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October 25, 2014 / 1 Heshvan, 5775
At a Glance

Posts Tagged ‘debt’

Romney Can’t and Obama Won’t Do What America Needs (Podcast Pt. I)

Friday, October 19th, 2012

Romney may say the right things, but will he really be able to affect change? And Obama says… and does… the wrong things, and he has no reason to change. Democrats complain that Romney has no sympathy for the unemployment problem.

Of course this is ironic since he has been hunting for a new job for the past year. In the recent debate, he stressed how he would work to improve the economy to help the middle class. He wants to cut out deductions, lower taxes, and simplify the tax code. Great idea, but that’s not how Washington politics work. With so many special interests, will he really be able to make the required changes? It doesn’t look good.

On the other hand, Obama wants to spend his way out of the problem. He gets the money from borrowing the same way overspending American citizens fund their personal largess. Instead of paying back debt that he racked up, Obama pays the minimum monthly balance. It’s like if you pay $50 on your $5,000 credit card debt. Based on the logic of Nobel Prize winning economist Paul Krugman, the President feels he can double the amount of debt since he’d only have to make $100 monthly payments (or, in the case of the United States debt, make that an increase from $30 billion per month in interest payments to $60 billion!). This system of borrowing money will probably continue to work until at least the  election date, and maybe for a few more years. But at some point, that debt must be paid off.

On this week’s Goldstein on Gelt radio show, I asked former Chief Economist for the International Monetary Fund (IMF) and Harvard professor Ken Rogoff about the American Debt Crisis. He gave a great explanation.

Here’s part one of the show (below). Part two will be posted next week.

Moody’s 2012 Report and Israel

Sunday, September 9th, 2012

While Israel is concerned about growing budget deficit and unemployment, Moody’s September 3, 2012 annual credit report on Israel, states:

*Israel’s A1 government bond rating and stable outlook are underpinned by the country’s high economic, institutional and government financial strength. [However], the rating is constrained by significant social and political challenges, which lead to moderate susceptibility to event risk….

*Israel’s high economic strength is supported by its relatively high GDP per capita (US$31,200 in 2011) and its economic resilience, which has been illustrated in recent years during frequent economic and political shocks. However, this resilience is being challenged once again by the ongoing euro zone debt crisis and the concurrent slowdown in the global economy.

*Moody’s points out that the Israeli economy’s pace of recovery following the global recession in 2009 has slowed as the contribution of net exports became a drag on the economy last year for the first time since 2007, a trend continued into the first quarter of this year. Capital inflows have diminished and the current account surplus has disappeared in 2012, the latter partly a result of the need to replace Egyptian gas imports following that country’s revolution. As a consequence, the real GDP growth rate dropped to 3% in H1 2012 from an average of 4.8% during 2010-11. Nonetheless, the country’s specialized export sector is well-positioned to rebound quickly should the global environment normalize….

*Moody’s assesses Israel’s government financial strength as being high thanks to the improving debt trajectory, the favorable debt composition and the comfortable debt service schedule…. Additional spending has been allocated to address the acute problems in the housing sector, related primarily to affordability. Other social spending hikes in response to last year’s widespread popular demonstrations and secular increases, mainly associated with demographic trends, will require strict prioritization to conform to the fiscal rule that sets a ceiling on the growth of government spending.

*Moody’s judges Israel’s susceptibility to event risk as moderate based on the political risks facing the country, both domestic and external. The Arab Spring revolutions have ironically created problems for Israel, for whom the 1979 peace treaty with Egypt has been critical to its security framework. The violent uprising in Syria and concerns about Iran’s nuclear program, have led the government to maintain a high level of defense spending, representing about 15% of total government expenditure. However, the negative impact of the cutoff of Egyptian gas supplies on the Israeli balance of payments will be more than offset as Israel’s own gas production increases substantially between 2013 and 2016.

On the other hand, here’s Moody’s August 30, 2012 assessment of the economic performance of the G-20 countries:

*We expect the G-20 advanced economies to grow by around 1.4% in 2012 and 2.0% in 2013, comparable to the 1.3% growth in 2011 and significantly lower than the 3.0% growth in 2010. We expect the prolonged financial market volatility stemming from the sovereign debt crisis in the euro area to continue to depress consumer and business confidence, and the high level of uncertainty to continue to weigh on investment and hiring decisions. Along with ongoing deleveraging efforts in the public and private sectors, persistently high unemployment levels, and real-estate market weakness in a number of countries, these developments will continue to constrain growth in advanced economies.…

*The risk of a deeper than currently expected euro area recession remains significant. The risk of further financial market turbulence in the euro area also remains elevated, given the need for fiscal consolidation measures in an environment of weak economic growth, which raises implementation risks. Furthermore, political and financial uncertainty in Greece and potential funding stress in Spain and Italy have increased the risk of severe economic and financial dislocations in the euro area….

Visit Yoram Ettinger’s website, www.theettingerreport.com.

Universal Education or Universal Competence?

Sunday, September 9th, 2012

Education was the defining paradigm of the 20th Century model of social progress, particularly the scientific education distributed through cells and classes where trained educators teach from prepared texts imparting the same knowledge to every students through the same methods.

Our educational system is nothing if not extensive. We, collectively and individually, spend fortunes on it. The average cost of a four year degree is approaching 100,000 dollars and that isn’t counting textbooks (1,100 per year) and the astronomical rates of interest on student loans. Total student loan debt has doubled in the last seven years and is approaching 300 billion dollars. The average student under 30 owes around 20,000 dollars as education has become the new mortgage.

Senior citizens who came of age in the age when college became universalized are having their social security payments reduced to cover their student loan debts proving that a college education really does last for a lifetime.

The individual expenses for an education are trivial compared to the collective burden. The budget for New York City’s Department of Education is 24.4 billion dollars. That is nearly the GDP of Vermont being expended on the schools of a single city. It’s the GDP of 60 percent of the countries on the planet being shoveled into a single school system of 1.1 million children under the banner of “Children First” that amounts to 40 percent of the city budget.

New York spends 11,572 dollars per pupil. For now the home of Wall Street can afford this kind of insane waste, closing the budget shortfall by finding a way to impose a 300 million or 500 million dollar fine on a major bank or brokerage. Most other places can’t. Across the river, New Jersey’s disastrous schools are bleeding taxpayers dry with murderous property taxes to fund failing schools.

The same story is repeated across the nation where homeowners are bled to fund swollen pension funds and failing urban schools. Gimmicks such as “weighed student funding” are used to divert as much money as possible from successful local schools to unsuccessful urban schools. People are losing their homes so that another high school in Newark can roll out more afterschool programs and Michelle Obama’s idea of nutritious lunches.

Politicians take for granted that education is the road to empowerment and equality. Obama has read poems off his teleprompter about the wonders of education as the only means of ensuring “our” children’s future. There is nothing revolutionary about that. Every politician takes it for granted that education means empowerment. But does it really?

Universal education was the panacea of every socialist state. By NEA rankings the Soviet Union had a better education system than we do. Its system routed as much of the population as possible through higher education and degree mills making it better educated, on paper, than the Yankee running dogs of the decadent West. And yet the USSR was behind the United States in every possible area of life.

The more you universalize education, the lower the value of that education becomes. When the goal of education is not to teach, but to graduate, then the educational system becomes a cattle run which exists only to move students through the system and then out the door through classroom promotion. The High School education of today is inferior to the Elementary School education of yesterday and the four year college graduate of today couldn’t even begin to match wits with a high school graduate from 1946. College has become the new High School. Graduate school is the new college. If we keep following the European model, then two decades from now, everyone will be encouraged to get a Master’s Degree which will be the prerequisite for most jobs and also be completely worthless.

The current model is that the more education you have, the better you are and the better that the society you live in will be. Everyone is expected to finish High School and as many as possible are encouraged to go to college, even if they’ll die before they pay off the student debt and even if more people go bankrupt subsidizing other people’s education. And at some point when everyone has six years of higher education, we’ll have a utopia of flying cars, glowing sidewalks in the sky and 5 minute tours of the moon.

Makor Rishon to Buy Maariv?

Thursday, September 6th, 2012

Globes is reporting that Shlomo Ben-Zvi, one of the owners of the religious Israeli newspaper, Makor Rishon, is in advanced talks with Maariv owner Nochi Dankner to buy the Maariv newspaper.

The report said that Ben-Zvi doesn’t plan to buy the debt of the paper, just the assets, including the Maariv brand name and control.

The deal is estimated in the tens of millions of shekels.

My Big Fat Jewish Wedding

Tuesday, August 28th, 2012

צאנז 111 from bhol on Vimeo.

Not being a Chasid of his (or Chasid of any kind) I don’t really know much about the Munkatcher Rebbe. But if he is like most other Chasidic Rebbes, he will have a huge blowout of a wedding next Monday for his grandson – similar to the one in the above video for the Sanzer Rebbe. The size of those crowds are comparable to those of Presidential inaugurations. Crowds numbering 10,000 people are not uncommon. An article in Matzav.com adds:

The chuppah will take place on the promenade in front of the shul on an especially erected elevated chuppah to ensure that all participants can see and hear all that transpires.

Following the chuppah, special buses will ferry the throngs of chasidim to the cavernous Palace Ballrooms on McDonald Avenue where the celebration will continue. During the meal, thousands of chasidim and well-wishers will have the opportunity to personally wish mazal tov to the Rebbe and mechutanim.

Whenever I see one of these events, I am reminded on the so called “Wedding Takanos”. These were guidelines established by members of the Agudah Moetzes (but not officially by the Moetzes themselves if I understand correctly) in order to combat a phenomenon where tons of money and resources are spent on lavish affairs.  They include*:

The Wedding:Typical families may only seat up to 400 invited guests at the seudah. The kabbolat panim smorgasbord should be limited to basic cakes, fruit platters, a modest buggest (sic), and the caterer’s standard chicken or meat hot dishes. The seuda menu is limited to three coures (sic) plus a regular dessert.

No Viennese table. No bar.

The Music:A band should consist of a maximum of 5 musicians or four plus vocalist. Recommended: a one man band.

Flowers and Chupa Decor: Total cost should not exceed $1,800. It is one thing when wealthy people have a lavish wedding. But the “Keeping up with the Cohens and Katzes” factor has caused some people who cannot afford it to do the same thing. They borrow money –sometimes putting second mortgages on their homes just to have that lavish wedding for their own children. And ‘prove to the world’ how successful they are. All that debt for keeping up an image – and one day of fun!

Contrast this with the tuition crisis. The parents who go into huge debt to make lavish weddings for their children are the same parents who ask for – and receive scholarships based on their actual income.

I need not go into the details of how unfair that is to schools whose huge budgets go mostly to pay teachers. Teachers that deserve to be paid a lot more than they actually are paid. These budgets require huge tuition bills which are more or less based on a cost per child basis to the school. A typical Orthodox family with four children will generate a tuition bill of at least $40,000 per year and a lot more in many schools.

Most people do not earn enough to pay that kind of after-tax money and require scholarship assistance. Thus placing a burden on the school to raise enough the difference between what parents pay and what they should pay. In many cases fundraising goals are not, putting schools in to debt. Year after year of accumulating debt in order to just meet the payroll obligations to their underpaid teachers.

One can easily see the absurdity and gross unfairness of parents borrowing money way over their heads to pay for a lavish wedding (just to keep up with the Katzes) who have in the past asked for and gotten scholarship assistance.

Although these wedding Takanos are well intentioned, I’m not sure they have been all that effective. Which means that there are still people borrowing money for weddings they can’t really afford.

As an aside I have never been a fan of these Takanos because I believe that wealthy people have a right to spend their money as they choose provided they meet all their financial obligations. And the wealthy people I know do meet their obligations and a lot more. The problem is with those who are not wealthy but for some reason feel the need to project that image. If a Takana could be made so that the wealthy would not be affected, I might support it. But Takanos don’t work that way.

For Love or Money – The Real Cost of a Wedding

Sunday, August 26th, 2012

When your child was a newborn baby, you probably thought that this moment would take forever to arrive. Think of all of the effort that you have put into your child over the years, with so many hopes and prayers that they would grow up to find a suitable spouse and one day you would proudly stand under the chuppah and watch the happy couple tie the knot.

Unfortunately, despite all of the hopes and dreams, many parents either don’t or can’t put so much effort into saving the money that goes into paying for the wedding. There could be many reasons for this. Maybe the parents didn’t think too much about it, and because the thought of a wedding always seemed so far away, they woke up too late and did not invest their money sensibly and in time. On the other hand, the parents may have tried their best to put money aside to pay for their children’s weddings, but try though they did, there was simply not enough. Perhaps their income was just not high enough, or maybe some other events happened within the family, like a sudden illness, that consumed all of their savings unexpectedly before they could be channeled into a wedding.

Unfortunately, another huge factor in this equation is peer pressure. Very often, families feel that they have to keep up with the Joneses in a big way. It becomes very important to them, for example, to hold the wedding in a certain, fancy hall. Even though the other hall down the road is large enough for their needs, “no one” gets married there because it is not quite as upmarket as the most popular hall in town, and therefore the parents feel the need to find the extra few thousand dollars that it costs to use the fancier place. And then of course, if you are using the fancy hall, then you can only take a fancy caterer, and so on and so forth.

Finding those extra dollars is not always so easy. And this is where the debt trap comes into play. As a financial adviser, I have often met families who are drowning in debt. To keep up appearances, they decide to borrow money from a loan fund. But when the time comes to pay off the debt, their financial situation has not suddenly improved. In fact, the additional expenses of the wedding have gobbled up most of their resources, and there is nothing left to pay back. So guess what happens? They go to another loan fund to obtain money to pay off the first debt … and so on and so forth until this unfortunate family falls even more deeply into a financial black hole.

Let’s go back to the beginning of this story. If the family had been content to make a more modest wedding, with fewer trimmings, they would not only have saved several thousand dollars, but they would have also saved themselves a lot of heartache.

Marriage is not meant to be a financial free for all, and using a topflight caterer will not guarantee anyone’s future happiness.

Before you decide to drown yourself in debts from banks, gemachim, and elsewhere, take a few steps back. Think about how much you really can afford to pay before taking on the bills, and where you are going to find the money. And once you know how much money you really have at your fingertips, decide which kind of wedding you are prepared to make.

For more information on how to plan a wedding wisely, read this article at the Profile Perspectives site.

Social Insecurity

Wednesday, August 22nd, 2012

Note to readers: A few weeks ago, Moshe Silman set himself alight at a so-called social justice protest. He was in debt to Israel’s Institute for Social Justice (the state’s social security agency), and his truck, the means of his livelihood, was confiscated by the agency as a result. Silman eventually died of his wounds, but the debate over social justice rages on in Israel.

More than any other reason, “social justice” killed Moshe Silman. Here’s why: Who confiscated his truck and for what purpose? Social security. After all, what is social security, if not the mechanism established by the state to ensure so-called social justice? It is an institution authorized to take from the “haves” and give to the “have-nots.” And from whom will the Institute for Social Justice take if not from the owner of a moving company? And to whom will it give the value of the truck? To the tycoons? Of course not. It will give the truck’s value to the have-nots, or to those who know how to hide what they have.

The story of the Institute for Social Justice and the truck of the “tycoon,” Moshe Silman, is the precise story of socialism. It is a flashing warning sign for everyone who has fallen captive to the charms of the social justice movement.

They want many more institutions for social justice and many more Moshe Silmans, from whom these institutions can confiscate the victims’ only source of livelihood. Most important of all, they want many more poor people who will justify the existence of more and more institutes for social justice. They desire for Israel to turn into one big commune – and be finished with it.

When tycoon Arcadi Gaydamak erected a tent city for the victims of Ehud Olmert’s War of Convergence, then “social” defense minister, Amir Peretz, bellowed this at him: “We will not let you take over our poverty!”

Poverty is an asset. Public outrage over it can be directed at those who open businesses, produce jobs (and income), and pay taxes. Then more and more social justice mechanisms can be established. More and more income-producing property is stolen from more and more Moshe Silmans, poverty is translated into political fortune, and the new social justice warriors are born. The productive segment of society shrinks, poverty grows, and those with the means to produce more income look to invest in markets that boast more freedom. The economic ship falls over on its side, is inundated with the poison of legalized robbery, namely socialism (or in its purer form, communism), and begins to sink.

The social justice protesters are right about the fact that most of the money in Israel is concentrated in the hands of just a few monopolies. The price of housing is sky-high, food is unjustifiably expensive, and the salary gap between rich and poor is second only to that of the U.S. But the solution for this illness is just the opposite of the centralization that the social protesters demand.

The solution is to allocate Israel’s land to the public and close Israel’s Land Authority; privatize the Water Company, Electric Company and banks – its assets not to big business but straight into the public’s bank accounts. Social security, like a car insurance company, should work like a commercial firm.

The economic strain is real. But its roots are in a completely different place. Moshe Silman was a man without a family or community. The socialists who led Israel when it was founded erased the institution called “community,” turning Israel into one big community. As a result, the individual has become very lonely, bereft of the buttressed walls of community that the largely religious public still enjoys.

Over the past 15 years, the institution called “family” has also been diminished. No longer is it politically correct to note that someone is widowed or divorced. Nowadays, they are “single-parent families.” Even a couple of the same gender is considered a family. Everything is family – so nothing is family.

The woman makes the home; the man makes the family. Feminism and homosexuality have eliminated manhood, thereby eliminating the family. The
protesters are searching for family. They are searching for a father figure. With no one to turn to, they turn to the state. Standing there together, the protesters replace the feeling of family – if only for a few fleeting moments. The children stand there in unison, shouting out for Mom and Dad – in this case, the state.

The state cannot replace family and community. But the protesters don’t know anything else. The traditional family has been taken from them, and the state has been empowered in its stead. The dominant elements of the protests do not stem from poverty-stricken areas, but from the heart of Tel Aviv – where there are no more men and no more families.

Printed from: http://www.jewishpress.com/indepth/columns/moshe-feiglin/social-insecurity/2012/08/22/

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