Hand It Over. And Stop Complaining About The Students
I said it a half-dozen times since June if I said it once. And I definitely said it once. To be bullish on US equities right now is to fight the Fed.
Fighting the Fed is, historically, a fool's errand. Investors relearned that lesson on Friday.
The selloff triggered by Jerome Powell's avowedly terse speech at Jackson Hole kneecapped a summer rally widely seen as counterproductive to officials' efforts to bring down inflation. In the current context, stock strength is pernicious because it work
Good stuff, as always. The fake news folks won’t let up on our poor students. The student loans being forgiven are a sunk cost. That money was paid to the schools of those students years, or even decades ago. Students whose loans are being forgiven won’t be getting any checks, other than they ones they get from working. What they will get is a bit more take home they will keep from that they are earning, money which can support growth in the economy. This is not a cash “handout,” you know the stuff the GOP hates, when someone else seems to be getting it. Sen. Grassley has never sent back any of his farm subsidy checks. All those greedy Congressmen who get to trade on inside info to blow up their stock portfolios will try their best to hide those gains. Amazing how all the senior politicians leave office a whole lot richer than when they went in, added wealth mostly in excess of their salaries, and they get a big pension and Cadillac healthcare to boot (handouts?) Enough already.
+1
Yes crying over student debt relief is farcical. Read Trish Regan on youtube it’s really pathetic. No subsidy program is perfect. Younger and poorer folks are part of the democrats base and they threw them a bone. The Republicans emptied the treasury for their base much wider in his first two years and punished blue states with salt cap. The gop is a bunch of hypocrites and crybabies. As for powell and the Fed, stocks are only indirectly targeted if at all. They are more like collateral damage to tightening financial conditions. I stood aside all week for my clients and could not believe the stock jockeys ran up the market at the back half of last week prior to the speech. Powell was blunt but take the fomc at their word. If inflation rolled over and the economy tanked they would change policy. But the bar is pretty high.
Meant in trumps first two years of office for emptying us treasury for his wealthy base..
In other words fomcis in a show me mode for disinflation….
H : will the loan forgiveness be taxable income?
From Google: “As a general rule, a discharge of indebtedness counts as income and is taxable, as my colleague Will McBride explains. Under § 9675 of the American Rescue Plan Act (ARPA), however, the forgiveness of student loan debt between 2021 and 2025 does not count toward federal taxable income.”
thanks as always, H … if only your effort was 1) the mainstream narrative, … or 2) the generalized understanding of the masses… the world would be such a better place…
Thanks for bringing this up H man. I realize Fox News anchors hate when average people get a break from the government, but they love it when the rich get the tax breaks and the average person gets screwed. From Trumps tax bill I remember seeing that the Koch brothers got a 1.4 billion tax break for a 500K contribution to Trumps campaign. But when he capped the real estate taxes, I know I lost 5k , so I know who that bill was aimed at.
No complaining then when the “rules” ( written and implied) under which we have created wealth during our lifetime with the understanding (hope?) that we can pass it along to our heirs are changed.
If the rules are changed (because it affects so few) so that 100% of accumulated wealth at the end of one’s life transfers to the government- everyone is ok with that?
The rules on inheritance have moved dramatically in the direction of being able to pass wealth on to heirs tax-free. From 1942 to 1976, the amount you could exclude from the estate tax was a mere $60,000 and the top rate was 77%. Nowadays, you can exclude $11.4M and the max tax rate is 37%, but anyone who has that size of estate has likely figured out how to avoid any estate taxes entirely anyway (not to mention that heirs receive assets like stocks at the stepped up basis so even if they inherited assets that would otherwise be subject to massive capital gains will never be taxed in the first place). The rules can and do change frequently, but the odds of anyone reinstating any sort of meaningful estate tax is negligible.
I’d also add that many of the people complaining are the same people who likely don’t blink at farmers receiving massive subsidies. I grew up in a farming family and community and I can assure you that those farmers weren’t complaining about the huge checks they got a few years ago, but they sure love to complain about other people getting handouts while cashing their government checks.
https://www.npr.org/sections/thesalt/2019/12/31/790261705/farmers-got-billions-from-taxpayers-in-2019-and-hardly-anyone-objected
I stumbled across a social media post of the White House twitter feed showing a tweet from GOP congresspeople complaining about student debt relief, with a caption on their post showing how much in PPP loans that congressperson had forgiven. As a small business person who received a fraction of those amounts (while keeping everyone I could employed or even sending some money to staff that couldn’t risk working in my store during the worst of the pandemic), I un-respectfully would like to tell them to STFU.
I get it, and you’re not wrong. The government giveth, and the government taketh. The rules are constantly changing and the rug gets pulled out. It’s frustrating
I graduated from PT school in 99. Same year that medicare announced PPS. PPS changed the way rehab is paid, and immediately PTs across the country were being laid off. So my prospects for a job went from 80K per year wherever I wanted to work, to begging a weekend only job at a hospital, and working construction all week to make 40K. And I paid every penny of my student loans off…
I started a practice in 2004 doing work comp consulting for heavy industry. I was doing really well until 2007 when the factories I was working with started closing. Had to close the business.
More recently I’ve been flipping houses because I’m burned out with the healthcare industry. I started building a spec house last November. I’ve been paying dearly for inflated building materials, so now the Fed decides to raise rates and cannot be deterred.
I’m extremely tired of the rules changing all the time and all the knee jerk governing going on.
I’ve been saying for years that the Fed needs to just pin rates at 2-3 % and stop fiddling with them. They manage to get it completely wrong because their “corrections” take several years to fully play out, and they can’t see it in the month data reports.
The fact that they’re seeing the economy pulling back but still think they need to continue tightening baffles me. Let it play out. Powell left the economy in the microwave too long, now he’s burning his mouth because he’s not waiting for dinner to cool. Trying to optimize everything today is creating the next crisis next year
Sorry NY Jeff, my comment was for Empty Nester, I didn’t mean to put it where it ended up
Excellent read. There will always be people, rich and poor, who will begrudge another’s good fortune. Student debt relief seems to fall squarely into some people’s zone of feeling they’ve been “cheated” somehow.
First of all, I promise that this is my final post on this subject for those of you are sick of hearing from me.
As a kid, when I played “The Game of Life” and “Monopoly” or when I played “Cash Flow 101” with my kids while they were growing up, the rules were the rules and you gave the game your all to make the best choices that you could in order to win. The rules did not change mid-game. As you might guess, most of my life I have followed the rules – primarily because during most of my life, the rules seemed both fair and reasonable.
Sure, there were “Chance” and other lucky/unlucky events that could occur when playing these games which could impact your overall results, but the message from these games was to learn that there is a financial impact related to one’s decisions in life. Not a bad lesson, imho.
For example, when people borrow money they are expected to repay the loan. I do not primarily blame the students and for those who borrowed a lot of money to get a degree in a subject that does not pay enough so that they could repay the loan over a reasonable period of time- I do believe that they are partially victims of extremely bad Federal policy, which actually encouraged students to borrow as much as they wanted without ever emphasizing or adequately explaining the repayment part of the borrowing process.
The Federal government should not be in the business of purchasing student loans from schools or banks because the schools/banks will not need to underwrite the loan. This means that the schools/banks do not care if the students ever repay the loan or not- because the schools/banks got repaid at the moment when they sell the loan to the Federal government. Repayment is now the Federal government’s problem.
If student loan forgiveness had come with terminating the Federal government’s involvement in purchasing student loans, I would have been thrilled. If student loans were subject to existing bankruptcy laws, even better. However, as it stands – nothing has changed to stop bad lending behavior. Rinse and repeat more bad behavior.
Maybe the student loan forgiveness is not a big deal or is even deserved, but our country has a system for changing the rules and it is through a Congressional act, not a presidential or supreme court ruling. Remember the separate function of the 3 branches of government? I learned this in about 3rd grade and I still remember. Anyway, It seems like a slippery slope.
I do feel bad for any rule abiding Americans who wanted to, but chose not to go to college or made other decisions (which in hindsight they would not have made) because they were worried about being able to repay the debt. Even if there are only a few of those people.
Finally, not all rules are fair, I get that. For example, many wealthy people borrow money against their stock portfolio to live on (instead of selling stock and triggering taxable capital gains) in order to minimize their taxable income. Then, they use lawyers to create Trusts which avoid estate taxes at the time of their death and all of their assets step up to fair value upon transfer to their heirs. I absolutely hate this- seems like they are cheating, but I looked it up and this is actually allowed in the taxation rules passed by Congress. These laws are neither fair or reasonable.
It used to be that we could count on Congress to put the interests of the USA before their own individual or their financial backers’ interests. Anarchy is coming. It is a race against time and we need better leadership, term limits and massive reductions in lobbying before we sink.
The last point I want to make is that even though it is true that the $330B was already given to the schools, the anticipated future loan repayment receipts that will no longer be collected by the Federal government (due to loan forgiveness) will now need to be replaced by additional tax revenues, money printing or (haha) an offsetting reduction in government expenses.
I tried to reply, but it got put above on NY Jeff’s comment
“… the anticipated future loan repayment receipts that will no longer be collected by the Federal government (due to loan forgiveness) will now need to be replaced by additional tax revenues, money printing or (haha) an offsetting reduction in government expenses.”
Why? Or, more aptly, “no, they will not.” They will not need to be “replaced.” Just like the cost of firing off a missile from a drone is never “replaced,” and just like the cost of paying our military to go running around in the desert somewhere is never “replaced” and just like the billions in aid we’re sending to Ukraine is never “replaced.”
We pretend all of that stuff is replaced or “paid for,” but it’s not. It just isn’t. Not in the same way that you and I have to “pay for” or “replace” money that we spend. People absolutely have to stop conflating their own personal finances with federal government financing. It’s not comparable. That’s just not how government finance works in advanced, currency-issuing economies with sufficient monetary sovereignty.
This is another one of those discussions which I realize is extremely uncomfortable for a lot of people, but at some point, it’s incumbent upon everyone to face reality. In this case, the reality is this: We spend first and “pay for it” later, and “pay for it” is a total misnomer. US dollars aren’t gold. They don’t exist, independently, “out there” somewhere. China doesn’t have a natural dollar spring where they go and gather up dollars to “loan” to the US government. Taxpayers don’t dig up dollars like Bitcoin miners. The Saudis don’t drill for dollars, they drill for oil, which they then trade for dollars. Your tax dollars don’t pay for anything, and China isn’t “loaning” the US any dollars. That’s just not reality. That’s a fantasy world. It’s not factual. Can I be any clearer?
Please note: Exactly none of that is an “argument” for MMT. Nobody has to “argue” for MMT, because MMT isn’t a theory. MMT doesn’t even understand itself, which is why I stopped talking about it. There’s no such thing as “Modern Monetary Theory.” It’s not “modern” and it’s not “theory.” It’s Old Reality. They should call it “OMR” — “Old Monetary Reality.” It’s just the way it works in Washington. It’s not a theory, it’s a fact and really, “fact” doesn’t convey the point either. It’s “standard operating procedure.” You can’t do anything with it. You can’t “adopt” it either, because it’s a description of how things already work.
All politicians, Republican and Democrat, know this, they just don’t know that they know it. If a Republican gets a concession for his/her state/district from Democrats in exchange for supporting a piece of legislation, do you think that Republican would accept the following: “Oh, you’re definitely going to get the money, it’s just that we need to see what the sponsorship is at next week’s 10-year auction. If the bid-to-cover looks good and Indirects are strong, we’ll write the check immediately, but if not, we’ll need to cash a few tax checks and as soon as those clear, you can have the money.” No, our hypothetical Republican wouldn’t accept that. He/she would laugh and walk away, assuming it was some kind of bad joke and not pay it any further mind because it’s totally ridiculous. Guess what? That Republican supports MMT! Only not really because, again, there’s no such thing as MMT. There’s just OMR.
When the US wants something, we buy it / fund it. Period. The rest of it (the taxing and the “borrowing” and so on) is just a charade. It “offsets” a greater or lesser portion of the money we conjured to buy / fund stuff depending on the political realities of a given time. That’s it. That’s all there is to it. When it’s politically expedient to the party in power to move towards a smaller deficit, then that’s where we drift. When it’s not, not. And it doesn’t make a shred of difference which way that drift is. Even if you want to cite “too much money” (i.e., too much demand) for the country’s current bout with inflation, that’s a function of too much demand versus too little supply, a juxtaposition that can occur at any time, deficit or no deficit.
One could expand on that by adding that ‘when the US wants to do something, we do it. Period. The rest of it (constitutional restraints, laws and so on) is just a charade. It’s no wonder that we habitually drive five mph over the speed limit, dodge taxes and occasionally riot in the capitol buildings. The disregard for logic and rules is now part of our DNA. That’s it. That’s all there is to it.
The Darkest of All Possible Brandons popped the very last remaining vein in the angry, selfish bigot’s collective forehead by announcing billions in student debt relief, and not only that – he waited for the inevitable FILTHY TAKERZ to have a shitfit before dropping receipts.
https://www.axios.com/2022/08/26/white-house-gop-student-loans-tweets
Then, the White House had a barbeque in the form of many a yapping plutocrat hypocrite’s forgiven PPP loans.
https://www.theguardian.com/media/2022/aug/25/this-you-meme-biden-student-loan-forgiveness-twitter
Dark Brandon’s been scraping Republicans off the heel of his boot longer than most of us have been alive.
Putting “pumpkin-coached” atop my Heisenberg leaderboard of bon mots and incisive word uses.
Sorry “conjecture” — you had a good run, but your time at the top is over for now!
Jesus, meant “conjuncture.” Way to ruin my own joke — thanks spell check.