My friends I have been commenting for years that the US income tax system is so complicated that even the employees at the IRS do not understand it. I got living proof of that early this morning. I got up at four and my instincts kept telling me that something was wrong with my 2013 Federal return. I started to examine it carefully. I found a number of mistakes and omissions. I had to redo the whole thing. I am not a CPA but I have worked on taxes for 40 years. If I made mistakes imagine what happens with those who are not well trained. Congress please change the tax system to make it fair and simple for all of us to understand.
In the early 1930’s my dear grand mother Sarah Elizabeth Walters found herself “in a big pickle.” She had ten kids and my grand father left to seek his fortune in the East Texas Oil fields. There was not much welfare over 80 years ago and very little employment for women. My grandmother was a lady of incredible character, resourcefulness and determination. She sat down with the kids and made a plan for all of them to survive. Every child was to continue with schooling. Every child was also to have a part time job and contribute to the costs of running the house. Some children had to move out of their rooms. These rooms were rented to tenants. My dear grand mother had to take in washing and go out and clean houses like a maid. They all survived those dark days and it made them all stronger.
In those “good old days” the average house might have had a mortgage equal to 20% of the value of the house. Even if foreclosure was a possibility, President Roosevelt put a moratorium on all foreclosures. Food, medical care, and other expenses were far lower than they are today. Families stood together and helped those in need.
Let us fast forward some 65 years later to 1996. I found myself in San Jose, California broke. I found out quickly that there was little or no job market for a 48 year old male. I had no family to aid me in this time of need. I found myself sleeping on the streets for two days. Then I came to Inn Visions. It was a homeless program. I spent some 18 months of my life in this homeless program before I got a job that paid a humane living wage. Without this program, I would have ended up permanently on the streets with no hope in life.
Now I see the big push to cut unemployment benefits, food stamps, etc. It’s all part of that proud American tradition of rugged individualism and being responsible and taking care of yourself. Please do not get me wrong, I admire these virtues that made our country great. But times have changed. In many cases families no longer stick together and help one another. The cost of every thing in life has gone up so much. The job market has changed and it’s tough to get a job. Massive retraining and new skills will be required for this new challenging world.
There are going to be a few unscrupulous and clever people who “game the system” to get benefits from the government. But there are a lot of people who genuinely need help. We cannot afford to turn our back on these people. I doubt that many of the people cutting these benefits ever had to sleep on the streets and do without food and even a shower, as I have.
Please rely on your instincts. Yesterday I was rushing to get to a food store. I was going at high speed and the light turned yellow. Many times I would have gone through the yellow light. This time my instincts told me to stop and I did. I looked over to my left and saw a police woman on a motorcycle. Had I run the yellow light I might have had my first traffic ticket since December, 2002.
Emerging Market Contagion Spreads; Argentina, Venezuela, Turkey Roundup; 50% Tax on Internet Purchases
Argentina Institutes 50% Tax on Internet Purchases; Emerging Market Contagion Spreads; Argentina, Venezuela, Turkey Roundup Yesterday, Argentina devalued the Peso hoping to halt further declines in its currency reserves. Markets had seen this coming as charts of the Peso vs. the US dollar show.
Peso vs. US Dollar One Week
Peso vs. US Dollar One Month
Peso vs. US Dollar Five Years
In the past 12 hours the peso fell as low as 8.164 to the dollar but currently sits at 7.164. Using the current close of 7.164 as our reference, here is a summary.
In the last week the peso fell from 6.643 to 7.164.
In the last month the peso fell from 6.362 to 7.164.
In the last five years the peso fell from 3.07 to 7.164.
The 5-year decline is over 50%.
Emerging Market Contagion Spreads
Bloomberg reports Contagion Spreads in Emerging Markets as Crises Grow
The worst selloff in emerging-market currencies in five years is beginning to reveal the extent of the fallout from the Federal Reserve’s tapering of monetary stimulus, compounded by political and financial instability.
The Turkish lira plunged to a record and South Africa’s rand fell yesterday to a level weaker than 11 per dollar for the first time since 2008. Argentine policy makers devalued the peso by reducing support in the foreign-exchange market, allowing the currency to drop the most in 12 years to an unprecedented low.
Investors are losing confidence in some of the biggest developing nations, extending the currency-market rout triggered last year when the Fed first signaled it would scale back stimulus. While Brazil, Russia, India, China and South Africa were the engines of global growth following the financial crisis in 2008, emerging markets now pose a threat to world financial stability.
“The current environment is potentially very toxic for emerging markets,” Eamon Aghdasi, a strategist at Societe Generale SA in New York, said in a phone interview yesterday. “You have two very troubling things: uncertainty about the Fed policy, combined with concerns about growth, particularly in China. It’s difficult to justify that it’s time to go out and buy emerging markets at the moment.”
In Venezuela, the government devalued its currency for airline tickets and incoming foreign direct investment on Jan. 22. International reserves are at a 10-year low.
The lira plunged to a record 2.3224 per dollar and also declined to an all-time intraday low of 3.2069 per euro. Turkey’s central bank refrained from raising benchmark rates this week, fueling concern that it will be difficult to finance current-account deficits.
Turkey holds about $33 billion in foreign reserves, excluding deposits from commercial banks, only enough to cover 1 1/2 months of imports, according to Citigroup Inc.
Yesterday, Bloomberg reported Argentina Devaluation Sends Currency Tumbling Most in 12 Years
50% Tax on Internet Purchases
The BBC reports Argentina restricts online shopping as foreign reserves drop
Argentina has introduced new restrictions on online shopping as part of efforts to stop foreign currency reserves from falling any further.
Anyone buying items through international websites will now need to sign a declaration and produce it at a customs office, where the packages have to be collected. The procedure will need to be repeated for every new purchase.
Argentina’s reserves of hard currencies dropped by 30% last year.
The government of President Cristina Fernandez de Kirchner has introduced a number of restrictions on transactions with foreign currency.
Items imported through websites such as Amazon and eBay are no longer delivered to people’s home addresses. The parcels need to be collected from the customs office. Individuals are allowed to buy items up to the value of $25 (£15) from abroad tax free every year. Once the $25 level is reached, online shoppers in Argentina need to pay a 50% tax on each item bought from international websites.
One resident of Buenos Aires, who gave his name as Martin, described the tax as “crazy”.
But he told the BBC: “The real problem is that the item is received in customs now instead of at your home. Each time you go to customs, you need to spend three or four hours.
Food Price Controls
Earlier this month, Reuters reported Argentine peso at new lows as food price controls take effect
Argentina’s peso slid to an all-time low on Tuesday as supermarkets froze prices in a deal with the government aimed at shielding poor families from one of the world’s highest inflation rates.
The year-long price fix on 200 basic food products signals continuation of President Cristina Fernandez’s interventionist policies even as polls show her image has been battered by 25 percent inflation, falling reserves and electricity shortages.
Tight currency and trade controls, as well as last year’s state seizure of Argentina’s top energy company YPF have taken a toll on confidence, while the electricity grid, ailing from lack of investment, fails to keep air conditioners humming at the height of the Southern Hemisphere summer.
The supermarket price freeze is the biggest policy move yet by fledgling Economy Minister Axel Kicillof, a leftist academic appointed in November.
Widely discredited official figures put inflation in the 12 months through November at 10.5 percent, while private economists say Argentine inflation is running at more than 25 percent annually.
Argentina is meanwhile struggling to attract the tens of millions of dollars it needs to develop its Vaca Muerta shale formation. Lying beneath the Patagonian plains, the Vaca Muerta (Dead Cow) field is estimated to hold 661 billion barrels of oil and 1,181 trillion cubic feet of natural gas.
It could be one of the biggest formations of its kind in the Western Hemisphere.
Black Market Purchases Will Soar
Price controls and currency pegs at ridiculous rates cause black markets. With the additional 50% tax on online purchases, expect black market trade to soar.
Argentina gets what little foreign reserves it has, being the number 3 soybean and corn supplier, as well as its top provider of soymeal animal feed and soyoil, used in biofuels.
Soybean Monthly Chart
Corn Monthly Chart
Soybean prices are still well above the 2009 lows, but are also far below the highs of a year ago. The price of corn is far below the highs of a year ago, and nearing the 2009 lows.
These trends are heightening the already huge problems of emerging market exporters.
Mike “Mish” Shedlock
Goldmoney: The best way to buy gold and silver
Emerging Market Contagion Spreads; Argentina, Venezuela, Turkey Roundup; 50% Tax on Internet Purchases
My incredible wife Elena has her birthday today. It is a celebration of an incredible life with outstanding accomplishments.
Elena and I have something in common. We both a survivors of South American military governments. I survived living in Brasil and Peru under military dictatorships. Life was not always pleasant during those times. But it was not horrible.
When Elena was 15 years of age, the military government took over in Argentina. I can best compare it to what happened in Nazi Germany after Hitler came to power. Some 30,000 people disappeared. Babies were stolen from their families and given to strangers to raise. Literally hundreds of millions of dollars of property was stolen from the rightful owners.
During that horrible time one’s worst nightmare was to have a green Ford Falcon pull up in front of your house or apartment one night. After the dreaded knock on the door, people would be arrested, taken to a military or police facility for torture and later executed.
One night after the military came to power, a green Ford Falcon pulled up in front of Elena’s house. The dreaded knock followed. For a brief eternity, Elena and her family thought that it was the end. The secret police asked for a person who did not live in the house and asked for permission to go through their house to get to another house. Of course Elena’s parents could not say no. The secret police went to another house. They hauled off a pregnant woman who was never seen again.
Despite all of this horror, Elena managed to graduate from high school one year early. She got accepted to medical school at the University of Buenos Aires. She graduated at age 23 with an honors diploma. (This medical school has a few Nobel Prize winners by the way and is a very tough educational institution.)
I could spend many more pages talking about Elena’s incredible achievements in life. I know how lucky I have been for the last 13 years to be with her. She is the best thing that ever happened in my life!!!!
Elena HAPPY BIRTHDAY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Ten years ago today Elena went to a title company late on a cold evening to sign all the papers to buy this house. We have spent a lot of years here. We have had a lot of struggles and trials with this house. Elena Torello refused to quit and walk away even when this house was falling apart and hundreds of thousands of dollars “underwater.” stand on the house and look up at it admiringly. I think to myself: “This is one of my greatest good accomplishments in life.”
This article, though aimed at a US audience, gives a scary insight into China ‘s growing economic power.
In future China will employ millions of American workers and dominate thousands of small communities all over the United States . Chinese acquisition of U.S. Businesses set a new all-time record last year, and it is on pace to shatter that record this year.
The Smithfield Foods acquisition is an example. Smithfield Foods is the largest pork producer and processor in the world. It has facilities in 26 U.S. States and it employs tens of thousands of Americans. It directly owns 460 farms and has contracts with approximately 2,100 others. But now a Chinese company has bought it for $ 4.7 billion, and that means that the Chinese will now be the most important employer in dozens of rural communities all over America .
Thanks in part to our massively bloated trade deficit with China , the Chinese have trillions of dollars to spend. They are only just starting to exercise their economic muscle. It is important to keep in mind that there is often not much of a difference between “the Chinese government” and “Chinese corporations”. In 2011, 43 percent of all profits in China were produced by companies where the Chinese government had a controlling interest. Last year a Chinese company spent $2.6 billion to purchase AMC entertainment – one of the largest movie theater chains in the United States . Now that Chinese company controls more movie ticket sales than anyone else in the world.
But China is not just relying on acquisitions to expand its economic power. “Economic beachheads” are being established all over America . For example, Golden Dragon Precise Copper Tube Group, Inc. Recently broke ground on a $100 million plant in Thomasville , Alabama . Many of the residents of Thomasville , Alabama will be glad to have jobs, but it will also become yet another community that will now be heavily dependent on communist China . And guess where else Chinese companies are putting down roots? Detroit . Chinese-owned companies are investing in American businesses and new vehicle technology, selling everything from seat belts to shock absorbers in retail stores and hiring experienced engineers and designers in an effort to soak up the talent and expertise of domestic automakers and their suppliers. If you recently purchased an “American-made” vehicle, there is a really good chance that it has a number of Chinese parts in it. Industry analysts are hard-pressed to put a number on the Chinese suppliers operating in the United States .
China seems particularly interested in acquiring energy resources in the United States . For example, China is actually mining for coal in the mountains of Tennessee . Guizhou Gouchuang Energy Holdings Group spent 616 million dollars to acquire Triple H Coal Co. in Jacksboro, Tennessee . At the time, that acquisition really didn’t make much news, but now a group of conservatives in Tennessee is trying to stop the Chinese from blowing up their mountains and taking their coal.
And pretty soon China may want to build entire cities in the United States just like they have been doing in other countries. Right now China is actually building a city larger than Manhattan just outside Minsk , the capital of Belarus .
Are you starting to get the picture? China is on the rise. If you doubt this, just read the following:
# When you total up all imports and exports, China is now the number one trading nation on the entire planet.
# Overall, the U.S. has run a trade deficit with China over the past decade that comes to more than 2.3 trillion dollars.
# China has more foreign currency reserves than anyone else on the planet.
# China now has the largest new car market in the entire world.
# China now produces more than twice as many automobiles as the United States does. After being bailed out by U.S. taxpayers, GM is involved in 11 joint ventures with Chinese companies.
# China is the number one gold producer in the world.
# The uniforms for the U.S. Olympic team were made in China .
# 85% of all artificial Christmas trees the world over are made in China .
# The new World Trade Center tower in New York is going to include glass imported from China .
# China now consumes more energy than the United States does.
# China is now in aggregate the leading manufacturer of goods in the entire world.
# China uses more cement than the rest of the world combined.
# China is now the number one producer of wind and solar power on the entire globe.
# China produces 3 times as much coal and 11 times as much steel as the United States does.
# China produces more than 90 percent of the global supply of rare earth elements.
# China is now the number one supplier of components that are critical to the operation of any national defense system.
# In published scientific research articles China is expected to become number one in the world very shortly.
And what we have seen so far may just be the tip of the iceberg. For now, I will just leave you with one piece of advice – Learn to speak Chinese. You are going to need it!