Goldman: Fed Needs $4 Trillion of QE2 to Meet Mandate (Fortune)
Fed Needs to Print $4 Trillion to Close Taylor Gap (ZeroHedge)
Goldman Sachs’ economists Jan Hatzius and Sven Jari Stehn estimate that the Fed needs to make $4 trillion in asset purchases if it is serious about reducing unemployment, increasing inflation and closing the 7% Taylor implied funds rate gap. Bernanke has been especially concerned with the low rate of inflation, which threatens the recovery by raising the real cost of borrowing for households and businesses. The Fed, however, is unlikely to approach such a figure, but rather enact a more incremental, as-needed piece-meal approach for QE2 in the range of $500 billion to $1 trillion. In any case, the money printed by the Fed will ultimately end of in the hands of China unless it does an unlikely 180 on its yuan policy.
Google Uses ‘Double Irish’ and ‘Dutch Sandwich’ For 2.4% Effective Tax Rate (Bloomberg)
Google, who preaches “don’t be evil” to its employees, is among the most egregious US companies using tax loopholes to save boatloads of cash. Over the last three years, Google has trimmed its tax burden by $3.1 billion by funneling profits mostly through Ireland and the Netherlands to Bermuda and other island nations with no income tax. Compared to a US corporate income tax rate of 35%, Google has managed an effective tax rate of 2.4%. Facebook and Microsoft are two other companies using these profit shifting techniques to reduce their tax burden.
Rueters Special Report: Does Income Inequality Cause Bubbles and Crises? (Reuters)
Income inequality is at its worst since the Great Depression. From 2002-2007, the last period of economic expansion, income growth for the top 1% of the population was 10.1%, as opposed to 1.3% for the lower 99%. Economists’ early findings, based on research from both periods, indicate the divide at least plays a part in financial crises. The US, in terms of the Gini coefficient for measuring wealth gaps, is in line with economic superpowers such as Ivory Coast and Malaysia. A consumption economy like the US needs consumers, and with income concentrated in the very upper echelons, there is a reliance on credit in the middle class to fill that void. In the past, Americans have largely shrugged off income inequality because they believed with hard work they could live the American Dream too. But that attitude is starting to wane as the US economy evolved into a “plutonomy”.
15 Inviolable Rules for Dealing with Wall Street (The Big Picture)
In the wake of never-ending stock scandals, Barry Ritholtz provides his rules for dealing with snake oil salesman. Highlights: 1) Reward is ALWAYS relative to Risk. 9) Zero Sum Game. 15) There is no free lunch.
Comic Relief: How To Report the News (The Onion)
*Disclaimer: Unsavory language.
