Euro zone deal sparks rally on Wall Street

Gabriel Kazakias 10/7/11

Stocks surged Thursday after an agreement was reached to boost Europe’s bailout fund. European stocks surged to a 12-week high and the euro shot above $1.40. But some aspects of the deal such as the mechanics for boosting the European Financial Stability Facility (EFSF) and the Greek debt could take weeks to pin down.

Just three months ago, another agreement that was meant to fix the debt woes was unveiled. But within weeks they realized that their plan was inadequate to handle Greece's economic problems and the vulnerability of their banks.

The new deal (Thursday’s plan) aims to address these areas. The private sector agreed to accept a 50 percent cut in its bond investments in order to reduce Greece's debt burden from 160% to 120% of gross domestic product by 2020. The total value to address Greece’s debt would be 130 billion euros. The July package, the one that didn’t materialize, was 109 billion euros.

Trying to convince markets that they can prevent larger countries like Italy and Spain from being swept up by the crisis, euro zone leaders also agreed to scale up the EFSF, the 440 billion euro bailout fund they have already used to provide help to Ireland, Portugal and Greece.

The remaining money in the fund will be deployed in a variety of ways producing a total figure of around 1.0 trillion euros.

In addition the EFSF announced that they will be initiate a campaign aimed at attracting investment from China and Brazil.

Is this initiative enough to deal with Europe’s long term problems? The answer to this question will be discussed in another posting.

Μήν ξεχνᾶμε τήν 28η Ὀκτωβρίου

Ἡ Ἑλλάς εἶναι ἡ πατρίς τῶν ἀνθρώπων γιά τούς ὁποίους τά αἰσθήματα τῆς αὐτοσυντηρήσεως  δέν ἐνίκησαν ποτέ τά αἰσθήματα τῆς αὐτοθυσίας.

Να το θημομαστε αυτο παντα.

Ἡ Ἑλλάς εἶναι πνεῦμα ἀκαταβλήτου δυνάμεως, πού δέν λυγίζει πρό τῆς σκοτεινῆς βίας τῶν κατακτητῶν. Ἡ Ἑλλάς εἶναι ἡ ὡραιοτέρα ἐκδήλωσις τῆς Ελευθερίας..

Οσο αφορα την οικονομικη κριση πρεπει να αλλάξουμε τρόπο ζωής και να διατηρησουμε την ενοτητα και την ομοψυχια μας γιατί μόνο έτσι θα μπορέσουμε να ξεπεράσουμε τα δεινά της κρίσης. Συγχρόνως να επαναπροσδιορίσουμε τον σκοπό της ζωής, να αλλάξουμε τον τρόπο σκέψης και να επανέλθουμε στις πατρογονικές μας ρίζες.

Ἕλληνες, Ἑλληνίδες, νά εἴμαστε ἕτοιμοι καί νά μήν ξεχνᾶμε πώς εἴμαστε οἱ Σκλαβωμένοι Νικηταί!

Μήν ξεχνᾶμε τήν 28η Ὀκτωβρίου.

2^nd Bailout and Private Sector Involvement

Gabriel Kazakias

On July 21^st European leaders agreed on a second bailout for Greece totalling $109 Billions. This was on top of the original $110 Billions agreed to be given in instalments assuming Greece complied with the Troika’s demands. 

Right from the start many expressed reservations as to the ability of the 2nd bailout to deal effectively with the Greek debt. It was obvious that the 2nd bailout was produced for the health of the banking sector and not the reduction of the Greek debt. .

Economists and politicians are advocating the severity of the measures needed and the involvement of the private sector for the bailout.

Jumpstart the US Economy

Gabriel Kazakias 10/24/11

After the 25-year boom the most harmful changes were the expansive Fed. Policies and the damaging “affordable housing” policies that caused the housing bubble in 2007-2008.

In addition the mark-to-market regulations forced institutions to list many sound mortgages as worthless and as these institutions began showing insolvency their stock plunged. Early 2008 Bush and Pelosi’s socialist allies increased government spending and tried a true recipe for failure, a $168 Billion stimulus package with no apparent economic benefits.

In February 2009 President Obama advocated another stimulus package, four times as much, with no apparent improvement.

A new economic plan that could jumpstart economic growth could be something similar to the one below:

1. Reduce Corporate Taxes to 12%
2. Adopt a 15% flat tax with personal exemptions of $12,000 per person
3. Abolish capital gains taxes
4. Abolish the death tax altogether
5. Allow 100% write off for new equipment purchased for business
6. Cut Federal spending by $200 Billion now and adopt future cuts by $1 Trillion

Tax Cuts during a recession

Gabriel Kazakias 11/24/11

President John Kennedy (1961-1963) cut the top tax rate from 91% to 70% with across the board cuts of 15%-30%. President Kennedy insisted that tax cuts do actually increase tax revenues.

President Ronald Reagan (1981-1989) reduced the top tax rate from 70% to 28% over five years. He also claimed that tax cut increase revenues. President Reagan was known for initiating the most successful economic policies in the US history, turning a rapid economic decline into a raging economic boom. The period from 1982 to 2007 is called the 25-year Reagan Boom even though we had three other presidents serving within that period, namely George Bush Sr. (1989-1993), Bill Clinton (1993-2001) and George Bush Jr. (2001-2009).

The question remains if tax cuts stimulate the economy, and if they do, how do they do it? When people have to pay less for taxes, they have more money to spend or invest. Hence, they stimulate the economy either directly or indirectly. Most economists seem to agree that tax cuts really do provide a stimulus. The real reason may be that people who want to consume more can use their tax cut for that purpose or people who want to save more can use their extra money to buy government bonds. This is a good thing during a recession.