A few other factors from recent discussions with various friends:
1) As more folks start cashing in 401k's, they are going to be taking tax hits on this money that has been tax-free up to that point. Given that the AARP is such a powerful lobby, what are the odds of pressure being put on Congress to forgive taxes on withdrawals, too? What will this do to revenues at a time when the whole Social Security system will be on the brink of collapse? Fire up the printing presses!
2) Yes, most of the mortgages that are likely to go into foreclosure are concentrated in a few states, and no distinction is being made about how many of those are held by "flippers". Still, what are the odds that whole blocks in some places like California or Florida could wind up vacant and up for sale? How prevalent can vandalism get in a neighborhood like that? Will we hear about "crack blocks" instead of "crack houses"?
I'm no expert and this is all idle speculation. Feel free to set me straight in Comments...
As far as whole blocks being in foreclosure, that is already happening in Atlanta. Several new subdivisions in the south side suburbs are more than 20% lender owned.
ReplyDeleteThese are built out subdivisions, not subdivisions under construction.
I don't think the tax hit on pulling retirement funds is going away anytime soon.
ReplyDeleteCongress might blow a lot of BS, but one thing they almost NEVER do without a huge fight is give up a buck.
Voters be damned...... The marriage penalty is still in place, no matter how many millions of married voters their are. The AMT has never been fixed, just kicked around yearly, and that effects millions of voters.
No... Gubermint tax revenooes have been going up the last few years, and that slime won't give up the spending power once they get it.
They'll kill the economy through greed, rather than relax their death grip.
Again, Ayn Rand was right.
'Dark' regions...... whole blocks, whole neighborhoods, gone dark and silent. Happen? Is happening?
I can't say. If so, I won't be surprised.
Age Range
ReplyDeleteMedian
Net Worth
Less than 35 years old
$14,200
35 - 44
$69,400
45 - 54
$144,700
55 - 64
$248,700
65 - 74
$190,100
75 or more
$163,100
... there's not enough money saved, on average, to matter. Eliminate your home as an asset, since we all have to live somewhere....you get the picture...what's in your future??? The new $2500 car from India and an empty chinese cargo container to live in....
I'll admit the one big gaping flaw in my pollyanna post was is the possibility (inevitability?) of well intentioned gov't interference.
ReplyDeleteBut even then, I think we're in a much better shape than in 1976. The regulatory state is far improved, we've got 30-odd years of productivity improvements as a buffer ... we have never been better at turning time into money. Even 8 years of Evita and Bubba raising taxes and casting PC BS about the landscape only started to gum things up 7 years into their reign, and the resulting slowdown was only, what, 2 quarters?
And a catastrophic terrorist attack at the very heart of our economy only resulted in a few quarters of low growth, and we've had 14 straight quarters of growth since. A correction may be way overdue, but I don't believe it will last long nor hurt much.
I don't share the concern that America is losing manufacturing jobs. Pulling resources out of the ground and reselling them is additive. Turning materials into value-added goods is multiplicative. A knowledge economy is geometric and makes the other methods of turning time into money look like a mug's game.
I'm also not concerned about China holding a lot of dollars. There's an old bromide that if you owe some money to the bank, that's your problem. But if you owe a LOT of money, that's the banks problem. Any funny business China may pull will hurt them more than it will us.
I used to worry more about the boomer question, but I think their effects will be tempered somewhat by the fact that the process will be gradual, and this article puts things in an interesting light.
I haven't given up on pessimism -- I was raised in Canada remember. But despite the best efforts of our political class, I have strong faith in the people of America being greedy bastards.
Actually, should the Fair Tax plan, as defined by Boortz and Linder, be adopted, tax-free 401(k) and IRA withdrawals is exactly what would happen. Under the Fair Tax, taxes would still be paid, however, but as that money is spent on stuff rather than as it's withdrawn, so it's a wash.
ReplyDeleteThe only reason I put money into my 401(k) was that my employer matched it. Now that predatory inflation has taken hold [thank you Federal reserve] I moved my assets in to gold and high performance mutual funds. My faith in government regulation is destroyed. I've moved to the private sector to protect my assets and its performing wonderfully.
ReplyDeleteMy pity on those that rely on the government for direction and help.
Hate to bust your bubble Tam, but there are "crack blocks" in sunny little K-town, and Im not talking about the ghettos. Now "crack hoods" where the ops just dont go...yeah, that could happen.
ReplyDeleteI know this is pretty much a dead letter, but I can't resist saying it anyway: General revenues and Social Security aren't supposed to have anything to do with each other; SS is supposed to come from payroll taxes.
ReplyDeleteOf course, the jig was up when Traitor John Kerry made that same claim (Bush tax cuts hurt Social Security) and no one in the media or punditocracy called him on it.
Interestingly enough, there are blocks and even huge chunks of subdivisions here in Charlotte under foreclosure much like Matthew mentioned about Atlanta.
ReplyDeleteLucky for us though, CMPD spent some dollars a while back on new armored vehicles. Homeland defense and the whole second largest banking center in the US on their minds at the time. They'll be on tap if/when there comes a need to Blitzkreig Bop the crack blocks.
'God help me, I do love it so.'
China's not going to start dumping dollars. To do so would upset their funnymoney accounting system further. Floating the yuan won't happen to a great extent; they're already doing that. If anything, the weak dollar is going to increase overseas spending in the CONUS on durable products and real estate. We'll see more Chinese/Asian spending here on infrastructure and real estate similar to what the Arabs and then the Japanese were doing in the late 70's to mid 80's. Even the Europeans may do it- remember when VW then Honda, then Mitsubishi built plants here?
ReplyDeleteA weak dollar isn't always horrific, economically. Granted, I'd much rather see it more on par with the euro and more favorable with the pound, but that's wage-price powerflation, just like we had in good ol' 1975, when wages went up to match the increase in consumer goods. We all know what happened in 1981 and 82, when home loan interest was 18% and higher and negative amortization, variable rate adjustable loans were the only ones available.
I'm in a house that is 4x larger than my first one, for which I paid 3x more than in 1982, and my payment is less than it was then with a fixed rate today.I call that progress.
Regards,
Rabbit.
Yes, I've been talking about the 401(k) Tax Forgiveness Act of 2012 (or 2016) for some time. That will be the boomers' second worst curse. The worst of course will be socialised medicine.
ReplyDeleteThere are entire subdivisions in Tampa that are owned mostly by "flippers" (or now their banks).
ReplyDeleteMiami built something on the order of 80,000 condominium units during the frenzy. A lot of those will be sold at fire-sale prices to Central and South Americans. But not all.
The number in the Tampa bay area is "only" about half that. (More single family houses though).
With the tax and insurance problem, snow birds are now heading for Tennessee (and similar areas). So you should see some of the insanity in 10 years or so.