Can Turtles Fly?

Source of American Government Funding (1873-1940) Ever wondered how taxation has changed in America over the last 100+ years? Following charts show the sources of government revenue in America from 1873 to 1940. Other developed countries are somewhat similar from a long-term perspective. Until the early 1900's, there was really no personal income taxes or corporate income taxes. Most of the revenue in the distant past was through customs levies and tobacco/liquor taxes. So basically nearly all government tax was consumption tax. The amount government collected was very small by modern standards (US government collected no more than 800 million in taxes in the 1800's whereas it generated 3+ billion by 1918). Government wasn't large and it didn't provide much in the 1800's (there was no standing armies for a long time, not to mention any notion of social welfare, public education, large-scale healthcare, no major public infrastructure projects, and so for...

Corruption Throughout the World       source: 2012 Corruption Perceptions Index , Transparency International

Ontario, my home province, is startling to resemble a mini-Greece :( Moody's sends a warning shot by downgrading Ontario's outlook to negative. The Globe & Mail reports , Moody's Investors Services has turned its wary eye from the basket cases of Europe to Ontario, revising its outlook to "negative" from "stable" and issuing a stern warning on the province's hefty debt burden. The decision, Moody's said in a statement, reflects the risks surrounding the province's ability to meet its medium-term fiscal targets. It noted the recent slowing of economic growth. "The negative outlook on the province reflects the softening economic outlook, Ontario's growing debt burden, and the extended time frame to achieving a balanced budget," Moody's analyst Jennifer Wong said. In his November statement, Finance Minister Dwight Duncan revised his forecasts for economic growth for both this year and next, a significant downgr...

The Obama administration has been looking into waiving the rapatriation tax on foreign income. The thinking is that this would lead to investment within the country and lead to job creation. For those not familiar, many US corporations are sitting on huge cash balances but a lot of that money is overseas (earned from their foreign operations). If they bring that back into the country, they would pay a repatriation tax. Many executives of multinational firms have been pushing the US government to waive the taxes. Most readers, that own shares in these firms, would benefit from such a tax holiday. I am not American so take it for what it's worth but I believe the US government shouldn't waive the tax.

I think he is deserving of it—some won't agree—but it looks like Warren Buffett will receive the Presidential Medal of Freedom . Although awards of any sort are always controversial, given questionable recipients in the past, this is an important one. This is the highest civilian honour in the United States of America (the highest civilian award in Canada is the Order of Canada , although some seem to suggest it is the Order of Merit). You can't get anything higher unless you are in the military. Warren Buffett will be receiving the medal along with several other prominent individuals such as Yo-Yo Ma (artist), Bill Russell (basketball player), George H. W. Bush (former president), Angela Merkel (German chancellor), and a few others. Although some may disagree with awarding it to Warren Bufffett, I think it is an appropriate choice. If America represents capitalism, it is only fitting the greatest capitalist of modern times, Warren Buffett, receive the highest civilian hono...

Most of you are likely aware by now that the SEC has made a civil charge* against Goldman Sachs for a CDO that they sold. I wasn't going to comment on this story, since it has been covered by others and you can get better information from those sources; but I changed my mind and thought I would just say something just for historical record-keeping purposes. The more I thought about the situation, the more I realize how significant this event may end up. To recap the situation, it seems Goldman Sachs sold a synthetic CDO called ABACUS 2007-AC1 in 2007 and the SEC is charging that Goldman Sachs made misrepresentations. Basically, it seems that Goldman Sachs didn't disclose material information. The material information centers on the fact that the CDO appears to have been constructed with the input of the hedge fund run by John Paulson. This is important because Paulson was attempting to short the CDO (for those not familiar, Paulson rose to fame after shorting the subprime mo...

The above headline from MarketWatch.com captures, what may turn out to be, the largest government bailout in history. Fannie Mae and Freddie Mac are being placed in conservatorship . You can get more detailed information from blogs such as The Big Picture and Calculated Risk . To recap, Fannie Mae and Freddie Mac are being taken over by the US government. It involves massive capital injection into the two entities, for which the government will receive preferential preferred shares and warrants. The plan also involves the US Treasury buying Fannie and Freddie MBS in the open market (one article said The Federal Reserve is the one that will be carrying this out but I believe it's actually the Treasury.) The plan does not eliminate either the preferred or common shares so holders will have something left, and it will likely also prevent CDS being written on the two firms from being triggered (but that depends on CDS legalities which I'm not familiar with.) According The Big Pict...

(Illustration by Christoph Niemann for The New Yorker ) It’s a good thing that Bear Stearns was saved. But it’s also a good thing that it nearly died. -- James Surowiecki, Too Dumb To Fail , The New Yorker The collapse of Bear Stearns will be remembered for centuries. It is not often that a top 5 Wall Street bank not only collapses, but ends up doing so under mysterious circumstances. It wasn't even 5 days before the collapse that the CEO of Bear Stearns was reiterating that Bear Stearns had ample liquidity. Investors who bought shares after the CEO's comments may disagree but I don't suspect that the CEO purposely lied. What is shady, however, is how Bear Stearns was taken over by JP Morgan Chase & Co under quite dubiuos of circumstances. There wasn't a coalition of the willing, using George's Bush's lingo, that was involved; instead, it looks like JPM was favoured and given the keys to Bear Stearns. In any case, all that is past and I am not a shareholde...