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A year ago I interviewed Mark Thomas of Economist’s View blog about the Great Moderation.  (You can listen to it here by scrolling down to the bottom.)  For you non-economists, the Great Moderation is the period of calmer economic activity that we’ve experienced since 1983.  Quarter-to-quarter changes in GDP are closer to average, the frequency of recessions has gone down, and the severity of recessions has become less.  It’s pretty cool.

With the recent turmoil in the economy, I was curious if he had changed his views about whether the Great Moderation was continuing, and would continue.  You can listen here.For a graphical view of the Great Moderation, I calculated the standard deviation of quarter-to-quarter changes in real GDP over rolling 5-year periods.  It’s stunning how much we’ve calmed down.

Bill Conerly
Creator of Businomics Blog
Ashworth University Contributing Blogger

*Bill Conerly is one of the most respected and trusted Business bloggers on the Web.  Mr. Conerly’s in-depth analyses are based on “real world” applicability, a communications’ style he has honed through years of professional experience. We’re honored to have Bill Conerly as a member of the Ashworth University Blog contributors network. To learn more about the life and work of Bill Conerly, visit his acclaimed Businomics Blog.

As tax season approaches, I just wanted to point out two of the main changes to Federal Tax Law.  

Some Hybrid automobile purchases may be tax deductible.  Click here to see if you fit the bill.

Homeowners Insurance to be figured into mortgage interest which makes it tax deductible.  Click here for more information.

Perhaps you’ll be able to take advantage of these changes as you file your taxes…

Thanks,

Betty Ray Mydland 

 
          Thanks to Rob West for permission to use this Photo.

Our new Ashworth University Discussion Forum has been sparking some lively debate.  If you haven’t checked out the forum yet, what are you waiting for?—get engaged with your student community!

Ashworth University Business Student, Frederick F, states: 

I recently completed the Macroeconomics course, and all the negative things about Keynes were wrong!

I do agree with government intervention to get the economy out of recession and depression as a better solution by lowering interest rates and major government projects to get people employed and spending money.

However… I wrote projects, not programs. Programs that are started to help people don’t usually work, just enough to keep people employed and create more red tape.

As for supply and demand side economics, I side with Jean-Baptiste Say whom said “Demand creates it’s own supply”

Keynes basically said that excessive saving can lead to recession or depression, True, but today we are experiencing excessive greed which is causing our current recession. (High gas prices and the mortgage crisis.)

Ashworth University Technical Services Supervisor And Resident Economist, John Ash, responds:

Well, Keynes’ ideas look dynamite on paper, but they suffer from the minute flaw of not actually holding up in the real world. I know, I know, we should ignore that and just let the beauty of his carefully constructed theories suffer no detractors, but those of us who are actually studying economics to understand the world better and use that knowledge to improve our own lives (i.e., make more money) can’t allow such intricate economic fallacies to remain unmolested.

Keynes’ theories were gospel for the economic advisors of the 60s and 70s, and it is generally believed (among economists anyway) that strict adherence to his policy recommendations led to the stagflation of those decades (stagflation is when the economy is in a recession but inflation is increasing, two things which are supposed to be mutually exclusive by Keynesian standards). Keynes is a good starting point for understanding economics, but modern post-industrial economies are far too complex to be modeled with it. Don’t fall into the trap of trying to find one unifying principle which will explain everything; it’s never going to happen. There are a lot of variables, and usually no single one is going to accurately predict the movement of the economy. (more…)

 
           Thanks to Rashida Simmons for permission to use this Photo.

OK, I know what you are all thinking!  It’s spring; the daffodils are blooming; the cherry trees are in full blossom; the birds are singing their happy springtime songs; the sweaters have been packed away; love is in the air; so, what is the problem?  Why would someone begrudgingly say, “It’s THAT time of year, again?”  What could possibly be the problem with spring? 

April 15^th is upon us and this is a date which strikes fear into the fiercest of hearts!  It is a time when the good citizens of our country must file their income tax returns.  “The National Bureau of Economic Research has concluded that the combined federal, state, and local government average marginal tax rate for most workers to be about 40% of income” (Wikipedia, 2008).   According to Brigham and Houston (2000), that figure could reach about 50% for some taxpayers (p. 61). What does this mean for all of us?  It means that a large portion of your total earnings are due in the form of tax payments.  In other words, you must work from January through April or May to pay your tax debt. 

Those of you who have been working for several years understand this concept more than some who have not yet held a job or filed their first income tax return.  For the entrepreneur, this concept takes on an additional meaning.  Not only will you have to file income tax returns for your own personal income, but you will also be responsible for filing corporate tax returns.  This is the reason why folks, who are about to start their own small business, need the services of a qualified tax accountant. 

If the thought of deciphering tax laws makes you a little crazy, do not worry!  According to Eugene Brigham and Joel Houston (2000), authors of Fundamentals of Financial Management,  “Taxes are so complicated that university law schools offer master’s degrees in taxation to lawyers, many of whom are also CPAs” (p. 61). The good news?  We don’t have to know all of the tax laws to own and operate our own businesses and to be successful; we just have to hire the right CPA.   

As an entrepreneur, you should be aware of the following taxes: Payroll taxes, Corporate, State, Local, Government, Income, Sales, and Property taxes. To emphasize the importance of understanding the objectives of taxation, let’s take a closer look at just one form: payroll taxes. 

Payroll taxes include Social Security and Medicare tax.   Employees are required to pay taxes on all wages and salaries from their place of employment; however, individuals must also pay taxes on investment income and on profits which are generated by proprietorships or partnerships.  The Social Security tax, listed as FICA on your paycheck stub, is a 6.2% tax of the income generated by the employee and matched by the employer. How does this affect the small business owner?  You actually have to pay double tax on your earned income to the tune of 12.4% because you are the employee AND the employer.  One piece of good news, this tax is not applicable to income which has not been earned (i.e., income from interest, dividends, or royalties). (more…)

                Thanks to Len Peralta for permission to use this Photo. 

As the deadline for completing 2007 tax returns approaches, more and more people are filing returns each and every day. Once the headaches of making sure all your information is accurate and all your paperwork has been submitted, you should know in advance if you can expect a tax refund this year. As with any income, it’s a good idea to think about what you’re going to do in advance and make a plan for how you will use it. We always quote the saying that “no plan is a plan to fail,” and it seems true that many of the worst financial decisions are those made compulsively. Since tax refunds are getting turned around more quickly than ever these days, take the time in between when you file and when you receive your refund to really think about what you’ll do with the money you get back. 

Here are seven ideas we at 22Dollars brainstormed to help get the wheels turning when it comes to your 2007 tax refund: 

* Deposit it in your savings account to help you meet your savings goals.

* Spend it on something you’ve needed to buy for a while and that will help save you money in the long run – like a fuel efficient car for example.

* Invest it in your retirement fund or in stocks you’ve researched.

* Pay it toward debts you have such as school loans or credit card debt to help yourself avoid spending additional money on interest payments. (more…)