The Fed, Income Tax, Economic Crisis
By: happyashell
Topics: economy, finance, economic crisis
Posted by happyashell Tue Mar 3, 2009 08:18:18 PST
Viewed 338 times
0 responses 0 comments
To The Federal Reserve, Faculty and Students of CSUB
I am posting this information so everyone will have it before the forum on Thursday. We should start the discussion now. Post your comments and question now. I will be at the meeting if you have a question or comment that you want me to answer privately. Let it begin.
Letter to Treasurer Tim Geithner
Treasurer Tim Geithner
Dept of Treasury Office of Treasurer
1500 Pennsylvania Ave., NW Room 2134
Washington D.C. 20220
Thank you for all your years of public service. You stepped into a firestorm when others feared the worse or didn’t know what to do about the currant economic crisis. It would have been much better if it hadn’t occurred at all. I wrote a book outlining policies that would help make our economy more efficient and cure economic crisis. We have to many cycles of recession, boom, and again, recession or depression. I believe that we rely on the Federal Reserve too much to manage our economy. Its policy of managing the economy, by adjusting the money supply, to control inflation, recessions, and cure economic crises, is too damaging to our economy when used by its self. I believe that the income tax should be automatically bought into play at the same time. When the government relies on the Fed to use its high interest rate policies, it is like driving a tack in with a sledgehammer. There is a lot of damage done to the economy that is unnecessary and much to much misery is created. The government responsibilities increase, as more people become government dependent. Enclosed you will find an article I wrote, to be published in our local newspaper. I am also enclosing a policy paper on how to stabilize oil prices. When the economies of the world recover energy prices will rise. We consume 25% of the world oil supply. Our actions will have an enormous affect on world oil prices. I hope you will find these policy changes helpful. Please let me know what you think and if I can be of anymore service.
Sincerely Leonard Tekaat
11620 Traviso Ave
E-mail economysflaw@Yahoo.com
Bakersfield, Ca. 93312
leonardc@earthlink.netIntroduction
Let me introduce myself. I am sixty-four years old. I am a retired Economic Analyst, Financier, Businessman, Investor, Author and former candidate for the California Congress. I have over forty years of being in the financial and business world. There is a major flaw in our economic theories! I wrote a book and several articles outlining new policies to cure economic crisis, now and in the future. It is a guide to correct a major flaw in our economic theories. If you agree that these changes need to be enacted, support me in getting them enacted. In this way you will be doing something that will really improve the lives of people and the families of America. The stock market should go up, replacing some of the value they have lost. We do not need a government jobs program or a bailout to cure the economic crisis. This is not to say that the things that President Elect Obama is proposing do not need to be done. It would be better if we did them at a slower pace so they could be done in an efficient manner. Job programs were tried in the Great Depression of the 1930s and were only partially successful. It was World War II that finally restarted the economy. We do not want that to happen again! Recently we had the housing bubble, which got us into this mess, and the oil bubble in the commodities market. The Federal Reserve could not do anything about them, without killing our economy and disrupting the world economies.
Find out why! The book INFLATION THE ECONOMY KILLER by Leonard Tekaat is available at Amazon.com free info. http://www.AmericanSolution... articles and comments by happyashell HOW TO STABILIZE THE VALUE OF YOUR HOME AND STIMULATE THE ECONOMY According to recent articles in newspapers and financial magazines, Bakersfield has seen the price of single-family homes drop an average of 31% or more in the past two years. A recent article by Courtenay Edelhart , Californian staff writer, stated, it is predicted we might see another 21% decrease in the median priced home in 2009! The deflation of housing prices was needed after the housing bubble, but we are now at a point where a floor must be put under home prices before we have a complete collapse of our economy. State and local governments, which rely on property tax money to finance their services, are cutting back and borrowing heavily. Our national economy is in terrible shape. Unemployment is rising. Our economy is experiencing an economic crisis. It is very sick because of decades of misguidance. State and local governments are close to being broke. The federal debt is expected to triple. People are losing their jobs and homes by tens of thousands. Business large and small are going bankrupt. People are giving up hope of a better future for themselves and their families. We have been treating the symptoms of the economic crisis, not the disease. We must try something different. What we are doing is not working! Investors must be encouraged to invest in long-term bonds and securities to restart the economy. There are four questions that investors ask before they will get off the sidelines. Will I make a profit? Will my investment retain its value? Will it pay a good return on investment? Will the economic future be better than the past? If we can satisfy these concerns, investors will get off the billions of dollars they are sitting on and reinvest them in our economy. Breathing new life into it. The government will not have to bailout the economy, if investors and consumers are confident of the future. John Maynard Keynes (1893-1946) was the British economist who revolutionized economic theories of the 1930s. Keynesian economics works well. The trouble is he did not leave a handbook on how to correctly slow down the economy when it is so strong, that it is creating an economic crisis. We recently had the housing bubble, which got us into this mess, and the oil bubble in the commodities market. The Federal Reserve was not able to do anything about either one of these bubbles. WHY? We need a new method to cure economic crisis and control inflation and inflation psychology. Our economy has become so big and electronically sophisticated, the old ways no longer work. One of the reasons we are experiencing an economic crisis is we have made investing in capital assets and commodities with rising prices very profitable. Since inflationary investments are taxed at 15%(long term capital gains tax rate) and money investments are taxed at 36%, making the money investments worth 21% less. In fact to offset the capital gains rate on personal residences, which is 0%, and the homes annual appreciation rate is 30%, which we had in 2003-2006, interest rates on bonds, securities and bank savings accounts would have go up to 48.5 a.p.r to have the same return on investment. Add in the effect of the interest deduction. Is it any wonder that we had a housing bubble and the Fed could not do anything about it, without killing our economy, and disrupting the world economies? To halt the falling housing prices, save our auto industry and put people back to work, mortgage rates must decrease 2 to 3%. When the economy refinances, at a lower interest rate, people’s disposable income will increase. The unemployed will be employed, and have more income. People’s confidence level will rise and they will start spending money again! They will be able to afford a new car, there-by saving the auto industry. If the vehicle’s loan interest is made tax deductible again, more vehicles will be sold and at a faster pace. Banks no longer hold mortgages. They sell them to investors. So we must induce an economic climate so investors are willing to purchase, during this economic crisis and the inflation cycle, long-term bonds and securities, I wrote a book “Inflation the Economy Killer” containing “The Zero Inflation Taxation Policy”, which correctly cures the economic crisis. It correctly controls inflation without hurting the economy unlike the Fed’s high interest rate policy. It also solves the problems of under investment in the long-term bond and securities market, during economic crises. As inflation or under investment in the bond and securities market begins to occur, the tax on money investments should automatically be decreased and the interest deduction should be decreased by the same percentage rate, based on the inflation rate. When money investments are taxed at 15%, money investments will be as valuable as inflationary investments. Most of the time, capital gains must be taxed at the same rate to correct this imbalance. I do not want to eliminate the long-term capital gains tax rate. We need it to encourage people to take risks and increase production. I want to neutralize it at the correct time in the economic cycle. It still is available to those people that create the real wealth of our economy, not paper profits. If a real estate, stock market or a commodities market bubble is occurring raise the capital gains tax rate on that item or all long-term investments. If price of one of the a-fore mentioned items are declining too rapidly, lower the capital gains tax rate on that item. Income taxes in general should not be raised. Investments in the commodities market must be made without credit until the day of delivery. It is a simple plan, but so was Keynesian economics. In the 1980s, even through interest rates went up to 21%, they were only 100% above the then currant annual inflation rate of 11%. The currant inflation rate is approximately 0%, some economist say we may even be lower than that (deflation). The currant interest rate to buy a home is approx.5%. That is at least 670% above Nov 2008’s deflation rate 1.7%. If a person has credit card debt, the interest rate is even worse. It can be 2500% or more above the annual inflation rate. If a person has credit card debt equal to their annual gross income, of say $25,000.00, they will pay more interest to the financial institution than income taxes to the state and federal governments combined! The economy cannot function efficiently under these conditions. We must stop the destruction of our economy every 7 to 10 years with high interest rate polices. ENCOURAGE FINANCIAL INSTITUTIONS TO LOWER THEIR LENDING INTEREST RATES. Banks have become their own worse enemy. If interest rates for mortgages were lowered there wouldn’t be as many foreclosures. The value of their collateral would stabilize. The money they are lending can be obtained at the Federal Reserve for a very low rate above the inflation rate. Banks kept the interest rates approx. 300 to 500% or more above the inflation rate all through the 1930s, causing the Great Depression to be worse than it would have been with lower interest rates. The Banks may be keeping interest rates high so they will not loose their depositors or for other reasons. If this is true, then the Federal Reserve should lend the U.S. Treasury the money to purchase the new mortgages through the following financial institutions. I would not use the TARP money to buy the bad mortgage securities. As the old mortgages are refinance they will change from a delinquent assets to a viable assets and be taken off the bad debt list. After the economy restarts and gets strong again, interest rates should rise. The Fed should never let interest rates rise more than 100% above the annual inflation rate. This means that mortgage interest rates and other loans must also follow the annual inflation rate down. Interest rates must be maintained fifty to 100% above the inflation rate. We have special circumstances in our economy at the currant time. With the government providing lower interest rate mortgages than the banks and financial institutions, the banks will have to offer lower interest rates. The banks and financial institutions will earn a huge amount of money arranging and servicing these new mortgages there-by making them profitable and capitalizing them. The Home Loan Bank, Federal Housing Authority, Fannie May, Freddie Mac and any other financial intuitions that are government sponsored, have deposits insurance by FDIC, or are partially owned by the government would not be allowed purchase or write any mortgages that have an interest rate greater than 200% to 300% above the annual inflation rate. I do not think this will be problem. Banks and financial institutions will willing arrange the refinancing of the mortgages, because of the fees they will collect. When the mortgages are bundled into securities, only those loans that had the same lending criteria, rating and purpose would be allowed into the security. With this policy in place the securities could be correctly rated as to value. Adjustable Rate Mortgages (ARM) should have a starting interest rate of 100 to 200 % above the annual deflation rate. The mortgage interest rate could not be raised more than one-quarter percent per year or greater than an apr of 5%. The mortgage rate could be lowered faster to maintain demand. Since we will be using the income tax to guide the economy and control inflation, interest rate will stay below 5% in the money markets, if inflation stays below 2.5%. The new buyer must qualify for the mortgage at the highest interest rate the mortgage will obtain. I believe that if home loans were made assumable, home prices would not have decreased as much as they have. The selling expenses connected to transferring the home to the buyer is considerable less and occurs much quicker, increasing demand, thus there is less time for the home to devalue. If there is no equity left in the home, the seller is not going to pay the extra expenses to sell it in a conventional manner. The homeowner will just let it go back to mortgage holder. Approval of the new buyer, by the lender, must be done before they could assume the mortgage. The mortgage should be adjusted to the current selling price of the house or the banks can agree to a sliding principal amount, as explained later. A 3% pay down of the unpaid principal amount would be required. If equity is less than 20% mortgage insurance is required. The assumption expenses to the buyer should only be the actual expenses of the mortgage service company. The title insurance should be assumable by the buyer, for a small fee to cover the actual cost of assumption and a title search. You might be thinking these changes to our financial system would decrease the investor’s willingness to invest in the new securities. Currently investors are not as concerned about the rate of return. They are more concerned about the borrower’s ability to repay the loan and the value of the collateral. People do not abandon their homes because the loan is greater than the current resale price. They have not given up hope that the selling price of the home will increase in the future. They are mainly moving out of their homes because they cannot afford the mortgage payments. They will give the home to the bank, if they have to move, to find less expensive housing or find employment. This is why the loan should be assumable. If the monthly payment is affordable to the buyer, it is better to own the home than to rent. Even if it’s current selling price is less than the mortgage owed. The new buyer will be allowed a tax deduction for the interest and property taxes. This advantage makes their housing cost cheaper than renting. Also it is possible they may make some money on the sale of the home in the future. Even if they do not make money on the sale, they are better off than renting, because they will eventually pay the home mortgage in full. For those people who own a home that the mortgage is greater than the currant selling price a clause should be included in the refinanced mortgage that states the bank or investor will discount the mortgage, an amount equal to 20%, of each monthly payment for a maximum the first ten year, or until the selling price of house plus repairs equals the amount of the mortgage, if the borrower agrees to pay off the entire unpaid balance due. This policy would allow for an orderly decrease in mortgage balances that are above the selling price of the home. The borrower must also buy mortgage insurance. Again the borrower must qualify for the loan at the highest rate of interest the mortgage will obtain. On all mortgage insured homes the insurance company could either take possession of the home or pay the unpaid amount between the currant selling price and the unpaid balance of the mortgage minus any repairs that need to be made to the home to obtain the highest possible selling price. The borrower should be responsible for any repairs to encourage the borrower to maintain the collateral. The repairs to a home should be made tax-deductible in the year they are made so the neighborhood does not deteriorate. The banks should and borrowers should be encouraged to use a Grant Deed In Lieu of Foreclosure so the amount of time the home is empty will decrease. In this way the bank’s cost will decrease and borrower’s responsibilities will not last as long. The shortest turn a round time will decrease the possibility of damage. The borrower should be responsible for the maintenance of the home until the bank obtains legal possession. The bank or securities investors do not care who is making the mortgage payment. They do not want the house back. They just want someone to continue making the monthly payments. To prevent another housing bubble and slow down rising housing prices, if another bubble is occurring in any of the twelve Federal Reserve Districts (more than 2% annual price increases) the secondary mortgage market should require a greater percentage down payment to reduce demand and maintain a strong financial industry. The Fed should not raise interest rates because this causes cost to go up in the economy and causes the economy to slow down in general, which causes a recession. If the interest rate for a mortgage is reduced by 2 to 3 % the price of the collateral will stabilize because of the increased number of qualified buyers that would qualify for a mortgage. The foreclosed housing inventory will quickly be sold increasing the value of all the other homes in the neighborhood. When the mortgage is made assumable, the monthly payments will continue to pay down the loan, there-by maintaining the value of the security. The investors will be making a good return on their investment if the interest rate they are collecting is up to 50% to 100% above the annual inflation rate. With The Zero Inflation Taxation Policy enacted, the security instrument will maintain its resale value because the Fed will not have to raise interest rates as high to control inflation and inflation psychology. There is a second wave of foreclosures on the way, starting in 2009 or 2010, when another set of (ARM) mortgages adjust. If we act quickly, they will adjust down instead of up. With the above policies enacted interest rates will come down, avoiding the possibility of hundred of thousands of more foreclosures and the prolonging of the recession or even developing a depression. The Policy should stabilize the long-term bond and securities market, creating a market for 30 year fixed rate or ARM mortgages, at the lowest possible interest rate. . If you agree that these changes need to be enacted, support me in getting them enacted. In this way you will be doing something that will really improve the lives of the people and families of America. The stock market should go up, replacing some of the value they have lost. We do not need a government jobs program or more bailouts to cure the economic crisis. They may do more harm than good. With the government borrowing such large amounts of money, treasury securities will rise in price. Banks and investors will then put their money into treasuries and not into the economy and mortgages. Housing prices must have a floor put under them before more equity is lost. Banks will then not loan homeowners money because of a lack of equity. Job programs were tried in the Great Depression and were only partially successful. It was World War II that finally restarted the economy. We do not want that to happen again! These policy changes will cause mortgage rates to drop and the stock market should go up. The economy will stand up on its own, without a government bailout. RECAP---WHAT TO DO TO STIMULATE THE ECONOMY.1. Enact the Zero Inflation Taxation policy. This policy will increase confidence in investors to make long-term money investments, creating a market for 30yr mortgages. It will automatically change the income tax as economic conditions change in our economy from recession to the inflation economic cycle.2. Create mortgages that have interest rates that are no more than 50 to 200 percent above the Consumer Price Index. Maintain mortgage interest rates with Adjustable Rate Mortgages at no more than 50 to 100% above the C.P.I. Have the U.S. Treasury fund these mortgages until the banks lower their mortgage rates and investors start investing in them. Lowering mortgage rates would be the fastest way to stimulate the economy. By decreasing mortgage rates by 50%, mortgage payments would decrease by 50% per month. A $1500.00 monthly interest payment would decrease to $750.00. That is a $750.00 stimulus check every month for 30 yrs. Remember, the first payment on a thirty year 0% interest, $200,000.00 loan is a$199.10 principal payment, the rest is interest. To increase people’s disposable income and increase demand in the economy, we must lower interest rates 2 to 3%. November 08 C.P.I. was negative1.9%. A 3% mortgage rate would be 490% above the deflation rate.3. Do not allow credit to be used in the commodities market until the day of delivery. This will reduce speculation and save our savings pool for necessary productive and consumption reasons.4. After home prices are stabilized, increase the capital gains tax rate to the same amount as other long-term capital investments. If home prices are going up more that 2% a year increase the capital gains tax rate and down payment requirement on homes. Do not raise income taxes in general.5. Make home loans assumable. Include all the terms stated in this stimulus plan. Increase the borrowers responsibility for maintaining the home. Encourage making repairs to the home by making the cost of the repairs tax deductible, in the year they are made. This provision doesn’t include home improvements. The capital gains rate will encourage that investment. This will increase economic activity and maintain the collateral for the loan.6. Make interest on auto loans tax deductible again. To encourage the stabilization of manufacturing cost, the auto industry would also be affected by the Zero Inflation Taxation Policy, by the disallowance of this tax encouragement to buy their product. 7. Do not create a government jobs program so large that interest rates rise at the present time. Allow this stimulus plan to create more economic activity, then take up slake in the economy, as needed, at an efficient rate, to achieve the infrastructure we need for the future.8. Do not use high interest rate policies alone to control inflation and inflation psychology. Use the income tax, which will not raise cost or cause a recession.9. Bundle the mortgages into securities that have the same criteria, rating and purpose. This will make it possible to determine their value, so they will be able to be marketed. 10. Enact the Oil Conservation Exchange Contribution (OPEC). This policy will help stabilize oil prices and reduce their importation. Help balance the trade deficient. Oil companies will not go broke at the currant price.11. Gold at one time in our history was the value behind our currency. It was called the Gold Standard. The new Gold Standard is the value of our homes, buildings, land, products, and our economy (people). Correctly guided, our economy will once again make our currency “As good as gold.” We must change how we make money. “ We must make money the old fashion way, we must earn it.”12. Additional info, Inflation the Economy Killer, available at Amazon.Com. Leonard Tekaat is an Economic analyst, Author Businessman, Financier, Investor and former candidate for California Congress. E-mail leonardc@earthlink.net economysflaw@yahoo.com copyright Jan 4, 2009HOW TO STABILIZE OIL FUEL PRICES ANDENOURAGE A CHANGE OF OURTRANSPORTATION VEHICLE’S PROPELLANT To The Federal Reserve Faculty and Students of CSUBI am posting this information so everyone will have it before the forum on Thursday. We should start the discussion now. Post your comments and question now. I will be at the meeting if you have a question or comment that you want me to answer privately. Let it begin. Letter to Treasurer Tim Geithner Treasurer Tim Geithner Dept of Treasury Office of Treasurer1500 Pennsylvania Ave., NW Room 2134Washington D.C. 20220Thank you for all your years of public service. You stepped into a firestorm when others feared the worse or didn’t know what to do about the currant economic crisis. It would have been much better if it hadn’t occurred at all. I wrote a book outlining policies that would help make our economy more efficient and cure economic crisis. We have to many cycles of recession, boom, and again, recession or depression. I believe that we rely on the Federal Reserve too much to manage our economy. Its policy of managing the economy, by adjusting the money supply, to control inflation, recessions, and cure economic crises, is too damaging to our economy when used by its self. I believe that the income tax should be automatically bought into play at the same time. When the government relies on the Fed to use its high interest rate policies, it is like driving a tack in with a sledgehammer. There is a lot of damage done to the economy that is unnecessary and much to much misery is created. The government responsibilities increase, as more people become government dependent. Enclosed you will find an article I wrote, to be published in our local newspaper. I am also enclosing a policy paper on how to stabilize oil prices. When the economies of the world recover energy prices will rise. We consume 25% of the world oil supply. Our actions will have an enormous affect on world oil prices. I hope you will find these policy changes helpful. Please let me know what you think and if I can be of anymore service. Sincerely Leonard Tekaat 11620 Traviso Ave E-mail economysflaw@Yahoo.com Bakersfield, Ca. 93312 leonardc@earthlink.net INTRODUCTION Let me introduce myself. I am sixty-four years old. I am a retired Economic Analyst, Financier, Businessman, Investor, Author and former candidate for the California Congress. I have over forty years of being in the financial and business world. There is a major flaw in our economic theories! I wrote a book and several articles outlining new policies to cure economic crisis, now and in the future. It is a guide to correct a major flaw in our economic theories. If you agree that these changes need to be enacted, support me in getting them enacted. In this way you will be doing something that will really improve the lives of people and the families of America. The stock market should go up, replacing some of the value they have lost. We do not need a government jobs program or a bailout to cure the economic crisis. This is not to say that the things that President Elect Obama is proposing do not need to be done. It would be better if we did them at a slower pace so they could be done in an efficient manner. Job programs were tried in the Great Depression of the 1930s and were only partially successful. It was World War II that finally restarted the economy. We do not want that to happen again! Recently we had the housing bubble, which got us into this mess, and the oil bubble in the commodities market. The Federal Reserve could not do anything about them, without killing our economy and disrupting the world economies. Find out why! The book INFLATION THE ECONOMY KILLER by Leonard Tekaat is available at Amazon.com free info. http://www.AmericanSolution... articles and comments by happyashell HOW TO STABILIZE THE VALUE OF YOUR HOME AND STIMULATE THE ECONOMY According to recent articles in newspapers and financial magazines, Bakersfield has seen the price of single-family homes drop an average of 31% or more in the past two years. A recent article by Courtenay Edelhart, Californian staff writer, stated, it is predicted we might see another 21% decrease in the median priced home in 2009! The deflation of housing prices was needed after the housing bubble, but we are now at a point where a floor must be put under home prices before we have a complete collapse of our economy. State and local governments, which rely on property tax money to finance their services, are cutting back and borrowing heavily. Our national economy is in terrible shape. Unemployment is rising. Our economy is experiencing an economic crisis. It is very sick because of decades of misguidance. State and local governments are close to being broke. The federal debt is expected to triple. People are losing their jobs and homes by tens of thousands. Business large and small are going bankrupt. People are giving up hope of a better future for themselves and their families.We have been treating the symptoms of the economic crisis, not the disease. We must try something different. What we are doing is not working! Investors must be encouraged to invest in long-term bonds and securities to restart the economy. There are four questions that investors ask before they will get off the sidelines. Will I make a profit? Will my investment retain its value? Will it pay a good return on investment? Will the economic future be better than the past? If we can satisfy these concerns, investors will get off the billions of dollars they are sitting on and reinvest them in our economy. Breathing new life into it. The government will not have to bailout the economy, if investors and consumers are confident of the future. John Maynard Keynes (1893-1946) was the British economist who revolutionized economic theories of the 1930s. Keynesian economics works well. The trouble is he did not leave a handbook on how to correctly slow down the economy when it is so strong, that it is creating an economic crisis. We recently had the housing bubble, which got us into this mess, and the oil bubble in the commodities market. The Federal Reserve was not able to do anything about either one of these bubbles. WHY? We need a new method to cure economic crisis and control inflation and inflation psychology. Our economy has become so big and electronically sophisticated, the old ways no longer work. One of the reasons we are experiencing an economic crisis is we have made investing in capital assets and commodities with rising prices very profitable. Since inflationary investments are taxed at 15%(long term capital gains tax rate) and money investments are taxed at 36%, making the money investments worth 21% less. In fact to offset the capital gains rate on personal residences, which is 0%, and the homes annual appreciation rate is 30%, which we had in 2003-2006, interest rates on bonds, securities and bank savings accounts would have go up to 48.5 a.p.r to have the same return on investment. Add in the effect of the interest deduction. Is it any wonder that we had a housing bubble and the Fed could not do anything about it, without killing our economy, and disrupting the world economies? To halt the falling housing prices, save our auto industry and put people back to work, mortgage rates must decrease 2 to 3%. When the economy refinances, at a lower interest rate, people’s disposable income will increase. The unemployed will be employed, and have more income. People’s confidence level will rise and they will start spending money again! They will be able to afford a new car, there-by saving the auto industry. If the vehicle’s loan interest is made tax deductible again, more vehicles will be sold and at a faster pace. Banks no longer hold mortgages. They sell them to investors. So we must induce an economic climate so investors are willing to purchase, during this economic crisis and the inflation cycle, long-term bonds and securities, I wrote a book “Inflation the Economy Killer” containing “The Zero Inflation Taxation Policy”, which correctly cures the economic crisis. It correctly controls inflation without hurting the economy unlike the Fed’s high interest rate policy. It also solves the problems of under investment in the long-term bond and securities market, during economic crises. As inflation or under investment in the bond and securities market begins to occur, the tax on money investments should automatically be decreased and the interest deduction should be decreased by the same percentage rate, based on the inflation rate. When money investments are taxed at 15%, money investments will be as valuable as inflationary investments. Most of the time, capital gains must be taxed at the same rate to correct this imbalance. I do not want to eliminate the long-term capital gains tax rate. We need it to encourage people to take risks and increase production. I want to neutralize it at the correct time in the economic cycle. It still is available to those people that create the real wealth of our economy, not paper profits. If a real estate, stock market or a commodities market bubble is occurring raise the capital gains tax rate on that item or all long-term investments. If price of one of the a-fore mentioned items are declining too rapidly, lower the capital gains tax rate on that item. Income taxes in general should not be raised. Investments in the commodities market must be made without credit until the day of delivery. It is a simple plan, but so was Keynesian economics. In the 1980s, even through interest rates went up to 21%, they were only 100% above the then currant annual inflation rate of 11%. The currant inflation rate is approximately 0%, some economist say we may even be lower than that (deflation). The currant interest rate to buy a home is approx.5%. That is at least 670% above Nov 2008’s deflation rate 1.7%. If a person has credit card debt, the interest rate is even worse. It can be 2500% or more above the annual inflation rate. If a person has credit card debt equal to their annual gross income, of say $25,000.00, they will pay more interest to the financial institution than income taxes to the state and federal governments combined! The economy cannot function efficiently under these conditions. We must stop the destruction of our economy every 7 to 10 years with high interest rate polices. ENCOURAGE FINANCIAL INSTITUTIONS TO LOWER THEIR LENDING INTEREST RATES. Banks have become their own worse enemy. If interest rates for mortgages were lowered there wouldn’t be as many foreclosures. The value of their collateral would stabilize. The money they are lending can be obtained at the Federal Reserve for a very low rate above the inflation rate. Banks kept the interest rates approx. 300 to 500% or more above the inflation rate all through the 1930s, causing the Great Depression to be worse than it would have been with lower interest rates. The Banks may be keeping interest rates high so they will not loose their depositors or for other reasons. If this is true, then the Federal Reserve should lend the U.S. Treasury the money to purchase the new mortgages through the following financial institutions. I would not use the TARP money to buy the bad mortgage securities. As the old mortgages are refinance they will change from a delinquent assets to a viable assets and be taken off the bad debt list. After the economy restarts and gets strong again, interest rates should rise. The Fed should never let interest rates rise more than 100% above the annual inflation rate. This means that mortgage interest rates and other loans must also follow the annual inflation rate down. Interest rates must be maintained fifty to 100% above the inflation rate. We have special circumstances in our economy at the currant time. With the government providing lower interest rate mortgages than the banks and financial institutions, the banks will have to offer lower interest rates. The banks and financial institutions will earn a huge amount of money arranging and servicing these new mortgages there-by making them profitable and capitalizing them. The Home Loan Bank, Federal Housing Authority, Fannie May, Freddie Mac and any other financial intuitions that are government sponsored, have deposits insurance by FDIC, or are partially owned by the government would not be allowed purchase or write any mortgages that have an interest rate greater than 200% to 300% above the annual inflation rate. I do not think this will be problem. Banks and financial institutions will willing arrange the refinancing of the mortgages, because of the fees they will collect. When the mortgages are bundled into securities, only those loans that had the same lending criteria, rating and purpose would be allowed into the security. With this policy in place the securities could be correctly rated as to value. Adjustable Rate Mortgages (ARM) should have a starting interest rate of 100 to 200 % above the annual deflation rate. The mortgage interest rate could not be raised more than one-quarter percent per year or greater than an apr of 5%. The mortgage rate could be lowered faster to maintain demand. Since we will be using the income tax to guide the economy and control inflation, interest rate will stay below 5% in the money markets, if inflation stays below 2.5%. The new buyer must qualify for the mortgage at the highest interest rate the mortgage will obtain. I believe that if home loans were made assumable, home prices would not have decreased as much as they have. The selling expenses connected to transferring the home to the buyer is considerable less and occurs much quicker, increasing demand, thus there is less time for the home to devalue. If there is no equity left in the home, the seller is not going to pay the extra expenses to sell it in a conventional manner. The homeowner will just let it go back to mortgage holder. Approval of the new buyer, by the lender, must be done before they could assume the mortgage. The mortgage should be adjusted to the current selling price of the house or the banks can agree to a sliding principal amount, as explained later. A 3% pay down of the unpaid principal amount would be required. If equity is less than 20% mortgage insurance is required. The assumption expenses to the buyer should only be the actual expenses of the mortgage service company. The title insurance should be assumable by the buyer, for a small fee to cover the actual cost of assumption and a title search. You might be thinking these changes to our financial system would decrease the investor’s willingness to invest in the new securities. Currently investors are not as concerned about the rate of return. They are more concerned about the borrower’s ability to repay the loan and the value of the collateral. People do not abandon their homes because the loan is greater than the current resale price. They have not given up hope that the selling price of the home will increase in the future. They are mainly moving out of their homes because they cannot afford the mortgage payments. They will give the home to the bank, if they have to move, to find less expensive housing or find employment. This is why the loan should be assumable. If the monthly payment is affordable to the buyer, it is better to own the home than to rent. Even if it’s current selling price is less than the mortgage owed. The new buyer will be allowed a tax deduction for the interest and property taxes. This advantage makes their housing cost cheaper than renting. Also it is possible they may make some money on the sale of the home in the future. Even if they do not make money on the sale, they are better off than renting, because they will eventually pay the home mortgage in full. For those people who own a home that the mortgage is greater than the currant selling price a clause should be included in the refinanced mortgage that states the bank or investor will discount the mortgage, an amount equal to 20%, of each monthly payment for a maximum the first ten year, or until the selling price of house plus repairs equals the amount of the mortgage, if the borrower agrees to pay off the entire unpaid balance due. This policy would allow for an orderly decrease in mortgage balances that are above the selling price of the home. The borrower must also buy mortgage insurance. Again the borrower must qualify for the loan at the highest rate of interest the mortgage will obtain. On all mortgage insured homes the insurance company could either take possession of the home or pay the unpaid amount between the currant selling price and the unpaid balance of the mortgage minus any repairs that need to be made to the home to obtain the highest possible selling price. The borrower should be responsible for any repairs to encourage the borrower to maintain the collateral. The repairs to a home should be made tax-deductible in the year they are made so the neighborhood does not deteriorate. The banks should and borrowers should be encouraged to use a Grant Deed In Lieu of Foreclosure so the amount of time the home is empty will decrease. In this way the bank’s cost will decrease and borrower’s responsibilities will not last as long. The shortest turn a round time will decrease the possibility of damage. The borrower should be responsible for the maintenance of the home until the bank obtains legal possession. The bank or securities investors do not care who is making the mortgage payment. They do not want the house back. They just want someone to continue making the monthly payments. To prevent another housing bubble and slow down rising housing prices, if another bubble is occurring in any of the twelve Federal Reserve Districts (more than 2% annual price increases) the secondary mortgage market should require a greater percentage down payment to reduce demand and maintain a strong financial industry. The Fed should not raise interest rates because this causes cost to go up in the economy and causes the economy to slow down in general, which causes a recession. If the interest rate for a mortgage is reduced by 2 to 3 % the price of the collateral will stabilize because of the increased number of qualified buyers that would qualify for a mortgage. The foreclosed housing inventory will quickly be sold increasing the value of all the other homes in the neighborhood. When the mortgage is made assumable, the monthly payments will continue to pay down the loan, there-by maintaining the value of the security. The investors will be making a good return on their investment if the interest rate they are collecting is up to 50% to 100% above the annual inflation rate. With The Zero Inflation Taxation Policy enacted, the security instrument will maintain its resale value because the Fed will not have to raise interest rates as high to control inflation and inflation psychology. There is a second wave of foreclosures on the way, starting in 2009 or 2010, when another set of (ARM) mortgages adjust. If we act quickly, they will adjust down instead of up. With the above policies enacted interest rates will come down, avoiding the possibility of hundred of thousands of more foreclosures and the prolonging of the recession or even developing a depression. The Policy should stabilize the long-term bond and securities market, creating a market for 30 year fixed rate or ARM mortgages, at the lowest possible interest rate. . If you agree that these changes need to be enacted, support me in getting them enacted. In this way you will be doing something that will really improve the lives of the people and families of America. The stock market should go up, replacing some of the value they have lost. We do not need a government jobs program or more bailouts to cure the economic crisis. They may do more harm than good. With the government borrowing such large amounts of money, treasury securities will rise in price. Banks and investors will then put their money into treasuries and not into the economy and mortgages. Housing prices must have a floor put under them before more equity is lost. Banks will then not loan homeowners money because of a lack of equity. Job programs were tried in the Great Depression and were only partially successful. It was World War II that finally restarted the economy. We do not want that to happen again! These policy changes will cause mortgage rates to drop and the stock market should go up. The economy will stand up on its own, without a government bailout. RECAP---WHAT TO DO TO STIMULATE THE ECONOMY. 1. Enact the Zero Inflation Taxation policy. This policy will increase confidence in investors to make long-term money investments, creating a market for 30yr mortgages. It will automatically change the income tax as economic conditions change in our economy from recession to the inflation economic cycle. 2. Create mortgages that have interest rates that are no more than 50 to 200 percent above the Consumer Price Index. Maintain mortgage interest rates with Adjustable Rate Mortgages at no more than 50 to 100% above the C.P.I. Have the U.S. Treasury fund these mortgages until the banks lower their mortgage rates and investors start investing in them. Lowering mortgage rates would be the fastest way to stimulate the economy. By decreasing mortgage rates by 50%, mortgage payments would decrease by 50% per month. A $1500.00 monthly interest payment would decrease to $750.00. That is a $750.00 stimulus check every month for 30 yrs. Remember, the first payment on a thirty year 0% interest, $200,000.00 loan is a$199.10 principal payment, the rest is interest. To increase people’s disposable income and increase demand in the economy, we must lower interest rates 2 to 3%. November 08 C.P.I. was negative1.9%. A 3% mortgage rate would be 490% above the deflation rate.3. Do not allow credit to be used in the commodities market until the day of delivery. This will reduce speculation and save our savings pool for necessary productive and consumption reasons.4. After home prices are stabilized, increase the capital gains tax rate to the same amount as other long-term capital investments. If home prices are going up more that 2% a year increase the capital gains tax rate and down payment requirement on homes. Do not raise income taxes in general.5. Make home loans assumable. Include all the terms stated in this stimulus plan. Increase the borrowers responsibility for maintaining the home. Encourage making repairs to the home by making the cost of the repairs tax deductible, in the year they are made. This provision doesn’t include home improvements. The capital gains rate will encourage that investment. This will increase economic activity and maintain the collateral for the loan.6. Make interest on auto loans tax deductible again. To encourage the stabilization of manufacturing cost, the auto industry would also be affected by the Zero Inflation Taxation Policy, by the disallowance of this tax encouragement to buy their product. 7. Do not create a government jobs program so large that interest rates rise at the present time. Allow this stimulus plan to create more economic activity, then take up slake in the economy, as needed, at an efficient rate, to achieve the infrastructure we need for the future.8. Do not use high interest rate policies alone to control inflation and inflation psychology. Use the income tax, which will not raise cost or cause a recession.9. Bundle the mortgages into securities that have the same criteria, rating and purpose. This will make it possible to determine their value, so they will be able to be marketed. 10. Enact the Oil Conservation Exchange Contribution (OPEC). This policy will help stabilize oil prices and reduce their importation. Help balance the trade deficient. Oil companies will not go broke at the currant price.11. Gold at one time in our history was the value behind our currency. It was called the Gold Standard. The new Gold Standard is the value of our homes, buildings, land, products, and our economy (people). Correctly guided, our economy will once again make our currency “As good as gold.” We must change how we make money. “ We must make money the old fashion way, we must earn it.”12. Additional info, Inflation the Economy Killer, available at Amazon.Com. Leonard Tekaat is an Economic analyst, Author Businessman, Financier, Investor and former candidate for California Congress. E-mail leonardc@earthlink.net economysflaw@yahoo.com copyright Jan 4, 2009HOW TO STABILIZE OIL FUEL PRICES ANDENOURAGE A CHANGE OF OURTRANSPORTATION VEHICLE’S PROPELLANT There always has been a problem with the price of oil being able to come down and remain profitable, which discourages the change over to another propellant for our transportation vehicles. Oil has been relatively cheap (not counting the cost of pollution) to produce based on the BTUs and the other products that can be obtained from a barrel of oil. Even at the currant price, a profit can be made from an existing oil well. So how do we stabilize the price of oil, to encourage the change to another propellant for our transportation vehicles? If our nation and President Elect Obama are serious about reducing the amount of oil we important the amount we use, this is the perfect opportunity to do something about it. Transportation fuel prices have fallen considerable in the last few months. Now is the time for our State and Federal governments, to add the $1.50 or more per gallon Oil Preservation Exchange Contribution (OPEC), charge onto transportation fuels. Instead of adding the OPEC at the pump, we could add a $100.00 per refined barrel of oil at the refinery. At the same time decrease the income tax by the same dollar amount, so there is not an increase in revenues. The program must be revenue neutral. The law that will create this program must have a provision that unconditionally guarantees, that the OPEC will remain revenue neutral. The people whose income is below the national poverty level and do not pay income taxes should a monthly check, even if they don’t own a car. The check should equal the cost of the OPEC that the average person would pay each month. This provision would encourage mass transit use. Or we could issue debit cards that can only be used for rides on mass transit systems. The people who pay taxes must change their E-4s and estimated tax statements so their monthly income will increase based on the lower amount of income tax that they will be paying because of the OPEC. Transportation fuel prices can only go up so much before people start changing their driving habits. This change would be good for the economy and the environment. At a certain price, the use of oil diminishes and alternative means of propelling transportation vehicles takes place. If the government increases the price of transportation oil fuels, with the OPEC, then Opec or the oil companies cannot increase them. They cannot come down either because of the OPEC. Please send this information to as many people and groups as you can. The last four letters in American are I__CAN. We can do this together and as a nation of free people. We are responsible for how our economy is managed and what laws are enacted. Copyright 12-1-08 by Leonard Tekaat. All rights reserved in the U.S. or any other country. The use of the information in the above articles copied or written by the author is strictly forbidden without written permission. ANOTHER ARTICLE IS POSTED ON THE PREVIOUS ARTICLE FROM CSUB
There always has been a problem with the price of oil being able to come down and remain profitable, which discourages the change over to another propellant for our transportation vehicles. Oil has been relatively cheap (not counting the cost of pollution) to produce based on the BTUs and the other products that can be obtained from a barrel of oil. Even at the currant price, a profit can be made from an existing oil well. So how do we stabilize the price of oil, to encourage the change to another propellant for our transportation vehicles? Our nation and President Elect Obama are serious about reducing the amount of oils we important the amount we use, this is the perfect opportunity to do something about it. Transportation fuel prices have fallen considerable in the last few months. Now is the time for our State and Federal governments, to add the $1.50 or more per gallon Oil Preservation Exchange Contribution (OPEC), charge onto transportation fuels. Instead of adding the OPEC at the pump, we could add a $100.00 per refined barrel of oil at the refinery. At the same time decrease the income tax by the same dollar amount, so there is not an increase in revenues. The program must be revenue neutral. The law that will create this program must have a provision that unconditionally guarantees, that the OPEC will remain revenue neutral. The people whose income is below the national poverty level and do not pay income taxes should a monthly check, even if they don’t own a car. The check should equal the cost of the OPEC that the average person would pay each month. This provision would encourage mass transit use. Or we could issue debit cards that can only be used for rides on mass transit systems. The people who pay taxes must change their E-4s and estimated tax statements so their monthly income will increase based on the lower amount of income tax that they will be paying because of the OPEC. Transportation fuel prices can only go up so much before people start changing their driving habits. This change would be good for the economy and the environment. At a certain price, the use of oil diminishes and alternative means of propelling transportation vehicles takes place. If the government increases the price of transportation oil fuels, with the OPEC, then Opec or the oil companies cannot increase them. They cannot come down either because of the OPEC. Please send this information to as many people and groups as you can. The last four letters in American are I__CAN. We can do this together and as a nation of free people. We are responsible for how our economy is managed and what laws are enacted. Copyright 12-1-08 by Leonard Tekaat. All rights reserved in the U.S. or any other country. The use of the information in the above articles copied or written by the author is strictly forbidden without written permission. ANOTHER ARTICLE IS POSTED ON THE PREVIOUS ARTICLE FROM CSUB
| Send to a Friend | Report a Violation |