Monday, April 10, 2017

Net migration of people within the United States mirrors the same thing taking place corporately on a global scale

US Property Tax Comparison by State

US Tax Ranking by State
The latest report on tax comparisons within the USA has been released. A report from Attom Datashows just how nuts things are becoming with regard to taxes. Property taxes have become really insane in the North. The average annual property tax bill in Alabama in 2016 was $776 compared to the the highest average is New Jersey where it stands at $8,477.
State Income Taxes
Now filter in the State Income Taxes and what emerges is human nature. For all the people who complain about multinational companies moving offshore and then deny that it is tax related and try to characterize that as simply labor is cheaper, need to look more closely. The multinational companies I restructured we looked at the whole picture. Wages were a small part and only one component. What was the amount of social taxation on top of the wages, property taxes in a region, and then the corporate tax. Ger – it looks like the individual is making the same analysis.
USA Map Migration
The net migration of people within the United States mirrors the same thing taking place corporately on a global scale. They are leaving the highest taxed states and moving to the lower taxes states. Taxes are more than just what you pay, they push up the cost of living because everyone is paying a higher tax rate. I took a friend out with his family down from NJ and the bought ice cream cones. The bill was about half that of what they pay at the Jersey shore. I said see: high taxes ripple through everything within the economy raising the price of everything you buy. The net bottom line – taxes rob much more of your disposable income than anyone actually attributes to government directly.

Wednesday, April 5, 2017

Moment that banks will be unable to lend for 30 years, real estate leverage falls so does price


Vacation Real Estate – Always at the Bottom of the List

Florida-1
QUESTION: I understand that when people lose confidence in government that equities, precious metals and real estate will rise in value. Looking at real estate, will vacation rental properties also rise in value?
RM
Ringling John 1866-1936ANSWER: Generally speaking, vacation properties will not fair as well as basic properties in a reset only because people contract in their spending. The real estate boom peaked in 2007, but that was the over-leveraged  houses for the lower-end. The high-end corrected and then rallied into 2015.75. That has peaked out in REAL TERMS. The nominal values will still rise as a factor of the purchasing power of the currency, but real estate will now fall to third place in the States. Cities are still buoyant generally because of capital flight from overseas. Some places have been attacked politically, such as Australia and Vancouver. In the case of latter, the attack was just local so the foreign capital shifted to Victoria and places like Toronto.
The vacation home in a crunch will perform the worst. The big vacation home bust was 1927. That was the Florida land boom. John Ringling in the mid-1920s, entered the field of land speculation and founded Sarasota, Florida. John was once one of the world’s wealthiest men, yet he died with only $311 in the bank.
The problem with real estate on this cycle is that it has been seriously leveraged. It was FDR who came up with the 30 year mortgage to try to support real estate prices that had fallen to 10 cents on the dollar and sometimes less. If you did not have cash, you could not buy. That measure instigated to support real estate prices has now become the problem in real estate. Values depend upon borrowing. When confidence declines, people fear the future. It is at that moment that banks will be unable to lend for 30 years if there is no bid lacking the confidence long-term.
Vacation homes will be at the bottom of the list. I personally bought what was a vacation second home on the beach. I bought it for 50% of what they paid in 2007. They had a sizable mortgage on it and could no longer afford the payments on a second home. Such is life

Top of the list for destinations are Texas Florida and Colorado

US Population Migrating South to Less Taxed States

USA Map Migration
The US Census report has shown that the net migration from the New York City area has surged during 2016, and that even included myself. Indeed, much more people are leaving the New York region than any other major metropolitan area in the country. Since 2010, the New York area has lost almost 4.5% of its population. This included New Jersey, Connecticut, Long Island, and the lower Hudson Valley. The number of people who left in 2015 was 187,034. Last year, 2016, that number jumped to 223,423. The number of international immigrants settling in the tri-state area declined from 181,551 to 160,324. The international migration has slowed and this trend means that taxes will only rise.
Meanwhile, Cook County, Illinois has lost more population than any other county in the United States from July 2015 to July 2016, according to the latest U.S. Census Bureau report. Clearly, the highest taxed states are losing the most people. Nevertheless, the data clearly shows that the higher the state tax rate, the greater the migration outward.
The State of New York as a whole lost 95,591 people and California came in second losing 93,915 with New Jersey losing 76,175, Illinois lost 52,804, and Michigan losing 47,347.
The three states at the top of the list for destinations are Texas posting a gain of 109,887 people, Florida 61,395, and Colorado 41,501.

Tuesday, April 4, 2017

How to Fix Gov’t in 30 days or less & Why do Smart People Avoid Gov’t


QUESTION:  You once said you could fix the mess in 30 days or less but they would assassinate you. How can you ever make our politicians responsible? My second question is, why are the really smart people not running government?
KW
ANSWER: The term limits are mandatory, but you have to cut off the incentive as well. No pension or salary after one term. People want to run for Congress and you are taken care of for life if you served even just one day. As for taking a cabinet position like Secretary of the Treasury, well you have to sell all your stock in whatever bank you are leaving and because you MUST do this, you get to sell everything tax free. They have rules to exempt themselves from everything.
Eliminate all special perks. Social Security should be for all as should the healthcare. Why should they get benefits we cannot even buy? If you limit the terms to one-time-and-out, eliminate pensions, and you subject everyone to the same benefits even while in office, then you will see things shape up. Drug Companies lobby the most. Politicians need money for re-election. If you make it one-term-and-out, you eliminate the lobbying since there is no re-election and you subject them to the same healthcare we have. Then they will not vote for things that will deprive themselves.
This is basic human nature.
Hunt MoneyAs to why really smart people are not in government? That is simple. Knowledge comes from ONLY experience. I was asked if I would take the position as Chief Economic Advisor in the Bush, Jr. White House. I laughed. First, I had a real company. I could not put that in some blind trust. Then, could you image a confirmation hearing in the Senate? I would have been accused by the Democrats or helping the Japanese and German auto manufactures against GM. They would have had a field day turning that into some sort of treason. On top of that, the only way to gain experience is doing something and that means we must make mistakes in order to learn. Do you keep putting your wet finger in a light socket assuming one time you will not get socked if you just keep it up?
Nobody I know who would be qualified to do anything in banking or the economy would EVER take such a job. Who needs that sort of magnification of every aspect of your entire life? There are only two types of people who will take such jobs. Either you do it for the perks, or you do it because you want to be remembered. You are better off with someone like Trump on that score for he cannot be bribed with money. They either have it and do it for the ego or they do it to get money and status like the Clintons. There really seems to be no in between these days.

The Conflict of Law – USA/England v Europe




Vattel Emer de (1714 – 1767)
COMMENT: I believe you are wrong about the meaning of natural born citizen in you blog Does it Matter If You Are Born Outside USA to be President? You are a natural born citizen only if BOTH parents are citizens.
REPLY: The site you refer to notes the definition which comes from Emer de Vattel (1714 – 1767) who was a Swiss philosopher, diplomat. Those who were trying to make arguments against Obama were relying upon Vattel because it suited their desired result. Vattel’s definition was in his 1758 “the Law of Nations”:
Book I, Chapter 19, section 212, is “Of the citizens and naturals”
The citizens are the members of the civil society; bound to this society by certain duties, and subject to its authority, they equally participate in its advantages. The natives, or natural-born citizens, are those born in the country, of parents who are citizens. As the society cannot exist and perpetuate itself otherwise than by the children of the citizens, those children naturally follow the condition of their fathers, and succeed to all their rights. The society is supposed to desire this, in consequence of what it owes to its own preservation; and it is presumed, as matter of course, that each citizen, on entering into society, reserves to his children the right of becoming members of it. The country of the fathers is therefore that of the children; and these become true citizens merely by their tacit consent. We shall soon see whether, on their coming to the years of discretion, they may renounce their right, and what they owe to the society in which they were born. I say, that, in order to be of the country, it is necessary that a person be born of a father who is a citizen; for, if he is born there of a foreigner, it will be only the place of his birth, and not his country.
blackstone-2
This is all fine and good. However, there is a conflict of law between the English “Common Law” and the law of Continental Europe. This is taught in the very first semester of law.  Emer de Vattel wasNOT any real influence in establishing the US Constitution. That distinction goes to William Blackstone (1723-1780).  Blackstone wrote the Commentaries On The Laws Of England. This is what the framers of the Constitution relied upon for here is the interpretation that the Supreme Court will turn to – Blackstone not Vattel.
When I say, that an alien is one who is born out of the king’s dominions, or allegiance, this also must be understood with some restrictions. The common law indeed stood absolutely so; with only a very few exceptions: so that a particular act of parliament became necessary after the restoration, for the naturalization of children of his majesty’s English subjects, born in foreign countries during the late troubles. And this maxim of the law proceeded upon a general principle, that every man owes natural allegiance where he is born, and cannot owe two such allegiances, or serve two masters, at once. Yet the children of the king’s ambassadors born abroad were always held to be natural subjects: for as the father, though in a foreign country, owes not even a local allegiance to the prince to whom he is sent; so, with regard to the son also, he was held (by a kind of postliminium) to be born under the king of England’s allegiance, represented by his father, the ambassador. To encourage also foreign commerce, it was enacted by statute 25 Edw. III. st. 2. that all children born abroad, provided both their parents were at the time of the birth in allegiance to the king, and the mother had passed the seas by her husband’s consent, might inherit as if born in England: and accordingly it hath been so adjudged in behalf of merchants. But by several more modern statutes these restrictions are still farther taken off: so that all children, born out of the king’s ligeance, whose fathers were natural-born subjects, are now natural-born subjects themselves, to all intents and purposes, without any exception; unless their said fathers were attainted, or banished beyond sea, for high treason; or were then in the service of a prince at enmity with Great Britain.
The children of aliens, born here in England, are, generally speaking, natural-born subjects, and entitled to all the privileges of such. In which the constitution of France differs from ours; for there, by their jus albinatus, if a child be born of foreign parents, it is an alien.
Those who relied upon Vattel to support their argument that Obama was not a natural born citizen simply were looking for someone to agree with them. Then McCain would not qualify either or anyone born to an ambassador while posted overseas or a child of someone in the military stationed overseas. Even in the tax code, Canadians with one single American parent born in Canada were all being sent notices from the IRS that they owed taxes in Washington because they were citizens. I had a friend in Switzerland who married an American girl and they had a son. When he was 13, they took him to the bank to open his first account. The bank refused to allow the child to open an account because he was an American and they would have to report under FATCA to the USA everything he did.
The definition is clearly different from that of Continental Europe. You could have applied for an EU passport even as an American if your grandfather was born in Europe. If your grandmother was born there instead of your grandfather, you were not eligible. The right to citizenship only followed the maleline – not the mother.
There is a huge conflict of laws between USA/UK and that of European which is based upon Canon Law from the Catholic Church. Under the Common Law (USA/UK), the only privilege is that a wife cannot testify against her husband. They can force your children to testify against you. Under Continental Law, nobody in your family can testify against you even a brother or sister-in-law –NOBODY. There are those who argue it is time to change that as well.

Monday, April 3, 2017

USA adopted AUSTERITY and allowed deflation to dominate – the same mistake made in Europe today


QUESTION: Hey Marty,
If the US debt bubble bursts, how does this not affect the banks and insurance companies, as they hold over $1 trillion worth of US debt? Wouldn’t these instances falter also? If they falter, wouldn’t that bring down the entire stock market as well? If this is the case, then how can the stock market rally as you have been stating?
Thanks
J
World Total Public Debt
ANSWER: Everyone focuses constantly on the US, and they tout how $20 trillion will all default. This is just first, NONSENSE, and secondly a gross exaggeration without looking at total global sovereign debt. Total global debt stands at $230 trillion which is more than 300% of total annual Gross Domestic Product (GDP) of the entire world. The United States recorded a government debt equivalent to 104.17 percent of the country’s GDP. If we look at the US debt and narrow the focus to just government debt, then we find that the US accounts for $20 trillion out of nearly $59 trillion or about 1/3rd. Those who keep ranting about the US debt level, have said the same thing at every milestone. First it was $1 trillion back in 1980, Then, $5 trillion, $10 trillion and now its is $20 trillion.
Intra-governmental Holdings of US Federal debt are rarely ever talked about, which includes 230 other federal agencies holding US debt totaling $5.554 trillion, or almost 28% of the entire federal debt. This includes the Social Security Trust Fund, which can only invest in government debt. As of December 31, 2016, here is the breakdown of who owns what:
  1. Social Security Trust Fund & Federal Disability Insurance Trust Fund = $2.801 trillion
  2. Office of Personnel Management Retirement = $888 billion
  3. Military Retirement Fund = $670 billion
  4. Medicare Trust Fund = $294 billion
  5. Misc. Government retirement funds = $304 billion
This is what we would call the asset balance sheet. If this were a business, we would then look to see how much cash it has on hand as well. That amounted to $580 billion as of December 31st, 2016. (Source: Treasury Bulletin, Monthly Treasury Statement, Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, U.S. Department of the Treasury, December 2016.)
Now, the remaining debt as of December 31st, 2016 held outside the government amounted to $14.403 trillion. Foreign governments and investors hold nearly half of that figure and 25% is held by yet other governmental entities non-federal, which are state and local governments, but legally also includes the Federal Reserve since it is technically not an agency. Now, looking to the private sector, about 15% is held by mutual funds, private pension funds, savings bonds or individual Treasury notes. Businesses own only about 10% of the national debt, which includes the banks and insurance companies. This also would include various trusts and investors holding T-Bills on deposit for trading. Then we have about 30% of the debt that is held by foreign holders, which includes governments around the globe as part of their foreign reserves. So here is what this looks like:
  1. Foreign – $6.281 trillion
  2. Federal Reserve – $2.463 trillion
  3. Mutual funds – $1.379 trillion
  4. State and local government, including their pension funds – $874 billion
  5. Private pension funds – $544 billion
  6. Banks – $570 billion
  7. Insurance companies – $304 billion
  8. U.S. savings bonds – $169 billion
  9. All Others = $1.349 trillion*
Now, a close review of this balance sheet shows that Social Security and all retirement/pension funds, hold almost 50% of the national debt. Let’s get to the bottom line. In the proposition that the United States actually defaulted on its debt, yes about 30% is held by foreign reserves and that would mean that the world monetary system would collapse. It is highly unlikely that such an event would ever take place and it most certainly is even less that the total debt owed by emerging market which stands at about 50% greater than that figure. Emerging Market corporate debt share of the global credit market has been increasing and now accounts for about 18% of all U.S. dollar-denominated corporate debt in the world. Emerging Market debt has increased 300% since 2005 alone. The USA has the biggest economy and the most viable. Yes, if USA defaulted on its debt it would be lights out for the entire world. However, current and future retirees would be hurt the most and that would provoke civil unrest like you have never seen.
UBLST-25 MA
The risk is by no means that the USA defaults. The risk is that the defaults start not in the core economy, but it ALWAYS begins from the outside and spreads inward to attack the core. The foreign bond defaults in 1931 is what created the Great Depression and it did not NOT because the US defaulted, but because the USA adopted AUSTERITY and allowed deflation to dominate – the same mistake made in Europe today.

  • * Individuals, brokers, dealers, bank personal trusts and estates, corporate/non-corporate businesses, various government-sponsored enterprises, and other misc investors. (Sources: “Factors Affecting Reserve Balance,” Federal Reserve, January 18, 2017. “Treasury Bulletin,” Table OFS-2, Ownership of Federal Securities, U.S. Department of the Treasury, June 2016.)

Allowing migration during a period of economic decline is a highly dangerous mix

Politicians – Courts – The Corruption of the Rule of Law in 1760s

Regulator Uprising 1771
William Tryon (1729-1788) was the Governor of North Carolina from 1765 to 1771 and the Province of New York from 1771 to 1780.  He is best known in North Carolina for his suppression of the Regulator Movement, which some see as a precursor of the American Revolution.  The Regulators were rebelling against increased taxes by Tryon as well as corrupt activities by tax collectors in the Piedmont and western part of the colony.
The War of Regulation sprung from a dramatic population increase in North and South Carolina during the 1760s, caused by a migration from the larger eastern cities to the rural west pressured by an economic decline. The rural section of the colonies were predominantly an agricultural economy. As merchants and lawyers began to move west, this began to alter the agricultural economy. This internal migration within the colonies was augmented by a new Scots-Irish migration to America who also sought to move into the rural region.
I have warned that allowing migration during a period of economic decline as has been taking place in Europe, is a highly dangerous mix. Here during the 1760s, the rural agricultural community was suffering from a deep economic depression caused by severe droughts throughout the previous decade. The farmers lost not merely their livelihood, but also their own direct food source. As income was cut off due to the crop failures, the farmers fell into debt. The merchants turned to the lawyers using the court to settle disputes. The debt defaults and the influx of lawyers increased the legal prosecutions more than 15 times. Where there had been just seven debt cases annually, this jumped to 111 in Orange County, North Carolina, alone.
Many court cases were being used to seize property. Farmers lost their homes and property to the lawyers and merchants and this fueled the animosity toward the migrants. The lawyers used the law to create an unjust advantage. The politicians were involved and this created the image of what people saw as a ‘courthouse ring’, with corrupt officials benefiting from the foreclosures.
The resentment built continually and finally the framers rebelled and took up arms. This armed conflict erupted at the Battle of Alamance in 1771, where Tryon’s soldiers slaughtered the farmers.  Tryon even executed the leader and some were pardoned. Then, Governor Tryon raised taxes once again to pay for the conflict.
This resentment remained in the minds of the people. This is often considered to be a precursor to the American Revolution.