By Edward Leone Jr. DMD MBA CFP RFC
Contact information: leonee@vzw.blackberry.net
We must understand that capital is a resource. Economics is the study that tells how society allocates by supply and demand. Individuals put their savings and borrowed capital at risk by investing in businesses and expect a return on investment for the risk they are taking. These returns create more capital for reinvestment growing the business climate. This is the dynamic of wealth creation which has enhanced the standard of living for all in this country. The 330 million people in this country have produced 25% of the global GDP and control 1/3rd of all global capital assets. Some studies tell us that up to 1.2 billion people on this earth still live without electricity. Clearly, our social and economic environment is beneficial to all economic classes living in the US. We must learn to protect this great dynamic from external influences and spread the message to those of minimal or limited existence around the world. Governments must learn from history and the examples we demonstrate. Our own government has the tendency lately to get in the way of the execution of our successful dynamics. They must understand that they work for us. We do not work for them. Our social fiber and intent is good but becoming distorted by those in power who want to pander to their constituents without regard for the good of the entirety. A great example is the Affordable Care Act. Why not set up a system which offers catastrophic coverage for health issues while avoiding the burden of first dollar coverage for which individuals should be responsible and can shop around on their own to discover value and avoid needless mandated process. A second example, which is clearly slowing our economic recovery in the business cycle, has to do with fiscal policy–the changes to occur in the tax code which will reduce the availability of capital. In 2013, a marginal tax rate of 39.6% will be imposed on those with AGI of $400,000 ($450,000 if filing jointly), a capital gains tax of 24.8% is imposed on this same group, effectively higher marginal rates for those with AGI of $250,000 ($300,000 for those filing jointly) since phase outs for itemized deductions have been modified, and the 3.8% surtax on investment income for those earning $200,000 ($250,000 if filing jointly). Other proposed changes in the rules regarding tax differed retirement savings will not only harm those who are or will be retired, but also further squeeze the availability of capital for investment. When will we learn. What do you think of all of this?
For The Record:
DJIA 15001.2
NASDAQ 3410.07
S&P 500 1613.72
Suggested Reading: “The 15-Minute Retirement Plan” By Fisher Investments
Leonesmoneymonitormonthly's Blog 
Leave a comment