Our financial system is crumbling this week.

[dangerous]

http://seekingalpha.com/article/121901- ... ocks-in-99

[dangerous]

http://seekingalpha.com/article/121854- ... er-wheaton

[Arthur Dent]

Let's Stimulate Private Risk Taking

Tax cuts are the way to nudge capital toward productive uses.

By ALBERTO ALESINA and LUIGI ZINGALES

...

So how do we stimulate the economy without increasing the already large current-account deficit? It's not easy, but here is an idea: Create the incentive for people to take more risk and move their savings from government bonds to risky assets. There is no better way to encourage this than a temporary elimination of the capital-gains tax for all the investments begun during 2009 and held for at least two years.

Lol at these clowns. Is there any economic problem that they won't propose solving by lowering the capital gains tax? It's worth pointing out that this tax was already slashed in 2003. You can see the economic miracle that resulted in the ensuing years. Cutting capital gains tax overwhelmingly favors the rich, but I'm sure that's just a coincidence.

Furthermore, tax cuts have a much better effect on job creation than highway rehabilitation.

Evidence for this claim?

[obucard]

Lol at these clowns. Is there any economic problem that they won't propose solving by lowering the capital gains tax? It's worth pointing out that this tax was already slashed in 2003. You can see the economic miracle that resulted in the ensuing years. Cutting capital gains tax overwhelmingly favors the rich, but I'm sure that's just a coincidence.

Cutting the CG tax encourages venture capitalism. VC is a very risky business; one may have several misses before finding a hit. That one hit is usually enough to recoup the previous losses, provided you're not paying half of it to Uncle Sam. If the hits don't make up for the outs, one tends to stay out of the game.

[Arthur Dent]

The long term capital gains tax is 15% not 50% which is already quite generous compared to tax on ordinary income.

[obucard]

The long term capital gains tax is 15% not 50% which is already quite generous compared to tax on ordinary income.

I quoted half because I've heard there are talks of raising the CG tax, which I believe would be disastrous for an already flailing economy.

Also, the tax cut had nothing to do with the housing market collapse or the corruption that led to the credit bust, though I will point out that on March 12, 2003 the Dow Jones closed at 7552.07. DJIA peaked at 14,000.41 on July 19, 2007, shortly before the housing crash.

[Arthur Dent]

Also, the tax cut had nothing to do with the housing market collapse or the corruption that led to the credit bust

Not claiming it did, but it certainly didn't have the wondrous effects its supporters' claimed.

[dangerous]

http://news.goldseek.com/CliveMaund/1235329685.php

[dangerous]

[Leroy]

So Citigroup (C) has proposed that the US taxpayer and other preferred shareholders convert up to $75 billion of preferred stock into common stock, thus bolstering the company's tangible equity and putting it in less desperate need of a complete takeover.

And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.

Well, that's nice for Citigroup...and another ream-job for taxpayers.

Citigroup's common equity is currently worth $10 billion. If the US were to convert all $45 billion of its preferred at the current stock price, it should end up with 80% of the company, not 40%.

For the US to convert $45 billion of preferred to common and only get 40% of the company, Citigroup's existing common equity would have to be valued at $65 billion, not $10 billion, and the conversion price would have to be about $10 a share. Or the US would only be able to convert $4 billion of its $45 billion, which wouldn't help Citigroup's tangible equity ratio much.

So is that what Citigroup is trying to do here? Persuade the US goverment to convert to common stock at a price miles above the current trading price, screwing the US taxpayer yet again?

Or does Citigroup have some other secret plan up its sleeve whereby it can take up to $75 billion of debt (preferred stock) off its books and not end up diluting its current shareholders 90%?

Thoughts?