This is the final part of a 3 part series on economic myths.

Myth 3: The U.S. is sliding into "socialism"

From Personal Finance News from Yahoo! Finance

For a system allegedly being strangled in its bed, U.S. capitalism seems to be in astonishingly robust shape.

Numbers published by the Federal Reserve a few weeks ago show that corporate profit margins have just hit record levels. Indeed. Andrew Smithers, the well-regarded financial consultant and author of "Wall Street Revalued," calculates from the Fed's latest Flow of Funds report that corporate profit margins rocketed to 36% in the first quarter. Since records began in 1947 they have never been this high. The highest they got under Ronald Reagan was 30%.

The picture is also similar when you exclude financials.

The Dow Jones Industrial Average (^DJI – News) is above 10,000. Small company stocks have rallied astonishingly since early last year: The Russell 2000 index is back to levels seen not long before Lehman imploded. Meanwhile Cap Gemini's latest Wealth Report notes that the North American rich saw an 18% jump in their wealth last year.

Meanwhile, federal spending, about 25% of the economy this year, is expected to fall to about 23% by 2013. In 1983, under Ronald Reagan, it hit 23.5%. In the early 1990s it was around 22%. Some socialism.

These days, three-fifths of the entire budget goes on just three things: Insurance for our old age (through Social Security and Medicare), defense, and debt interest.

Conservatives don't want to cut the $700 billion-plus we spend on defense. We can't cut debt interest payments. And while Social Security and Medicare certainly need reform, the main "problems" are simply rising life expectancy and health care demands. If we didn't provide for the insurance through our taxes we'd have to do it individually.

What about the rest of the budget? It's jumped from around 7% of GDP a few years ago to about 10% now. Out of control? It's been in the 6% to 9% range for decades. It's forecast to fall to about 8% again in a few years.

So much for a revolution. But here comes the counter-revolution just the same.

It's socialism because we have a Democrat in the office of the President. It's "trickle down" when we have a Republican in office. Let's see:

• Corporate profits up – CHECK
• Stock market up – CHECK
• Non-discretionary spending unmovable – CHECK
• Federal budget as a percentage of the economy hasn't changed much (if at all) – CHECK

Seems like nothing's wrong to me. Oh, sure, the federal government spends a lot of money – money it doesn't have – on some stuff we don't need. But try taking away social security, Medicare, or defense. You'll be out of a job real fast if you're a national politician. Nobody has the wherewithal to do anything about any of this stuff.

So this is what I'd tell the Obama administration, if they asked: GROW the damned economy. Get it to 5-8 percent, and all this debt/deficit talk vanishes, people get hired for good jobs, and Obama gets a second term. It really is the economy, stupid, and Obama should have cracked this nut a while ago.

If I've said it once, I've said it a thousand times: The stimulus package was way too small.

And now that both sides of the aisle have either forgotten or dug in their heels on unemployment compensation extensions and further stimulatory legislation, we may be in for a classic double-dip recession.

Only this time, it might drive what seemed to be inevitable and then highly unlikely – a corporate lending and business real estate catastrophe that could dwarf the mortgage meltdown.

Then more cries, this time maybe real, for socialism will come to the forefront. Our brand of market capitalism (highly influenced by the idiots who represent us in Congress) certainly isn't working right now.

It's been a long time since I looked at a credit card offer (I simply don't need more than 1-2 cards–nobody does, really), but this site crossed my desk and I thought I'd share it with you.

I mean, if you're looking for a credit card, you may as well get the best one there is.

Best Credit Card Offers

This is part 2 of a 3 part series on economic myths.

Economic Myth 2: The markets are panicking about the deficit

From Personal Finance News from Yahoo! Finance

 

To hear the G-20 tell it, the U.S. and other top countries had better slash those budget deficits before the world comes to an end.

And maybe the markets should be panicking about the deficits.

But they're not. It's that simple.

If they were, the interest rate on government bonds would be skyrocketing. That's what happens with risky debt: Lenders demand higher and higher interest payments to compensate them for the dangers.

But the rates on U.S. bonds have been plummeting recently. The yield on the 30-year Treasury bond is down to just 4%. By historic standards that's chickenfeed. Panicked? The bond markets are practically snoring.

They aren't seeing inflation either. On the contrary, they're saying it will average just 2.3% a year over the next three decades. That's the gap between the interest rates on inflation-protected Treasury bonds and the rates on the regular bonds. By any modern standard the forecast is low. Instead of worrying about inflation, some are starting to worry about something even more dangerous: deflation, or falling prices.

If that takes hold, cutting spending and raising taxes would be a bad move.

It's certainly possible the lenders buying these bonds are being foolish. And it's worth noting that the Treasury market is also subject to political distortions, because foreign are among the heavy buyers of bonds. So it's worth treating its apparent verdicts with some caution. Nonetheless, the burden of proof, as usual, is on those who argue the market is wrong.

It's the age-old "deficits are bad" baloney. Well, deficits can be bad. But in our case, they're not. We've been running deficits since the 40s, regularly. There was a time when we got close to eliminating the yearly difference between tax revenues and federal spending (late 90s very early 2000s), but Alan Greenspan warned that surpluses were bad.

Maybe he was right. The federal government certainly heeded his warning: We've spend trillions over the past 9 1/2 years, well above our "normal."

But most of that spending has come in terms of non-discretionary spending ("entitlements" that no politician has the courage to challenge, social security being one of the biggies, Medicare being the other horn of a really nasty bull) and very discretionary war spending.

Neither of which, I'll add, stimulates growth in the economy or jobs. Surely, soldiers have jobs, but they had those jobs before the economy tanked. What's going to happen if we every withdraw and don't need them any more? Will the government have the courage and discipline to "lay them off?"

I doubt it.

The problem is that, while we did put together a $787 billion stimulus package, it clearly wasn't enough. Yeah, you read that right.

They should have spent $2 trillion on boosting the economy from the get-go. But that's just my opinion. Prove me wrong

by Jack Guttentag

Yes, the mortgage market is more rigged against borrowers than ever before. If only PMI had been required on all buyers between 2001 and 2007…what if?

In my last column, I indicated that most mortgage borrowers who need private mortgage insurance are not aware that they have options in the kind of premium plan they select. Almost all are directed into monthly premium plans. Yet for many borrowers, the total cost over the period the borrowers will have the mortgage will be higher on a monthly premium plan than on a single financed-premium plan. In every case, furthermore, the increase in payment will be larger on a monthly premium plan.

A Market Rigged Against Borrowers: Why aren’t borrowers offered the option?

More on Mortgage Market Rigging

mortgage market is rigged against borrowers, private mortgage insurance, mortgage meltdown

If this were a class, Congress and the White House would be in dire need of extra credit. Read more.