Purpose:
To give America's future
a better chance to succeed
than our forefathers
gave our parents
and our parents gave us.
Greensboro CPA CPE "What Could Happen
After What May Happen Next"
September 21, 2010
8:30am to 4:15pm
Drury Inn & Suites,
Greensboro, NC

$100, 8 Hour CPA CPE "What Could Happen
After What May Happen Next"
September 9, 2010
8:15am to 4:30pm
Days Inn, Raleigh-Airport Research Triangle Park
1000 Airport Drive
Morrisville, NC
$100, 8 Hour CPA CPE "What Could Happen
After What May Happen Next"
September 2, 2010
8:15am to 4:30pm
Drury Inn & Suites,
415 W. T Harris Boulevard
Charlotte, NC

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Why would some of one generation
want to covertly confiscate another’s wealth?
It is grossly irresponsible for the baby boom generation
to expect Generations X and Y
to be saddled with our national debt,
our trade debt, and our infrastructure debt,
and the retirement debt created by baby boomers
enjoying long retirements supported by future tax increases
on their children.
Rob Atkinson
The Atlantic
If workers earn, pay taxes, spend, save and invest,
while retirees divest, downsize, budget
and draw income and healthcare benefits,
what’s going to happen when more retirees want
what fewer workers may not be able to deliver?
Are Baby Boomers going to get more or less than they think
if the supply of what they want to sell exceeds demand,
as they exchange assets for needed goods and services
at relatively the same time?
Loss is nothing else but change,
and change is Nature’s delight.
Marcus Aurelius Antoninus Augustus
Roman Emperor
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August 31st, 2010 | Tags: Legal Ethics, Social Security
The Treasury Department has for decades
borrowed money from the Social Security trust fund
to finance government operations.
If it is no longer able to do so
it could be forced to borrow an additional $700 billion
over the next decade
from China, Japan and other investors
“Over the past 25 years,
the government has gotten used to the fact
that Social Security is providing free money
to make the rest of the deficit look smaller.” said Andrew Biggs
a resident scholar at the American Enterprise Institute
“Now they’ve essentially got to pay their own way
at least a little more fully…”
“Instead of Social Security subsidizing the rest of the budget,
the rest of the budget will have to subsidize Social Security.”
Recession Puts a Major Strain On Social Security Trust Fund
As Payroll Tax Revenue Falls, So Does Surplus
Lori Montgomery
Washington Post
If Bernard Madoff
distributed money received from new investors to older investors,
until there wasn’t enough money to continue,
does Social Security operate under the same structure
with mandatory participation?
If a private financial institution
were as reckless with its fiduciary responsibility
as Congress has been with Social Security and Medicare,
there would be howls of indignation, demands for regulation
and calls for the resignation and prosecution of those responsible.
Arnold Kling
Was it justifiable for the baby boom and their elders
to promise themselves tens of trillions of unfunded benefits
like Social Security, Medicare and Medicaid,
for future generations to pay for?
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August 28th, 2010 | Tags: Economic Ethics, Ratings
The United States government needs to take steps to preserve its top AAA-rating…
…”It is very important for the credit standing of the United States that the Congress considers very carefully what the fiscal commission proposes,” John Chambers, chairman of S&P’s sovereign rating committee, was quoted as saying.
“It is very important for Congress to take the required steps.”
S&P…has repeatedly warned about the gigantic deficit and the debt burden in the world’s biggest economy, calling it a challenge for the government.
…the U.S. does not have unlimited fiscal flexibility and the best-case scenario for the U.S. would be for its debt-GDP ratio to peak at around 80 percent, although there was a chance it could exceed 100 percent.
…On Tuesday, S&P cut Ireland’s long-term rating by one notch to ‘AA-’, the fourth highest investment grade, and assigned the country a negative outlook saying the cost to the government of supporting the financial sector had increased significantly.
Reuters
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We Lost Track of $25 Billion?
I have been keeping an eye on the monthly numbers for the Social Security Trust Fund…
…There was no logical explanation for the continued drop in YoY payroll tax receipts.
Two important sources have “explained” this drop. Both the SSTF [Social Security Trust Fund] and the CBO [Congressional Budget Office]have confirmed that somehow there was a miscount over at Treasury for $25-29 billion.
Receipts from social insurance taxes
are also expected to decline this year
by $29 billion (3.2 percent) from last year,
mostly because of an adjustment by the Treasury
to correct for the allocation of receipts in earlier years.
The explanation from the CBO
The estimated decline in trust fund income from 2009 to 2010
is due to the economic recession
and to an expected $25 billion downward adjustment to 2010 income
that corrects for excess payroll tax revenue
credited to the Trust Funds in earlier years.
The explanation from the SSTF
…This is not supposed to happen. In the monster numbers the government tosses around this is not a big deal. But $25b is still a lot of dough.
…There is not an adequate explanation of what has happened. What the hell does “earlier years” mean? (Note the common language by both CBO and SSTF)
…this money was invested in Special Issue Treasury securities. It earned interest on those securities. So Treasury created the $25b and gave it to the TF in cash, then the TF invested it back with Treasury. But there was no money. It was a double count. One would have thought that Treasury actually balances and confirms its cash accounts from time to time. This gets back to the question how long this error has been going on.
-In my opinion the SSTF has misrepresented its financial condition to the public and to Congress for more than eleven months. Faced with an embarrassing $25billion restatement what do they do? They bury the loss. They have artificially reduced reported monthly payroll tax receipts by approximately $2b per month for all of 2010.
That is not how a loss of this magnitude should be handled. A public announcement and a one-time loss would have been the appropriate way to account for it.
…If a public company played fast and loose with top line earnings to obfuscate a bottom line loss there would be hell to pay. The market would take the stock out in the woods and shoot it. The SEC would fine them 10% of what they hid. The press would have a field day and anyone near the cover up would be forced to resign. But this is D.C.
Bruce Krasting
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…Whose judgment do you trust more:
that of the American people or America’s political leaders?
Has the federal government become its own special interest group?
Do government and big business often work together
in ways that hurt consumers and investors?
Those who identify with the government on two or more questions are defined as the political class…
Before the financial crisis of late 2008, about a tenth of Americans fell into the political class,
while some 53% were classified as in the mainstream public.
The rest fell somewhere in the middle.
Now the percentage of people identifying with the political class
has clearly declined into single digits,
while those in the mainstream public have grown slightly.
A majority of Democrats, Republicans and independents all agree
with the mainstream view on Mr. Rasmussen’s three questions.
“The major division in this country is no longer between parties
but between political elites and the people,”
Scott Rasmussen
His recent polls show huge gaps between the two groups.
While 67% of the political class believes the U.S. is moving in the right direction,
a full 84% of mainstream voters believe the nation is moving in the wrong one.
The political class overwhelmingly supported the bailouts of the financial and auto industries,
the health-care bill, and the Justice Department’s decision to sue Arizona
over its new immigration law.
Those in the mainstream public just as intensely opposed those moves…
…”[Obama] kept citing Congressional Budget Office projections
that his [healthcare] plan would save money and cut the deficit…:
60% thought it would raise the deficit
and 81% thought it would cost more than CBO projected.”…
…”This will be the third straight election
in which people vote against the party in power,”…
Scott Rasmussen
John Fund
Wall Street Journal
If Gazelles need water and grass,
and Cheetahs need water and Gazelles,
and an abundance of sustenance leads to more Gazelles,
should more Gazelles and water lead to more Cheetahs?
If too many Gazelles relative to water and grass lead to fewer Gazelles,
do fewer Gazelles = fewer Cheetahs?
If Cheetahs and Gazelles were people,
who would be who?
George Hartzman
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China’s Looming Real-Estate Bubble
A massive Keynesian spending program has misallocated capital and set the stage for a crisis.
…there is mounting evidence that Beijing has misallocated vast amounts of capital, touching off a real-estate crisis that could yet drag the world’s second-largest economy down to earth.
When the global marketplace went into meltdown mode two years ago and Chinese exports dropped off, Beijing mounted a stimulus several times bigger relative to the size of its economy than in this country. It announced a four trillion yuan ($586 billion) stimulus for infrastructure projects and housing developments. Some of the stimulus was used to encourage local governments to lend money to state-owned companies to develop housing complexes, roads and bridges, on the theory that these are big employment generators because they boost heavy manufacturing—steel, cement—and other sectors of the economy.
Beijing also lowered capital reserve requirements for its state-owned banks ordering them to dole out loans to “support growth.” Though official data are unreliable, in 2009 Beijing apparently handed out somewhere close to 10 trillion yuan in new loans—more than twice the year before—and expanded the country’s total loan portfolio and money supply by one-third…
…Fueled in part by this massive injection of liquidity, housing prices that had started dropping due to the recession began to soar again. Over the past year they increased nearly 12%, according to the latest figures from China’s National Bureau of Statistics. So many middle-class Chinese (especially young couples wishing to move out of their parents’ home) are being priced out of the market that their travails became the subject of a popular TV series called “Dwelling Narrowness.” Beijing banned the show, fearing it would cause unrest.
…almost 25% to 30% of private commercial and housing stock in China is vacant. Entire cities, such as Ordos in inner-Mongolia, erected literally from scratch, stand empty.
“Chinese treat homes like gold bars buying multiple units as a store of value,” notes Mr. Chovanec. Chinese avoid the stock market because it is still volatile and risky, and banks and bonds offer a low yield. Hence, Chinese are content to buy homes and let them sit because, thanks to the absence of property taxes, holding costs are negligible. Having never experienced a housing slump since China privatized its housing market in the 1990s, they believe that home prices only rise…
…backers of China’s stimulus believe there won’t be any serious economic downside when the bubble bursts…
…While Chinese homeowners are not generally leveraged, those who buy second homes do finance them. And developers, including local governments and state-owned companies, are massively leveraged. This poses a big problem—Shen Minggao, Citigroup’s Hong Kong-based China economist, estimates in Bloomberg Businessweek that at least 2.4 trillion yuan of the stimulus is already in nonperforming loans.
China’s autocrats understand that they have a bubble on their hands. They’ve mandated minimum down payments of 50% on second homes and are considering property taxes to rein in speculative purchases. However, this will mean that the houses put on the market will find fewer buyers.
Beijing is in a dilemma. It can cut spending and rein in its monetary expansion, releasing over time capital for more productive endeavors (especially if it opens up hitherto closed investment options) and putting the economy on a healthier footing. However, that would mean slower growth, lower home values, rising unemployment and potential political unrest. Alternatively, it can buy a few more years of faux-growth and stability by propping up the real-estate market—and risk making the day of reckoning far worse when it arrives…
…Pouring liquidity into real estate is the Keynesian equivalent of digging ditches and filling them with stones…
Shikha Dalmia and Anthony Randazzo
Reason Foundation
Wall Street Journal
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FDA Not Testing Gulf Seafood for Mercury, Arsenic or Other Heavy Metals Because “We Do Not Expect to See an Increase Based on this Spill”
Congressman Markey’s subcomittee…got the Food and Drug Administration to admit that fish are not being tested from oiled areas…
The FDA also admitted that it is not testing for mercury, arsenic or other toxic heavy metals, because – wait for it – the FDA doesn’t expect to see an increase of these toxins from the oil spill…
The FDA’s statement is similar to NOAA Administrator Jane Lubchenco’s recent assertion that oil doesn’t bioaccumulate in fish, and that fish naturally “degrade and process” the oil.
The FDA also admitted that it is not testing for the most toxic bioaccumulating metabolites of polycyclic aromatic hydrocarbons.
George Washington
via Tyler
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August 22nd, 2010 | Tags: BP, Oil Spill, Political Ethics
BP oil spill: US scientist retracts assurances over success of cleanup
…White House claims that the worst of the BP oil spill was over were undermined yesterday when a senior government scientist said three-quarters of the oil was still in the Gulf environment…
…A NOAA team reported two weeks ago that just over a quarter of oil remained in the Gulf as a light sheen on the surface or degraded tar balls washing ashore…
Looking for the oil? NOAA says it’s mostly gone
…the government said…that the mess made by the BP oil spill
…is mostly gone already.
The National Oceanic and Atmospheric Administration
and the U.S. Geological Survey announced
…that only 52.7 million gallons of oil are left in the Gulf.
That is about 31 percent of the 172 million gallons
that spewed into the water from the broken BP well.
What’s left in the water
is still almost five times the amount spilled by the Exxon Valdez…
“I think it is fairly safe to say
… that many of the doomsday scenarios that we talked about
and repeated a lot have not and will not come to fruition,”
White House spokesman Robert Gibbs said
at a briefing with NOAA’s top scientist.
The federal calculations are based on direct measurements
for only 18 million gallons of the oil spilled
the stuff burned and skimmed.
The other numbers are “educated scientific guesses,”
said NOAA emergency response senior scientist Bill Lehr…
Bill Lehr, a senior scientist at the National Oceanographic and Atmospheric Administration (NOAA) departed from an official report from two weeks ago which suggested the majority of the oil had been captured or broken down.
“I would say most of that is still in the environment,” Lehr, the lead author of the report, told the house energy and commerce committee.
“This is just way too neat,” said Larry McKinney,
director of the Texas A&M University research center…
“How can you even do this at this point?
There’s a lot of oil still floating out there.”
McKinney said he most worried that this overly optimistic assessment
would cost the government
and save BP
billions of dollars in the damage assessment process.
“BP attorneys are placing this in plastic and putting this in frames.”
The growing evidence that the White House painted an overly optimistic picture when officials claimed two weeks ago the remaining oil in the Gulf was rapidly breaking down fuelled a sense of outrage in the scientific community that government agencies are hiding data and spinning the science of the oil spill.
…The NOAA has been under fire from independent scientists and Congress for its conclusions and for failing to explain how it arrived at its calculations. The agency has failed to respond to repeated requests from Congress to reveal its raw data and methodology.
The scientific report, which has four pages of text
followed by one page of credits,
is small compared to other similar reports.
Initially, NOAA said there was a fuller, 200-page report,
but then retracted that.
The initial report cites no scientific references…
those, Lehr said, are in his head.
…the impression of stonewalling has damaged the credibility of the Obama administration in the scientific community.
“That report was not science,” said Ian MacDonald, an ocean scientist at Florida State University… He accused the White House of making “sweeping and largely unsupported” claims that three-quarters of the oil in the Gulf was gone.
…MacDonald and other scientists have accused NOAA of discouraging them from making public their findings about lingering oil in the deepwater…
MacDonald said the core of the idea here
that oil in water essentially has about a half-life of a week
makes sense, but what happened from there doesn’t.
“There’s some science here, but mostly, it’s spin,” he said.
“And it breaks my heart to see them do it.”
MacDonald pointed out that NOAA
spent weeks sticking with its claim the BP well
was spewing only 210,000 gallons a day.
Now, after several revisions,
the federal government said it really was 2.2 million gallons a day.
So he has a hard time believing NOAA this time, he said.
…Yesterday’s testimony and the Science article put the White House and government scientific agencies increasingly out of step with independent scientists.
…The NOAA chief Jane Lubchenco, herself an ocean scientist, had played down the first reports of oil in the ocean depths…
When Lubchenco was asked about that
…Gibbs stepped in to defend the agency’s credibility.
Gibbs and Lubchenco said NOAA
provided the best information at the time
and updated estimates when it had better data and tools.
“Is there uncertainty to this?
Of course there is,” said NOAA’s Lehr.
But he said there was no political interference.
That question got raised
because of the coordination of the media rollout of the report.
[White House energy adviser Carol] Browner
was on all four morning TV shows saying
“the vast majority of oil is gone,”
and the report was leaked to The New York Times.
…experts from the Woods Hole Oceanographic Institute mapped a 22-mile plume of oil droplets from BP’s well, providing the strongest evidence so far over the fate of the crude.
…It noted that the plume was not made up of pure oil but included toxic oil compounds including benzene and xylene.
Suzanne Goldenberg
US environment correspondent
guardian.co.uk, August 19, 2010
Seth Borenstein
Associated Press, Aug 6, 2010
NOAA Claims Scientists Reviewed Controversial Report; The Scientists Say Otherwise
…at the report’s unveiling on August 4, Lubchenco spoke of a “peer review of the calculations that went into this by both other federal and non-federal scientists.” On Thursday afternoon, she told reporters on a conference call: “The report and the calculations that went into it were reviewed by independent scientists.” The scientists, she said, were listed at the end of the report.
…Told how much certainty administration officials expressed in the estimates — “we have high degree of confidence in them,” is how Lubchenco put it…
…Lubchenco had previously been a key figure in the patently low-ball estimates for the oil flow, and fervently resisted acknowledging the existence of underwater oil plumes…
But all the scientists on that list contacted by the Huffington Post for comment this week said the exact same thing: That although they provided some input to NOAA (the National Oceanic and Atmospheric Administration), they in no way reviewed the report, and could not vouch for it.
…they refuted the notion, as put forth by Lubchenco and other Obama administration officials, that the report was either scientifically precise or an authoritative account of where the oil went…
…independent scientists are…expressing outrage that the administration released no actual data or algorithms to support its claims.
Why did administration officials mislead the public about those findings — and then claim that independent scientists had reviewed them, when the evidence suggests that they did not?
Dan Froomkin
Huffington Post, August 20, 2010
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The FCIC: Passing the Buck
…the federal government’s Financial Crisis Inquiry Commission held hearings as part of their continuing investigation into the causes of the acute economic meltdown which occurred in late summer 2008.
…The individuals questioned by the commission mostly seem to be diverting blame for the whole fiasco to someone else.
…The reality is that the Federal Reserve relentlessly expanded the money supply through artificially low interest rates for over two decades, and this expansion of easy money caused a wholly predictable bubble. To a myopic Keynesian regulator, the bubble may appear to be caused by greed, but in truth it is completely predictable that humans will act in their own perceived self interest.
…We can condemn this as greed, but the fundamental problem is Fed policy itself. There will always be demand for cheap money, but we should not allow the Fed to debase our currency and create bubbles of false prosperity to satisfy that demand.
What the commission really needs are experts who understand free market economics rather than big government Keynesian fantasies. The commission has none of these, and has called no true free market witnesses. That perspective would only distract from their predetermined goals.
The commission will bemoan the complexity and inscrutability of our economic problems, but the solution is simple: allow freedom to operate in our markets. Allow U.S. financial, labor, and housing markets to normalize without political interference.
Though solution is simple…,It would require admitting fiat money is a tangled web of monetary deception prone to catastrophic failure. It would require allowing Americans to choose a system of sound money, where the money supply and interest rates are set by market forces rather than centralized economic planners.
Unfortunately, fiat money is like a drug to a Congress hopelessly addicted to spending vastly more than the Treasury collects in revenues. Because of this, our problems can only get worse and more complex before they get better.
Congressman Ron Paul
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