National Treasury Union President Colleen M. Kelly recently described the 2014 IRS budget allocation as “woefully inadequate.” But the agency has not proven itself to be an efficient steward of taxpayer dollars. Here are ten ways the IRS lost the trust of the American people.
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too. The spate of recent activity, however, suggests otherwise.
The financial world is plodding along like a drunken sailor avoiding debt collectors by keeping no cash in his wallet. It’s not the kind of calm that’s going to last or end well. But the storm will have to wait until after the Olympics.What a game! We’ve never watched ice hockey closely before. But watching […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Amidst all the revelations about how the American people, many of whom are absolutely convinced they live in a free society, have their telephone calls, emails, website visits, and who knows what else under surveillance by their own government, let’s not forget the massive infringements on financial privacy that have gone on for decades.Consider, for […]
The exercise had an awesome name, inspired by the movies: “Quantum Dawn 2.”On July 18, scads of U.S. banks, stock exchanges and government agencies took part in a digital fire drill — a practice run in the event all of Wall Street came under massive cyberattack.This isn’t the first time banks have come under an […]
The faces of the Detroit bankruptcy are the thousands of pensioners whose promised benefits are suddenly part of the restructure negotiation. When Motown filed for Chapter 9 last July, the city had $11.5 billion in unsecured liabilities. The vast majority of this was pension and health care benefits owed to retired city employees.The images of […]
The Largest Company in History:“The United States Corporation of Government (USCOG)”I follow global social and commercial networks, looking for entrepreneurial opportunities.Innovation surges when industry and government models change. Buggy whips. Landline phones. Railroads. The Soviet Union. Apartheid South Africa. All marked social and commercial innovation, both bad and good.We are witnessing a new form of […]
We’d like to give the banks in Australia some credit. They’ve finally gone and done it. They have caught up with 1960s technology. They’ve figured out how to use PIN numbers.How to only use PIN numbers, that is. They’re considering scrapping signatures on credit cards to cut down on fraud. Apparently, having to verify your […]
We put in a good-citizen call to the SEC the other day.“There’s a massive scheme to manipulate stock prices,” we told the friendly agent.“I have to tell you that your call is being monitored so that we can better serve the public,” he replied.“Oh, don’t worry about that. The NSA is tapping our call anyway.”“Are […]
No other price pops during a boom like that of condominiums. The common view among savvy real estate types is condos are the last to jump and the first to crash. A decade ago, Bernanke’s post-Sept. 11 easy money fueled condo prices and in turn high-rise residential construction from coast to coast.In downtown Miami, 22,200 […]
Our grandparents believed in the value of thrift, but many of their grandchildren don’t.That’s because cultural and economic values have changed dramatically over the last generations as political and media elites have convinced many Americans that saving is passe. So today, under the influence of Keynesian economists who champion government spending and high levels of […]
So Janet Yellen’s first hearing took place a few nights ago. It was fairly boring. She’s expected to sail through and become the next chairperson of the Federal Reserve. Given that the last few years of extraordinary monetary policy have achieved a miserable recovery, what’s she going to do differently?Nothing. Just more of the same. […]
Imagine that everyone in your community is issued a credit card with the same account number. At the end of every month, the bill is totaled and divided equally among you. Suppose that during the first month, you choose not to use the credit card, yet you receive a bill for $100. The next month, […]
From the Tongue-in-Cheek Department of Laissez Faire Books…Washington, D.C. – Jeff Incast, a Democratic representative from California, has tabled a bill that would expand current insider trading laws.He said he was “distressed” by the acquittal of Mark Cuban, whom a jury cleared of civil charges of insider trading brought by the Securities and Exchange Commission […]
Hanging out in Rome, surrounded by ruins of all ages, you can’t help but have big thoughts about the state of the world. Here are a few of mine.No generation during the long fall of the Roman Empire was really aware of it. Each generation accepted the conditions they inherited and worked to survive as […]
I just spoke to a friend, Skinner Layne, who is from Arkansas, but now lives in Santiago, Chile. He emigrated there and is now heading a startup enterprise that is showing great promise. It is called Exosphere. I asked him about the backstory to the company. It turns out that he moved in 2008, six […]
The dream of virtually every American is to retire as early as possible. Who doesn’t want to have each and every day to do exactly what he or she wants to do?Sure, for some people, that would be work. They like having somewhere to go every day, being valued for their services, and the interaction […]
It’s come to this: A typical family’s health insurance costs as much as a typical family car.If you’re a typical American family, your “health” will set you back $20,728 every year. That figure comes gratis of Milliman, a benefits consulting group. A base-model Toyota Camry… the typical family’s most-popular make? It costs $22,055.Milliman’s numbers account […]
The study of crowds has always fascinated people in finance. It’s not hard to understand why. Markets can go to crazy extremes, extremes no one can make sense of. So, one favorite way to explain it away is to say that crowds do dumb things that individuals, upon cooler reflection, would never do. In a […]
Since before the tech bust, we’ve been suggesting that while Americans “think” they’re getting richer… they’re actually heading in the other direction. They’re getting poorer.This proposition has been easier for folks to entertain since housing busted and the financial crisis reversed the “wealth effect” in 2008. With that in mind, let’s take a look at […]
People will be paying more and getting less from their governments as health costs and pension obligations will force state and local governments to adjust their budgets over the next 50 years, according to a new report.The new report from the Government Accountability Office, a nonpartisan congressional agency that audits federal programs, paints a dreary […]
The countries of the developed world are experiencing a new class of refugee — members of the middle and upper classes. These rungs of the socioeconomic ladder are realizing that their countries of residence are in many ways going rapidly downhill without much hope of a short- or medium-term reversal. This is particularly true for […]
People seem to do the craziest things when it comes to money. They chase stock market bubbles. They throw good money after bad investments, like a home that’s hopelessly underwater. They spend and spend while racking up crushing debt. They destroy their own businesses with dishonesty and deception.Given all of this, the idea that individuals […]
The 20th century was an age of big business. And investors did well backing the giant blue chips on their march to glory. But those days are over. In its simplest terms, my thesis is to bet with the small guys.I think of them as cottage industrials. A cottage industry brings up images of small-scale, […]
During the 2008 credit crisis, a horde of central bankers, Treasury officials and large corporations screamed that the end of the world was upon us — unless trillions of your money were spent (or created) to prop up the existing financial and banking systems.
The presumption was that the existing structure must never be changed, or the Fed’s control over the financial and monetary system ever brought into question. Everything is just as it should be. This is a minor blip on the radar screen, nothing to be concerned about, provided certain steps were taken.
So we were all looted. There was the debt run-up, the new regulations, the funny money creation, the absorption of bad debt that was revarnished and relabeled as assets, the complicated payouts to every institution that Bernanke and his friends deemed to be too big and too crucial to our well-being to be allowed to fail. The government must be permitted to throw around inconceivable amounts of money, they said, in order to save our glorious system.
Democrats, Republicans, liberals, conservatives and every conventional media outlet on this green earth agreed: No expense can be spared to solve this great emergency. Anyone who resists this multiyear bailout, began under Bush and continued under Obama and to be continued by whomever follows, is clearly an egregious cretin who doesn’t understand the depth of the emergency we (as a nation) face.
Yet here we are not too many years later, and it seems that entrepreneurs understand something that the political and banking classes did not understand: The system is rotten and needs to be fixed. It doesn’t serve consumers, which is to say that it does not serve society. There are too many layers between us and the people running the show.
These young entrepreneurs have been hard at working to find new ways for us to develop financial relationships with each other, human ways that don’t rely on force, fraud and freaking out at every sign of trouble. The most-remarkable thing is how they are doing this within the rigid existing structure, regardless of every barrier thrown in their way.
I’ve been exploring some fascinating new digital-age systems for banking, money, loans and payments. If you aren’t following this stuff day to day, you would miss them. They might be used by millions to transfers billions of dollars, yet even still, they aren’t in our purview. This is because people are using digital media as never before to create and innovate in ways that the mercifully spared money institutions of old could not even imagine.
Let’s name a few from simple to complex. And let me say, just before marching through these things, if you have had a rotten day, working in a routine job in which nothing new ever happens, or you have been sitting in a desk listening to some drone professor babble on about the dated falsehoods that clog his brain, these little tools will seriously lift your spirits.
Squareup. This is an innovation by Jack Dorsey (Twitter fame) and his friends, and came about only in 2010. The first problem they were trying to overcome was there has to be an easier way for merchants to accept credit cards. They decided to give the hardware away for use on simple mobile phones, and then charge per transaction. Win!
In the course of developing the business, which is valued already at $1 billion, they solved an even stranger problem that all of us have but never really noticed that we have: If we don’t have our wallets with us, we can’t buy anything.
Now this is genius: Square allows you to pay by saying your name. The merchant matches a picture of your on the square system with your physical face. You look each other in the eye and the deal is done. Anyone can sign up. Yes, it is incredible. Simple and wonderful.
The Lending Club. Again, this is mind-blowing. The Lending Club matches up lenders and borrowers while bypassing the banking system altogether. The idea emerged in October 2008, just as the existing credit system seemed to be blowing up. Today, the company originates $1 million in loans per day.
Anyone can become a lender with a minimum investment of $25 per note. Lenders can choose specific borrowers or choose among many baskets and combinations of borrowers to reduce risk.
Any potential borrower can apply, but of course the company wants to keep default rates at the lowest possible level, and these are published daily (right now, they are running 3%). As a result, most applications to borrow are declined (this is good!).
The average rate of interest on the loans is 11%, cheaper than credit cards but more realistic than the Fed’s crazy push for zero. As a result, the average net annualized return is 9.6%.
The focus if of course on small loans for weddings, moving expenses, business startups, debt consolidation and the like. If you are an indebted country with large unfunded liabilities, you probably can’t get a loan. But if you are student with a job who needs upfront money to put down on an apartment, you might qualify.
Dwolla. This is a super-easy, super-slick online payment system that specializes in linking payments through social networks like Facebook and Twitter. Like most of these companies, the idea was hatched in 2008 in response to the crisis. The system was breaking down and needed new services that worked. Dwolla got off the ground in 2009, and today, it processes more than $1 million per week.
An easy way to understand Dwolla is to view it as the next generation of PayPal, but with a special focus on reducing the problem that vexed PayPal in its early years: getting rid of credit card fraud. Dwolla is focussing its product development on ways to pay that do not require sending credit card information over networks.
Dwolla has also taken a strong interest in the Internet payment system called Bitcoin, a digital unit of account that hopes to become an alternative to national monetary systems. It is a long way from becoming that, but it is hardly surprising that a young and innovative company would be interested in competition to failed paper money.
These are a few of the services, but there are hundreds more. None were created by the money masters in Washington. They are results of private innovation, individual entrepreneurs thinking their way through social and economic problems and coming up with solutions. They accept the risk of failure and enjoy the profit from success.
What they all have in common that is missing from the current monetary, financial and banking structure — a maniacal focus on serving the individual consumer. If or when the official structure blows up, such private enterprises will be there to save us.