Trump rollback of banking regulation well underway
Read more at http://www.channelnewsasia.com/news/business/trump-rollback-of-banking-regulation-well-underway-9420122(Updated: )
Is Trump creating conditions for US to experience another Lehman Brothers collapse in the US financial sector?
The World financial system must be careful in investing in funds coming out from US - or else get caught in the Lehman Brothers 2 saga.
The World financial system must be careful in investing in funds coming out from US - or else get caught in the Lehman Brothers 2 saga.
Trump drastic cuts in taxes, and boosting rampant spendings - is creating a ballooning fiscal deficit --- and increasing debts for US - and its future generation will have a hard time servicing the debt.
Together with this banking regulation - Trump is creating a condition for financial crisis or meltdown of the past.
Trump don't seems to care about the future - and bend on immeditate gratification.
World Economy and finacial institutions must be careful and watchful of what will come out from Trump financial and fiscal policies --- and not let it drag down in a domino effect of the past.
Together with this banking regulation - Trump is creating a condition for financial crisis or meltdown of the past.
Trump don't seems to care about the future - and bend on immeditate gratification.
World Economy and finacial institutions must be careful and watchful of what will come out from Trump financial and fiscal policies --- and not let it drag down in a domino effect of the past.
Trump don't seems to learn from the lesson of the past - or rather he is indifferent - because it will not affect him now.
The problem will surface later - where he may not even be around - and he couldn't care less.
The problem will surface later - where he may not even be around - and he couldn't care less.
Ricky Lim ·
In the past, financial crisis one after another is trigger by such policies - and has recently been ratified and regulation put in place - to prevent such cyclic eruption of financial crisis - after a few years - when it bust after boom.
Now Trump want ot reintroduce this "boom and bust" policies again - and stir the World financial system.
Now Trump want ot reintroduce this "boom and bust" policies again - and stir the World financial system.
ricky l
2 seconds ago
Wonder how can a Country sustain trillion dollars of debt and need to service hundred and billions dollars of debt interest?
Will the Country even able to repay the debt?
Wonder by deregulating the banking sector, will banks and financial institutions again resort to risky investment and put all the investors and depositors money into big risk of default and run-on bank again.
Will the Country even able to repay the debt?
Wonder by deregulating the banking sector, will banks and financial institutions again resort to risky investment and put all the investors and depositors money into big risk of default and run-on bank again.
Trump obviously have forgotten or try to forget the lessons learn from US past finanical crisis :-
(1) US taxpayers money of hundred and hundred billions of dollars are used to prop up US banks and finanical institutions like BOA, JP Morgan, Citibank, AIA, etc - when financial crisis hit from its sub-prime investments in toxic assets. ----- Now Trump want to dismantle the banking regulation - to protect its financial industries.
(2) US Treasury have to borrow trillions of dollars by selling bonds to China, Japan, Saudi - to fund its massive budget deficit. --- Now Trump want to cut its tax in huge percentage, boost its spendings and balloon its debt and widen its budget deficit.
(3) US Treasury have to pump prime its Economy ---- by printing US dollars to repay its debt. ----- Now Trump think that he can do this again if US Economy go into "cyclic boom and bust" cycle --- with Trump risky policies - for immediate gratification but no regards for the future US generations.
--- Can the World not be careful and watchful on what Trump try to do --- and trigger a domino effect on the World financial system in the near future?
(1) US taxpayers money of hundred and hundred billions of dollars are used to prop up US banks and finanical institutions like BOA, JP Morgan, Citibank, AIA, etc - when financial crisis hit from its sub-prime investments in toxic assets. ----- Now Trump want to dismantle the banking regulation - to protect its financial industries.
(2) US Treasury have to borrow trillions of dollars by selling bonds to China, Japan, Saudi - to fund its massive budget deficit. --- Now Trump want to cut its tax in huge percentage, boost its spendings and balloon its debt and widen its budget deficit.
(3) US Treasury have to pump prime its Economy ---- by printing US dollars to repay its debt. ----- Now Trump think that he can do this again if US Economy go into "cyclic boom and bust" cycle --- with Trump risky policies - for immediate gratification but no regards for the future US generations.
--- Can the World not be careful and watchful on what Trump try to do --- and trigger a domino effect on the World financial system in the near future?
Commentary: US tax cuts a hot potato average Americans are stuck with
The US tax plan includes US$1.5 trillion in cuts for corporations, but someone has to foot the bill for these cuts, says one observer from Colorado State University.
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FORT COLLINS, Colorado: Many children have played hot potato, a game in which they pass a potato to other children quickly so they don’t get stuck with it when the music stops.
Taxes are like hot potatoes. No one likes paying them and everyone tries to pass them to others. The game of hot potato sheds some light on the debate over the proposed US tax cutting plans, particularly when it comes to companies.
The House just passed its tax cut bill. It would give about two-thirds of roughly US$1.5 trillion in net tax cuts over the next decade to businesses, mainly by lowering the corporate income tax rate to 20 per cent from 35 per cent.
That puts a lot of money on the table. About US$100 billion in US corporate profits would be retained by companies rather than paid to the government each year.
Treasury Secretary Steve Mnuchin has claimed that most of this tax savings would go to workers, in the form of higher wages, in line with President Donald Trump’s argument that the plan would benefit the middle class.
With the help of hot potatoes, let me explain why he’s wrong.
WHY WORKERS WON’T GAIN
There are two ways a corporate income tax cut can trickle down to workers’ pockets: Directly through higher wages or indirectly via lower prices at stores selling the things they buy.
Mnuchin contends that workers currently bear 70 per cent of the corporate tax burden – or get stuck with 70 per cent of the corporate tax hot potato. So, a tax cut would mean that companies pass much of their tax benefits to their employees by paying them more or by cutting prices and increasing the buying power of current workers.
Yet, based on past tax cuts, economists have estimated that only 20 per cent of the corporate income tax is borne by workers, suggesting that they would get just a small fraction of any corporate tax reduction.
Furthermore, when asked how they’d spend the gains from a tax holiday on the US$2.5 trillion that they currently have parked overseas – which is also part of the corporate tax cut plan – most companies indicated they’d pay back debt, repurchase shares or invest in mergers and acquisitions. Wage hikes were not high on the corporate agenda.
Nor have they been part of the corporate agenda for the past several decades. Since the 1970s, worker productivity has increased 74 per cent, while average wages have risen only 12 per cent. There is no reason to believe that tax cuts would all of a sudden generate greater corporate generosity for workers.
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As for lower prices, if the US economy were dominated by small businesses, intense competition would force these companies to lower prices rather than give it to shareholders in the form of dividends. Reduced prices for goods would translate into improved living standards for workers the same way that a wage hike would.
But the US economy today is dominated by large multinational corporations facing little pressure to reduce prices. So, the gains from a corporate tax cut will remain with the owners of the business – shareholders.
Furthermore, corporate CEOs have large incentives to avoid passing the gains from a tax cut to workers: Executive pay is tied to the company’s share price. If they pass the extra money on to shareholders in the form of dividends or stock buybacks, share prices will rise – as will executive pay packages.
PAYING FOR TAX CUTS
So back to our game. When there’s a tax cut, someone still is stuck with a potato. That is, someone has to pay for it. There are two ways this can be done: Increased borrowing or lower government spending.
When economies are near full employment, as the US is today, additional government borrowing will increase borrowing costs or interest rates. So if the US were to borrow more money to finance the tax cuts, the losers would be middle-income households borrowing to start a business, go to university or buy a home.
Around 80 per cent of Americans are currently in debt, with a median debt of US$70,000. Homeowners would be big losers because higher mortgage rates would also lower the value of their home. They’d also get hammered by changes to the tax code that would make the mortgage interest deduction useless for most people.
Whether or not the US borrows more and increases the national debt, some spending cuts would also be required.
These would likely come from social spending, funding of health insurance and other social programmes that benefit average citizens and the poor. That’s because lawmakers won’t find much savings anywhere else, apart from the military budget, which they almost certainly wouldn’t touch.
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Already this appears to be in the cards. The Congressional Budget Office warned that if the proposed tax plan adds to the deficit, it could set off a 2010 budget rule that would lead to half a trillion in automatic cuts to the US health insurance programme Medicare over the next decade.
And the Senate tax plan calls for repealing the requirement that everyone buy insurance, which would lead to 13 million Americans losing health insurance – all to save US$338 billion over 10 years.
THE BIG WINNERS
The consequence of the US$1.5 trillion tax cut then would be continuing stagnant wages, cuts in government programmes, higher interest rates and rising inequality.
Translation: The rich get richer and average Americans get stuck holding some very big potatoes.
Adding further injury, average workers wouldn’t benefit very much from the proposed individual income tax cuts either. Only 8.3 percent of those in the House plan would go to taxpayers making US$50,000 or less (about half of all taxpayers).
In contrast, millionaires, the richest 0.3 per cent of the population, receive more than a fifth of the cuts.
Even worse, unlike for companies, all the tax cuts for the working class disappear after 10 years.
Steven Pressman is professor of economics at Colorado State University. This commentary first appeared in The Conversation. Read the original commentary here.
Source: CNA/sl
Read more at http://www.channelnewsasia.com/news/commentary/commentary-us-tax-cuts-a-hot-potato-average-americans-are-stuck-9421838
Read more at http://www.channelnewsasia.com/news/commentary/commentary-us-tax-cuts-a-hot-potato-average-americans-are-stuck-9421838
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