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That Joke Isn’t Funny Anymore

The dollar hits an all time low against the euro, bumping against $1.60 today.

2 year euro

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4 Comments

  1. James

    Though there are many factors that go into a currency’s value, and some of the recent fall off has been to poor fiscal, monetary, and energy policies, both of the democrat presidential candiates who wish to almost double the capital gains tax, will cause the dollar to fall further. Foreign investment will slow down, and wealthy american investors put more of their money overseas. There will be a net decline in the demand for the greenback.

    If you want to stablize the dollar, you should be lobbying for a corprate tax cut, which is currently the second highest int he industrialized world, and see how much investment stays and comes back into the country.

    PS.. I’m hoping you are going to post more on the Singh/ Ellmore debate. Thankx for covering it.

  2. MB

    Though there are many factors that go into a currency’s value, and some of the recent fall off has been to poor fiscal, monetary, and energy policies,

    Those would be the Republican policies, correct?

    both of the democrat presidential candiates

    I ask very little of commenters here, but correct usage of Democratic is always appreciated.

    who wish to almost double the capital gains tax, will cause the dollar to fall further.

    Really? Because we had a 25-50% cut of the capital gains tax in 2003, and do you want to guess what happened to the value of the dollar then (and since?). You can check out the history here.

    Foreign investment will slow down, and wealthy american investors put more of their money overseas. There will be a net decline in the demand for the greenback.

    Are you sure you’re not describing the present state of things?

    If you want to stablize the dollar, you should be lobbying for a corprate tax cut, which is currently the second highest int he industrialized world,

    Well, there are a few things I’d put in line ahead of that in terms of effectiveness, but I can’t let this claim slide without asking – so, since you’re implying that the industrialized world’s norms are to be admired, are you also supporting rises in personal income tax rates that would put the US on par? Or are we cherry-picking?

    PS.. I’m hoping you are going to post more on the Singh/ Ellmore debate. Thankx for covering it.

    I definitely will. Just need to get the rest of the Ellmore interview out, first. I hope it’s been informative.

  3. James

    1. yes a lot of those fiscal, monetary and energy policies have been republican. Im not a blind partisan. But to be fair, the dems have also gone along with most of these policies as well. I havent heard any dems the last 8 years complaining the government has spent too much or do anything to reduce demand for oil, or increase domestic supply of energy.

    2 I appoligize for the democrtat v democratic term… if it makes you feel better, then you win this one.

    3. I am hoping you are smart enough to realize the differnce between correlation and causation. Yes, the capital gains tax was cut in 2003 along with others (not coincidentally, thats also when employment started to improve), but at the same time, other factors outweighed it, including lareg federal deficits, and extremely low FED funds interest rates. If you look at a history of the dollar, you will notice it appriciated in 1996, when the cap gains tax was cut, and in the early 80s when it was also cut (1983 i believe). The dollar sank after 86, when the cap gains tax was increased, and in the late 70’s when it was increased.(I can send you a historical shart of this in an excel file if you wish. You can go ahead and post it if you really like). I have given you a logical reasoning for it – the reduced demand for the dollar as investment demand dries up… you gave me no logical argumanet other then correlation. My tv broke last year… bush is in office… must be bush’s fault. That is the extent of you logic.

    Furtheremore, as the global capital markets become more globalized and fluid, a higher tax on capital, which in effect loweres the real return to investmnet, will have a greater effect on financial outflows then it has in the past, because the barriers are less then they used to be. Furtheremore, our capital gains tax is not inflation adjusted, so though the rate is currently 15%, the average effective rate is close to 35%, (due to compounding over the time of holding an investment) and it only goes higher as inflation gets greater.

    4. Lowering the corprate tax has a lot to do with compeditiveness, because firms have choices over where to build production facilities. The relative rate is important, and most nations have been cutting theirs in recent years. Even Sweden and Franch have. The comment was not for us to do what the rest of the world does simply because they do it. No, I am not advocating an increase in income tax. Even though the rates were all cut by bush, the braket levels were not kicked up and havent been, except for inflation adjustments, since 1986. Because wages grow faster then inflation, more people are now in higher brakets then there used to be. So even though the rates were lower, we have close to the highest level of GDP being taken by the income tax since the pre-Reagan era (except for two years in the late ninetees. If the tax rates were let to expire, the percentage of GDP the income tax captures would be the highest in history.

    I am not some simple minded partisan who says “go bush” just because he has an R next to his name. I am very upset with him and most of the Republicans in office right now. I analyze things, and I m hoping that you are able to do so as well. You have shown yourself able in the past, and would hope you would continue.

    PS: Im glad your going to cover more of the debate

  4. MB

    1. yes a lot of those fiscal, monetary and energy policies have been republican. Im not a blind partisan.

    I realize and appreciate that. Which is why I’m responding.

    But to be fair, the dems have also gone along with most of these policies as well.

    For the most part, you’ll only be able to wring a muted defense – at best – of the recent edition of Congressional Democrats.

    I havent heard any dems the last 8 years complaining the government has spent too much or do anything to reduce demand for oil, or increase domestic supply of energy.

    But you’ll get that (admittedly muted) defense on these three items specifically. If you haven’t heard the howling over the money being shoveled into Iraq, increasing mileage standards, or pushing alternative energy, you’ve not been listening.

    2 I appoligize for the democrtat v democratic term… if it makes you feel better, then you win this one.

    Well, it’s not about making me feel better. I just ask that disdain for Democrats not be expressed through butchering the English language, is all.

    3. I am hoping you are smart enough to realize the differnce between correlation and causation.

    Well, I’d say I was, and that your original argument pretty much presented it as a correlation.

    I have given you a logical reasoning for it – the reduced demand for the dollar as investment demand dries up… you gave me no logical argumanet other then correlation.

    Well, you’ve sort of made that argument. There are a lot of factors that go into dollar investment demand, cap gains tax included – but not principal – among them. I’d throw competence of the Fed, geopolitical risk, and availability of attractive alternatives (i.e., the euro) well ahead of cap gains taxes.

    Furtheremore, as the global capital markets become more globalized and fluid, a higher tax on capital, which in effect loweres the real return to investmnet, will have a greater effect on financial outflows then it has in the past, because the barriers are less then they used to be.

    But this is a rather tenuous hook on which to hang your hat. Cayman used to be a great place to keep your money. Switzerland, for the moment, still is. But these things are changing quickly as the rest of the world moves to recapture what it sees as their rightful tax bases.

    Furtheremore, our capital gains tax is not inflation adjusted, so though the rate is currently 15%, the average effective rate is close to 35%, (due to compounding over the time of holding an investment) and it only goes higher as inflation gets greater.

    Well, okay (tho’ I have no idea of whether you’re at all right about the 35% rate). But is that the case anywhere? And it doesn’t strike me that adjusting for inflation should really be a function of taxation.

    4. Lowering the corprate tax has a lot to do with compeditiveness, because firms have choices over where to build production facilities.

    Sure. So do basic employment protections, environmental standards, and a reliable legal system. I’m sure that if we gutted the systems upholding those things, we could be competitive with China in a heartbeat. You in?

    To follow up on the corporate v. personal income tax bit – I really don’t care where the tax revenues come from. What I care about is that the costs of society are fairly apportioned.

    I am not some simple minded partisan who says “go bush” just because he has an R next to his name. I am very upset with him and most of the Republicans in office right now.

    Again, I realize that. Perhaps I should have made clear that I see “Republican” as shorthand for all of the failed policies of the past 7-8 years. Supposed conservatives got everything they ever wanted – less gov’t regulation, massive tax cuts, and lots of gov’t swill at the trough.

    And what did that get us? Yeah, this fantastic economy.

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