than-inflation health care costs, a looming higher education bubble, and finally levels of income inequality at levels not last seen since before the Great Depression. The Dow’s arbitrary high is nothing but false hope in an unsustainable economy if you ask me.

Tell us what you think at stepasideshow@gmail.com

How Does Government Debt Impact the Economy?

Classic GW
Classic GW

I’m seriously asking, because I have no idea. Economists all have very differing opinions here as well; some think it’s a huge deal, others think it is a small deal. Personally, I think it is not a small deal, in fact, I think it is of no impact on the overall economy. Here is why.

When was the last time you looked to borrow money? Think back to that moment, whether it was a house, a car, a business loan, student loan, whatever – was there any thought in your head along the lines of “well the country’s deficit right now is growing, so maybe it is not a good time for me to borrow.” I don’t know you, but I am inclined to think this thought was never processed by your brain. And I would venture to guess all the smart business types who are looking for capital to start and grow businesses don’t care about the government debt, because if they have demand for said business, then what does the national debt even matter? Sure, you can say government employees worry because if the fed doesn’t get control of its spending, they may start to cut back on government jobs. But does this matter in the private industry? I suppose it does actually, because if government workers lose their jobs, they’re spending less in the private industry, lessening the demand for private capital. On the contrary, the government can just print more money to keep paying for workers they’d otherwise have to let go, but then of course they are growing the debt and lessening confidence in the private sector. Ahh, but you’re now thinking that printing money will create inflation, however, this is not true as long as the demand for goods and services remains equal. Or if demand actually increases as money is printed, then you could see a situation where we get deflation, while printing currency. In the case of high demand, more people will work and pay taxes and the government debt won’t be such a big deal after all.

Did you follow any of that? No, because modern economics is stupid. It’s a confidence game more than real supply and demand. Go read Atlas Shrugged, drink a bottle of scotch, and set your doomsday clock accordingly.

Real Workers – Not Women or Immigrants

Sorry Rosie, but you're not a real American
Sorry Rosie, but you’re not a real American

In today’s Wall Street Journal, there is an op-ed discussing the myth of the stagnating middle class. The argument is, while middle class incomes have not risen in 50 years (in real dollars), are middle class folk like you and me better off today than we were 50 years ago? The answer to this question is incredibly difficult to answer, and depending what you think a high quality life is, then it could easily go either way. For instance, if your goal is to graduate high school, get a job that can support a family and buy a house, then no – you are probably not part of the middle class that is better off today versus the middle class 50 years ago. However if your goal was to go to college, marry a career driven person, and combined work 100 hours a week to pay off a house you can’t really afford – then yes, you probably are way better off.

That’s my shallow analysis. For an even shallower analysis, lets quote the article:

{..} the average hourly wage is held down by the great increase of women and immigrants into the workforce over the past three decades. Precisely because the U.S. economy was flexible and strong, it created millions of jobs for the influx of many often lesser-skilled workers who sought employment during these years.

Since almost all lesser-skilled workers entering the workforce in any given year are paid wages lower than the average, the measured statistic, “average hourly wage,” remained stagnant over the years—even while the real wages of actual flesh-and-blood workers employed in any given year rose over time as they gained more experience and skills.

If I am reading that right, then the authors here are insinuating that an increase in lower-wage jobs are hurting the middle-class income argument by lowering the average hourly wage. But if there is an increase in lower wage jobs, doesn’t that mean there is a decrease in higher paying jobs? Probably. So what the authors here would define as middle class is simply different on how other economists would define as middle class. All in all, it’s a pretty weak argument because it fails to mention two very big pieces of the big picture, health care costs and housing costs (SPOILER ALERT: they’re way higher today!)

Now onto more important matters from the op-ed, specifically the quote above where they are also insinuating that woman and immigrants are not “actual flesh and blood workers” – glad I’m not a woman or immigrant. So to all you white males out there looking to put your wives in place, be sure to show them a copy of the Wall Street Journal next time you get into a fight over the legitimacy of how hard you do/don’t work at your real job. Be sure to mention that it is your flesh and blood that is creating a stronger middle class for the real America, and isn’t being American what it is all about?

Why Obama Never Needed The Trillion Dollar Coin

"I wonder if the office vending machine accepts one of these.."
“I wonder if the office vending machine accepts one of these..”

If you listened to our latest podcast (and I’m sure you didn’t), you could have heard what we at the Step Aside Show think of the whole trillion dollar coin debate. To quickly reiterate, the trillion dollar platinum coin would be minted and deposited at the treasury so that the treasury could continue to pay the government’s bills. Usually, the government would borrow the money to pay its bills, however our government has a “debt ceiling” and they can only borrow so much before congress votes to increase the ceiling. If you’re a regular reader of the blog, you know Dick Sharpe thought this was a great idea, a way for Obama to completely ignore the GOP and keep the government at work. I on the other hand disagree immensely.

The reason I disagree is quite simple: the debt ceiling exists simply so that the government (mainly the executive and legislative branch) can keep spending under control, so the government does not borrow too much too fast. In theory, this is a good idea because no entity should ever be in a position to borrow too much money in too short a period of time, that’s how people get into trouble. However, when it comes to government, this ceiling is merely symbolic. At the moment, the US government is running a budget built on natural deficits, meaning the laws the country has enacted up to this point cost the country more money than the government is taking in. The fault of this deficit can be blamed on A LOT of people, including past Presidents, wars, greedy bankers, the unemployed, poor/old people, etc. Regardless of fault though, the bills the government has to pay are simply that, bills that have to be paid. So, should the president really use a trillion dollar coin?

No. Why you ask? Because apart from being a completely ridiculous idea, it undermines the government greatly. It’s basically a huge overstep of the executive branch if the president can avoid hitting the debt ceiling simply by printing new money within the system. Some argue that printing the coin increases inflation, which depending on your economic philosophy may or may not be true. Let’s pretend that it doesn’t increase inflation (which I actually believe wouldn’t), it’s still a terrible idea because of the moral principle of the debt ceiling’s intentions.

Funny enough, two pundits I follow very closely – Jon Stewart and Paul Krugman – got into a bit of a spat over the whole ordeal. Stewart essentially takes the side that the idea is ridiculous while Krugman seriously believe Obama should absolutely use the coin to avoid economic problems. I bring this up for no significant reason other than the comedy involved.

Ultimately, Obama’s strategy thus far is perfect in my opinion, and if it wasn’t for re-election hopes in 2011 is something he should have done the first time he needed to raise the debt ceiling. Obama is telling Congressional Republicans that there will be no negotiation, and that if the Congress does not act and raise the limit, the government shutdown that will result will be on their hands, not the president’s. Many thought this was a huge bluff by the president, however I’m willing to bet it’s not a bluff Republican congress people are willing to call. Just today, news of a minor lift in the debt ceiling is being discussed, and leading the discussion is the Any-Rand-loving-conservative Paul Ryan. And if they don’t raise the ceiling, then let the government shut down and watch how fast the citizens of the country start to rise up against the government. It could be exactly what this country needs right now, even though it is certainly not what the economy needs right now. I’ll say that the state of politics in this country is far worse right now than the economy, and if one was in dire need of serious improvement, it’s our government. And what better way to improve government than pissing off a lot of citizens.

v for vendetta 2

One Coin, One Trillion Dollars, and One Big Set of Balls

original

 

In an age where compromise is scarce, creativity and guts is worth their weight in platinum, the idea of using Trillion Dollar Coin from the US mint to allow the US Treasury to guarantee payment on the Nations Debt is just that. Anyone who says this coin is a ridicules option lives in a world of denial where the Debt Ceiling is not a ridicules process. These are also the same people that missed the first day of Economics class in college, where the professor explained that the modern world stopped using commodities as currency half a century ago. The same shitheads also made the following Fox News Graphic:

380_52106678trilliondollarcoinfoxnewsvideo

If used by the Obama Administration this option would also deweaponize the the Debt Ceiling deadline which the House Republicans have used a leverage to force cuts in social programs like Social Security and Medicare. This is all in the name of lowering the National Deficit, which is no longer a problem according to one of the most credible economists in the world.

And if your one of the few intellectual people that think the trillion dollar coin idea sounds too simple to you, then there is a dumber idea. That is that the president can issue I.O.U. which will act like debt coupons but not count against the debt ceiling. This works because people have taken the simple act of counting money and replaced it with a complicated system called “Accounting”. (Accounting is when Gingotts goblins summon up new words for simple things in order to avoid doing things like paying taxes or defaulting on debt payments.)

The fact that people are actual coming up with these notions tells us one thing. The system of governance in this country is fucked. Knowing that republicans will demand spending cuts on already hamstrung social programs in order to raise the Debt Ceiling, and even then it will only happen in the 11th hour bringing the financial markets down the creek with them, there is no option but for the Executive Branch to act unilaterally.