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Forbes reports that Texas has three of the best cities to work in the nation.  Dallas, Houston and Austin are among the top cities to earn a living while also keeping living costs down.   Being a native Texan for many years it has never been lost on me how inexpensive Dallas is compared to cities like Seattle, New York and L.A.  The cost of living in those cites has been a game changer for me at least twice during my career. 

There are some interesting things to think about and perspectives to ponder.

• If I were a policymaker in a competing state I would probably want to take a close look at my home state and how it compares to to Texas.  I would be interested in finding ways to attract more employers and job hunters.

 

• Which came first? The chicken or the egg?  Did these employers setup shop here because of a good stock of skilled talent or whas the initial move a cost-benefit one where taxes and state provided incentives were offered?

 

• Forbes did not publish (or at least I did not see it) their data tables but I would be interested to see how each city in their list ranked in terms of transportation options.

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The Times reports today that France has obtained a list of 3,000 account holders at Swiss banks.  This is only days after France and Switzerland reached an agreement to exchange information on French citizens who hold Swiss bank accounts. 

Just last week the U.S. Department of Justice and the I.R.S reached a deal with Switzerland to get the names of 4,450 U.S. account holders who may be suspect of hiding income and assets from Uncle Sam.

And the week before that Britain and Liechtenstein inked a new tax cooperation agreement to allow British account holders the opportunity to disclose their hidden accounts.  British citizens must disclose their accounts to get some leniency for tax evasion and those who do not will be forced to move their money out of Liechtenstein and face the full consequences – back taxes, penalties and possible legal action.

These three events are not coincidental and clearly indicate a growing trend among nations to shore up badly needed tax revenues.  The question is what will happen when the global economy picks up again.  There are hundreds of millions, if not billions, of dollars at stake for countries like the United States, Britain, France, Germany and Italy.

Once the tax coffers begin to rely on an increased taxpayer participation rate it would be hard to notice any dramatic reduction.  But that is where I think we could see an eventual pullback to the traditional tax evasion scheme.  It is always that slow and gradual change that proves to be the hardest to see.  A slow but sustained effort to chip away at these new rules and agreements could be just what the banks ordered.

The motivations behind hiding assets from tax authorities can vary from the outright criminal to well justified.  For those parties that use offshore havens to sustain their criminal activities I share no sentiment with you.  Those activities include money laundering, tax evasion and fraud.

In the case of tax evasion I take additional exception, as I liken it to you living under my roof and refusing to help pay the rent.    Regardless of the extent to which one may agree or disagree with the tax code, the fact should not be lost that citizenship has its privileges AND responsibilities.  One of those responsibilities being that of helping to pay for the government that protects you, defends your way of life and makes it possible for you to create any wealth in the first place.  Grievances with tax rules should be funneled through the appropriate channels – call your senator not your offshore banker. 

If you are one of those 4,450 lucky winners on that UBS list then you might want to call your local I.R.S agent too, as the Sep. 23 deadline for disclosing those secret accounts is getting close.

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The Federal Reserve Bank of San Francisco has posted a “Fed Chairman Game” on their website.  It lets you set monetary policy for 16 quarters.

The game starts you off with the fed funds rate set at 4.50%, unemployment at 4.75% and inflation at 2.14%.  I played a few times and got hit with events like energy price spikes and stimulus programs.  I lost the first two tries but on the third go-round I decided to keep the fed funds rate around 3% ahead of inflation while also keeping an eye on th unemployment rate.  I am happy to say that I got to keep my job at the end of the game.

Give it a go and see how you do.  Click here to access the game.

Fed Chairmain Game

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The Times and NPR have written recently about employers using credit checks as an additional means to screen potential new hires.  I’ve heard about these on rare occasion but it seems that a trend may be developing whereby one’s personal financial situation becomes a hiring tool.  This is an interesting issue that poses some important questions:

• Should potential employers have access to your financial history?
• What relevance does one’s credit score have on employment candidacy?
• What protections have been put in place to prevent abuse?
• Who (what federal agency) is representing the interests of the candidate?
• Are employers opening themselves up to potential legal problems by making hiring decisions based on personal and confidential financial information?
• What kinds of externalities can we expect from this activity?

Lets start with the most basic question – why should potential employers have access to this information?  The most compelling argument I have seen is that potential employers can use a credit report to gauge a candidate’s decision-making abilities.  It goes like so: the likelihood that a candidate who has a history of delinquencies, collections, foreclosure or perhaps a bankruptcy will make similarly poor decisions in their professional life is higher than a candidate with a clean credit history with few or no blips. In other words, the argument says, “hey, this person has taken good care of his/her financial reputation and demonstrated responsibility over the long term”.

While I may appreciate and even agree with that claim, I cannot reconcile that argument against a more important claim – that personal financial and medical information is too sensitive to be used for anything other than what they were originally intended for – doctors need your medical record to provide health care and banks need it to decide whether they should lend you money for that car or business idea. Why did I throw in medical information? Because I consider both to be the last bastions of personal privacy afforded us by the government from prying employers, insurance companies, marketing agencies and the like.  Although HIPAA has made progress with Protected Health Information it seems that our credit history is slowly becoming a one-stop shop for anyone willing to write Experian, TransUnion or Equifax a check.

Another area of concern is what happens to this information once it is obtained by potential employers?  Who in the organization has access to this information?  In today’s world of Twitter and Facebook how long will it be before we hear about someone tweeting about a candidate’s bankruptcy?  What happens after a candidate has been hired?  Will the employer have an obligation (read unintended consequence) to disclose any of this information to other parties?

Perhaps my strongest concern for using credit reports as a way to screen job candidates is the long-term and compounding (yet to be determined) socioeconomic effect.  Hans Rossling’s enlightening presentation at the 2006 TED Conference comes to mind.  Watch it below.

What we should be cognizant of is that this is a slippery slope we have started.  I know that my car insurance provider accesses and (whether they acknowledge it or not) utilizes my credit score to determine my premiums.  Although I have yet to be asked by a potential employer for my credit report it may only be a matter of time.  What will be next?  Will credit scores be required for admission to colleges and universities? Hey, the admissions departments could argue that it would help them keep their graduation rates high.

I can imagine a situation where pervasive use of credit reports for employee screening could perpetuate a gradual segregation of those who have had the success or luck in maintaining their credit in good standing from those who have not.  I can imagine watching Hans Rossling’s presentation 10 years from now as he shows the ‘completely new world’ we live in, where those with good credit have access to every definition of economic opportunity one could conceive while those with poor credit are left to struggle for whatever remains as they descend into a self reinforcing spiral.

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I am sure others have noticed by now that the discussion about bailing out our Big 3 auto firms reliably ends up with GM being the focus of attention.  I think there is something to be said about this.

It has always been my opinion that GM is the embodiment of poor management, lack of vision and a stubborn proclivity to rely on excuses in the face of adversity.  The public apprehension towards bailing out the Big 3 seems to be a manifestation of the same sentiment.

What I find unfortunate is that Ford, while equally responsible for its current situation, has been more responsive to the realities of the marketplace and yet seems to be getting dragged down with GM’s bad reputation.  Ford has brought in a new CEO, it has been in the process of painful but necessary steps to restructure and it has quickly begun to adapt.  If any of these firms should be bailed out it should be Ford.  GM should be forced to restructure under Chapter 11.

What many do not seem to understand is that allowing GM to fail could be a blessing in disguise.  With the anticipated growth of the alternative energy industry (wind, solar, etc…) we will need workers to man these jobs.  Where will they come from???  Look at the unemployment rate as it stands in the midst of a considerable economic  downturn – 6.5%.

Let’s look past the trees for a moment and see the forest.  The next decade will see baby boomers leaving the job market en masse – creating an industry that caters to them in the process.  Energy will be an ever increasingly important industry that will require imagination, talent and huge amounts of capital.  There is opportunity on the horizon, but we need to recognize it and prepare ourselves for it.  Americans have always shown their ability to take a bad situation and thrive on it.  Let’s keep that tradition alive.

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Just pondering here… my ability to articulate these thoughts in a clear and comprehensive way are lacking right now but bear with me – these are interesting things to consider..

Let’s talk about the current financial situation going on globally – particularly this ‘credit crisis’.  Perhaps I am just too simple to understand the ‘complexities’ of the global financial markets and how credit is a fundamental component of it.  But perhaps I do.  Perhaps I do understand that credit is the grease that keeps the gears of our economy moving smoothly.  That credit is THE way in which risk is spread out among all of the market participants.  Perhaps it is the large banks and the Federal Reserve and our celebrity politicians who do not understand these complexities.  Robert Reich, a former Secretary of Labor, is on to something in one of his recent posts where he asks the question ‘maybe too big to fail is just too big’.

What I find interesting even now is how banks continue to make poor decisions that only seem to aggravate the current situation.  Only now are banks beginning to mobilize to keep families in their homes instead of putting them on the street.  Where was the foresight? Now of course we will get excuses about how much red tape must be navigated in order to take those steps, but I consider them just that – excuses.  Action requires only one real ingredient – a desire to make it so.

This ‘credit crisis’ is also a function of banks choosing to hide under a rock instead of taking a leadership role and managing the situation.  They are choosing to hoard their cash and refusing to lend it out and keep those ‘gears’ turning.  This morning I read another article showing banks’ counterproductive efforts, this time dealing with public transportation.  Banks are using technical legal language in their financial dealings with mass transit companies to require lump sum repayments – hundreds of millions of dollars – within weeks!

It feels like we are all stuck in a canoe paddling furiously against a current that is taking us directly towards a deadly waterfall.  The strongest and most capable paddlers are the banks, but unfortunately they are jumping ship en masse and forcing us to work ever harder.

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I cannot help but notice the unending stream of repetitive news reports commenting about how housing prices are falling and sales are declining.  Every time I read one of these reports I find myself asking, “Who writes these things?  Are they serious? (more…)

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I seem to be the odd one out on this one but I’m sticking to my guns… interest rates can only go up.  This week should be a defining moment in this subprime mess… just as soon as the Fed makes its decision.

I’m expecting the rates to be held while the market is doing otherwise.  Have you ever seen a spoiled child react when they get that rare rejection?  We might be seeing a market ‘fit’ sooner that later.

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Back in the late 90’s and early 2000 the rage was making a quick buck in the stock market. You could throw a dart at a moving stock ticker and still make money. Authors, talk show hosts, and other ‘experts’ abounded in their availability and willingness to share their winning methods. Day trading became the new buzzword, as a new breed of its constituents threw caution to the wind and staked their fortunes on the concept that profit was just an abstract idea and that it created itself out of thin air. (more…)

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President Truman must be rolling in his grave.  We have become a society enthralled with the notion that responsibility lies…… way over there.  Burn yourself on HOT coffee at McDonalds?  Easy, just sue them for serving you hot coffee.  Suffer hearing loss from listening to your iPod to loud?  No problem, stick it to Apple for creating ADJUSTABLE volume controls. (more…)

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