Where is the US economy headed?

@cicerone imposter,

cicerone imposter wrote:

I doubt it; you wrote,
Quote:
Not at all. I'm saying that our tax code shouldn't reward companies who use Bonds instead of Equity to raise money.

It creates a perverse incentive for them to take on what have been revealed to be unsustainable levels of debt.

Yes, but those unsustainable levels of debt result from raising capital through the sale of bonds, not through loans taken out from a bank.

I'm saying the exact opposite of what you asked if I was implying: if there is too much capital financed by bonds, there IS a fear of bankruptcy. And that's a bad thing, so our tax code shouldn't be pushing businesses to do that.

Cycloptichorn

1 Reply

@Cycloptichorn,

If it's through the sale of bonds, it's up to the investor to make sure they are viable for the company. The lower the rating, the higher the interest rates. There are investment institutions that grades these bonds, so there's no excuse they are not aware of the risks. It's like anything else people invest in; nothing has a 100% guarantee.

1 Reply

@cicerone imposter,

cicerone imposter wrote:

If it's through the sale of bonds, it's up to the investor to make sure they are viable for the company. The lower the rating, the higher the interest rates. There are investment institutions that grades these bonds, so there's no excuse they are not aware of the risks. It's like anything else people invest in; nothing has a 100% guarantee.

Sure, but the problem with the Bankruptcy isn't for the INVESTOR, it's for the COMPANY. That's what we are worried about; short, sharp spikes in the market can leave a company with a ton of structural debt and very little liquid income or assets to satisfy that debt. And then we are forced to either let them collapse (with tons of jobs lost) or bail them out (at high expense). We don't want either of those to happen so we shouldn't be pushing companies to take on more and more debt through the tax code.

I don't give two shits about the bondholders, personally.

Cycloptichorn

1 Reply

@Cycloptichorn,

Bailing out a company by government is another issue; it's not the purview of government to "save" ill-managed companies. That's an entirely different issue from your original claim about bond sales.

1 Reply

@cicerone imposter,

cicerone imposter wrote:

Bailing out a company by government is another issue; it's not the purview of government to "save" ill-managed companies. That's an entirely different issue from your original claim about bond sales.

NO, it's not! It's EXACTLY the same issue. Our tax code makes it more likely that we will have to make decisions as to whether or not to bail out companies because it pushes companies into taking on more and more debt through the sale of bonds, rather than taking on additional investors through the sale of stock.

This has been my claim, and that of the original writer, all along. That's why I said I feel like we're talking about two different things here.

Cycloptichorn

1 Reply

@Cycloptichorn,

Buyers of risky, commercial, bonds has no guarantee.

3 Replies

@cicerone imposter,

cicerone imposter wrote:

Buyers of risky, commercial, bonds has no guarantee.

To pull a pom on you, ci, you should have written "Buyers of risky, commercial, bonds have no guarantee."

1 Reply

@okie,

Correct!

1 Reply

@cicerone imposter,

cicerone imposter wrote:

Buyers of risky, commercial, bonds has no guarantee.

Nope - but it still hurts the company and our economy when these companies collapse under their debt load.

Cycloptichorn

1 Reply

@cicerone imposter,

By the way, I am the one giving you thumbs up in your debate with cyclops. I agree with you, which I think you summarized with this statement in one of your posts:
"it's not the purview of government to "save" ill-managed companies."

1 Reply

@okie,

okie wrote:

By the way, I am the one giving you thumbs up in your debate with cyclops. I agree with you, which I think you summarized with this statement in one of your posts:
"it's not the purview of government to "save" ill-managed companies."

But it is the purpose of the government to give money out to highly profitable ones? Who certainly don't need the subsidy to remain profitable?

I'm just looking, futilely, for some consistency here, Okie.

Cycloptichorn

1 Reply

@Cycloptichorn,

Is allowing a profitable company to deduct their expenses on their income tax return for buying equipment or leasing equipment, is that "giving money to that profitable company, cyclops? Is that your assertion here? Also, is that a "subsidy?" It seems to be. Please clarify.

1 Reply

@Cycloptichorn,

How much proof do you have of your contention? Are all bond issuing companies doing the wrong thing? What percentage go bankrupt? How many do better from the sale of bonds?

Besides, sale of bonds by companies are legal in this country.

1 Reply

@cicerone imposter,

cicerone imposter wrote:

Buyers of risky, commercial, bonds has no guarantee.

You couldn't be more right. When holders of secured auto company bonds go to the bottom of the list instead of near the top in bankruptcy proceedings, I can't imagine anyone buying commercial bonds at a rate any borrower could afford.

0 Replies

@okie,

okie wrote:

Is allowing a profitable company to deduct their expenses on their income tax return for buying equipment or leasing equipment, is that "giving money to that profitable company, cyclops?

Yes, it is. What you are talking about here is a DIRECT way that companies manipulate the tax code to end up paying little to no tax. It shouldn't be allowed.

Quote:

Is that your assertion here? Also, is that a "subsidy?" It seems to be. Please clarify.

It is one type of subsidy, yes. The oil companies receive MANY types of subsides, you only pointed out a single one of them.

Cycloptichorn

1 Reply

@cicerone imposter,

cicerone imposter wrote:

How much proof do you have of your contention? Are all bond issuing companies doing the wrong thing? What percentage go bankrupt? How many do better from the sale of bonds?

Besides, sale of bonds by companies are legal in this country.

Sigh, I just can't carry this conversation any further right now. The recommendation made was one to change the tax code, to stop rewarding the sale of bonds OVER the sale of stock. Not that it should be illegal to sell bonds.

Cycloptichorn

1 Reply

@Cycloptichorn,

There needs to be a good reason for such a change; you have provided none that exceeds other deductions that can be made by corporations. Your attack on one issue falls into the laffer curve.

1 Reply

@cicerone imposter,

cicerone imposter wrote:

There needs to be a good reason for such a change; you have provided none that exceeds other deductions that can be made by corporations. Your attack on one issue falls into the laffer curve.

WHAT?? The Laffer curve has NOTHING to do with what we are talking about, CI. Nothing at all.

I think you are getting a little confused here, old chum.

Like I said - I'm gonna take a break from this for a while, because we aren't really getting anywhere and I feel you are fundamentally misunderstanding the situation here.

Cycloptichorn

1 Reply

@Cycloptichorn,

Cycloptichorn wrote:

okie wrote:
Is allowing a profitable company to deduct their expenses on their income tax return for buying equipment or leasing equipment, is that "giving money to that profitable company, cyclops?
Yes, it is. What you are talking about here is a DIRECT way that companies manipulate the tax code to end up paying little to no tax. It shouldn't be allowed.

That is absolutely amazing that you believe that, cyclops. It is really revealing of your bias and ignorance of business. I guess under your reasoning, allowing a farmer to expense the cost of buying farm equipment is the same as the government giving the farmer money. I really hate to have to say this, but if you believe that, you must be a total idiot.

Quote:

Quote:
Is that your assertion here? Also, is that a "subsidy?" It seems to be. Please clarify.
It is one type of subsidy, yes. The oil companies receive MANY types of subsides, you only pointed out a single one of them.
Cycloptichorn

Read my response in the above, cyclops. Do you realize how silly and idiotic you really must be? Seriously, are you that insulated from reality in Berkeley?

1 Reply

@Cycloptichorn,

I don't think so, but that's your opinion. I'll let those interested in this issue decide for themselves.

1 Reply

Where is the US economy headed?

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