Colleges’ Stealth Tax on Family Savings

Its just recently that the UK (specifically England) has started charging for college education. Now its up to £9k per year (ouch!). But here’s an interesting perspective and connection to the savings rate in the USA. I quote:

Consider two young people who have identical potential for success in college based on high-school grades, test scores and so on. Let’s say both are accepted at an upscale private school costing $50,000 a year, or $200,000 for four years. Both kids come from moderately prosperous families with $125,000 in annual income. Student A comes from a family that saved a lot for college by scrimping, buying a modest $200,000 house and paying it off. This family has managed to accumulate $100,000 to defray much of their child’s college costs.

Student B comes from a big-spending family that has a $350,000 house with a big mortgage, and a vacation condo and nice cars, all bought with borrowed money. This family has no college-savings account as a consequence.

Colleges exploit this situation with the assistance of the federal government’s Free Application for Federal Student Aid form, which requires the student to give detailed family financial and other personal information -- income, debts, alimony payments, number of other dependent children and their age, and so on. The college uses this information to determine what the student will pay (up to the $50,000 sticker price).

Tuition Discounts

My guess, based on considerable anecdotal evidence, is that the student from the free-spending family will get a tuition discount of perhaps $25,000, while Student A will get only $10,000. Because that will probably apply for four years, Student A will end up paying $60,000 more than Student B -- solely because of the $100,000 in accumulated savings. The college is imposing the equivalent of a 60 percent tax on the income saved for college.

Moreover, to save $100,000 for college, Student A’s parents would probably have to earn about $150,000 because of taxes. So out of $150,000 in earnings, their child gets only $40,000 closer to paying for college than Student B.

Between real taxes and the private tax imposed by the college’s anti-savings policies, the financially prudent family has to pay more than 73 percent of earnings, a crushing burden that the free-spending family avoids by consuming, rather than saving their money.

But that isn’t all. Student B is forced to borrow more via the college-loan program, which the federal government subsidizes. The implicit value of that loan subsidy is greater to Student B than to Student A -- the federal government implicitly discriminates against those who are frugal and fiscally responsible. This doesn’t even include other anti-saving provisions in federal tax law, such as the impact of double taxation of income at the corporate and individual level.

I was kicking this around and it sort of making sense. This is an interesting situation. I am still struggling with whether or not I should fund my child’s education or let him fund it himself with his savings and debt. Leave aside the issue of means testing (which currently doesn't apply to fees but does apply to maintenance grants).  At this moment, the repayment rate is about inflation plus 3%. Say 5%. frankly, from a pure financial perspective, its better for him to go into debt and then use the investments to get a return which will generally be higher than this rate. There you go, arbitrage zindabad.

Have your lettuce, it will put lead in your pencil

I didn't know this! I quote:

Lettuce has been harvested for millenia—it was depicted by ancient Egyptians on the walls of tombs dating back to at least 2,700 B.C. The earliest version of the greens resembled two modern lettuces: romaine, from the French word “romaine” (from Rome), and cos lettuce, believed to have been found on the island of Kos, located along the coast of modern day Turkey. 

But in Ancient Egypt around 2,000 B.C., lettuce was not a popular appetizer, it was an aphrodisiac, a phallic symbol that represented the celebrated food of the Egyptian god of fertility, Min. (It is unclear whether the lettuce’s development in Egypt predates its appearance on the island of Kos.) The god, often pictured with an erect penis in wall paintings and reliefs was also known as the “great of love” as he is called in a text from Edfu Temple. The plant was believed to help the god “perform the sexual act untiringly.”

I think teenagers will be more happy to eat this if they are told that its going to help them boink!

I saw Min in the Petrie Museum the other weekend.

people were not very happy with the display of the erect Phallus and when it was first displayed in the early 20th century, it was covered by a label!

Interestingly, for many many years, the idea of seeing the nude was anathema to Europe. We have so many instances that nude statues or even examples of Min like the above had the phallus hidden. I came across another article here. The abstract:

This essay proposes that we question the current understanding of the Italian Renaissance nude by examining contemporaries’ perceptions of nakedness. Despite the importance of the nude for the development of Western art, there have been few studies that consider how the revival of the nude form in  fifteenth-century Italy was understood by people at the time.Most scholars, understandably, see the new fashion for portraying naked figures in the fifteenth century as a direct reflection of the enthusiasm for classical antiquity during this era. Without denying the crucial importance of antique precedents, I wish here to investigate another possibility: that travellers’ accounts of naked natives encountered on European voyages of exploration, particularly those to sub-Saharan Africa, influenced the creation of what has been called a ‘Renaissance anthropology’ – debates about the nature of mankind.This provided a new conceptual filter through which the nude figure was seen – and in some cases, these accounts may have directly affected the iconography of otherwise puzzling images.

Here’s an example of an iconic image

Masaccio, Expulsion from
Paradise, 1426. Fresco, 208 ×
88cm. Florence: Brancacci
Chapel, Santa Maria del
Carmine

Interesting how our ideas of nudity change…this painting is in a chapel! So the painting was painted in 1425. Then around the 18th century, Cosimo Medici asked for fig leaves to be painted on the genitals to hide them. Then in 1980, the painting was cleaned and the fig leaves removed.

Welcome to Mogadishu

In one way son, Somalia should be a libertarian wet dream. Total or near total absence of the state. Which should leave individual rights all right? Self defence. Self reliance? And as this article says, the economy is ok with companies flourishing in the absence if the state. 

But then on the flip side you have a classic example of how societies cannot function when the mob takes over. It's the state that provides security. And that leads to durable institutions. Take the example of Egypt and Pakistan. Pakistan just completed one parliamentary term, despite the govt being totally corrupt. The new govt was sworn in. Best way forward. Institutions take time to build. At this moment, I have more hope for Pakistan than Egypt. Which basically has screwed itself. The promising beginning even with that idiotic Morsi was stopped in the middle. Now the secular liberal military backed idiots have basically created a bigger injury to Egypt than what Morsi and his beards ever could. 

Egypt has deep structural problems. And to think that a liberal secular new pm will be able to resolve exhibits a dangerous level of blindness. The incoming govt now has to deal with a pissed off large part of the electorate and the same if not worse economic and social problems, the financial aid from the gulf not withstanding. And given that its been established that mobs on the street can bring down governments for bad governance, the brothers will and can do the same. Result? Egypt's people have made a huge mistake. But revolutions,while exciting, take a very long time to repair the damage. All I can think is the quote, the road to hell is paved with good intentions. 

Love

Baba

Welcome to Mogadishu - FT.com
http://www.ft.com/cms/s/2/e0c521b4-c8bd-11e2-acc6-00144feab7de.html#slide0

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Despite the threats from Islamist militants, the Somali capital is bursting back to life

©Petterik Wiggers

Boys repairing fishermen’s nets on Mogadishu seafront

You can see where their heads hit the roof,” says a member of Somalia’s bomb squad. He is showing me pictures of the latest co-ordinated suicide attack. Even in the mess that mingles body parts of victims and perpetrators, the explosives team finds it easy to collect a suicide bomber’s DNA: you just look up. Red stains, splattered flesh and a pair of earphones are all that’s left of two al-Shabaab bombers who – posing as soldiers of the national army – detonated themselves at the entrance of a courthouse in the capital, Mogadishu in April.

After the initial explosions, more gunmen wearing suicide vests entered the building and went from room to room, assassinating people before blowing themselves up when they ran out of ammunition. Court workers cowered in rooms before escaping by ladder; altogether 60 people were killed, estimates the man showing me the photos. The attack was the work of Islamist militants, allied to al-Qaeda, who emerged in the mid-2000s as the biggest threat to Somalia – 15 years after the former Italian colony started tearing itself apart in a civil war which has yet to end.

Celebrating Volunteers at Home Start Hillingdon

So we had the annual summer celebration of our volunteers at Home start Hillingdon. Its a wonderful occasion, we see the amazing ladies and gentlemen who have their own children but also take time out of their busy lives to help families in distress. More interestingly and very thankfully, we had the Mayor of Hillingdon who popped over to give the certificates to the volunteers. Along with his utterly delightful and fragrant lady wife, Mrs. Mayor who was wonderful. She just made sure we were all comfortable and both went around to each table making them comfortable.

As soon as I get the photo’s, I will post them. The stories they tell about the families we support. Wonderful people, all. Here’s a great story by a volunteer. We also celebrated the 10 year anniversary of our charity administrator. Wonderful lady, she is a quiet lady, but everything else is well managed and runs and hums smoothly. She is amazing, very impressed. We are going through a spot of recruitment for the charity. Are you interested to become a trustee? Let me know.

In other news, popped over to Manchester to lecture a wee bit. Also working on bits and bobs with Essex and Swansea. I realised that I didn't do much with Disha for some time now, but have asked Ma to find out if they need something, perhaps a library? that would be good. Also attended a mentoring session for start-up technology companies wanting to sell into the financial sector, I'm most probably going to end up mentoring couple of companies. What else? Mentoring of students from London, Essex, Manchester and Swansea goes on.

And I'm hoping we can do something with the abandoned animals at the Mayhew with the firm…lets see if I can arrange for a bit of a fund raiser at work..And here’s a great post on the Mayhew blog. See the eyes of this little doggie.

This is her story

Help Us Stop the Cruelty

 

It is generally said that Britain is a ‘nation of animal lovers’ but, sadly, The Mayhew feels we must question this claim in the face of growing levels of animal neglect and abandonment.

Instead of more animals finding happy homes we are admitting more stray cats and dogs, receiving more calls about animal abandonment and finding only a few microchipped animals that can be reunited with a caring owner.

Our Animal Welfare Officers and Clinic staff are helping increasing numbers of pet owners whose personal or financial circumstances have left them unable to care for their cat or dog and who need assistance with basic, preventative care.
This country’s financial difficulties touch all areas of everyday life and this is affecting innocent animals, with pets increasingly being considered ‘non-essential’ when it comes to spending money. The Mayhew strives to help both animals and their carers without judging their circumstances. We encourage owners to come to us for assistance to try and avoid devastating cases like Deirdre and Buddy; two animals who learnt first-hand exactly what it means to become surplus to requirement.

Make a one-off donation to help us fight animal cruelty

Set up a small monthly donation to The Mayhew

Deirdre’s story
Deirdre arrived in late April after she was found struggling and alone on the streets of London. Our vets estimated that she was around 13 years old and in dire need of medical attention. Without identification, there was no one around to provide this elderly girl with the care and treatment she needed. Deirdre was very malnourished, extremely weak in both her back legs and reluctant to stand up or move around. She was distressed, confused and clearly in pain. Even after pain relief medication, some tempting food, a warm bed and plenty of TLC, she was still at rock bottom.

Our charity’s ethos is to help every animal we can and so, regardless of her age and poor condition, our vets carried out a thorough health check and tests to see if we could give this girl a second chance at happiness. Sadly, in addition to a range of other debilitating illnesses, Deirdre’s tests indicated that cancer was likely. Despite the security, safety and comfort she was given at The Mayhew Deirdre simply refused to eat. Already withdrawn she shut down even further and it became evident that she no longer wished to face the life that had treated her so cruelly.

Our round-the-clock care ensured that Deirdre was comfortable and given the palliative care needed for her condition. However in the face of her mental and physical deterioration and, with recovery no longer being an option, our vets took the decision to give a peaceful and dignified end to a life that had become engulfed in suffering and misery.

It is always hard for us at The Mayhew when we see cases like these and even harder to tell our supporters about them, however these are the realities that we are dealing with on an increasingly frequent basis. It is vital that we continue to be there for those who cannot help themselves, who need us right at the end in order to bring them peace and relieve their pain.
But it is not only those at the end of their lives that need our help. We must also be there for animals who have hardly been in this world longer than the blink of an eye but who are already struggling with debilitating pain.

 

criminal!

Top 20 most visited museums in the world

From here. Sighs, so much to see and so little time

1. Louvre, Paris, France, 9,720,000
2. National Museum of Natural History, Washington D.C., 7,600,000
3. National Air and Space Museum, Washington D.C., 6,800,000
4. The Metropolitan Museum of Art, New York, 6,116,000
5. British Museum, London, 5,576,000
6. Tate Modern, London, 5,319,000
7. National Gallery, London, 5,164,000
8. Vatican Museums, Vatican City, 5,065,000
9. American Museum of Natural History, New York, 5,000,000
10. Natural History Museum, London, 4,936,000
11. National Museum of American History, Washington D.C., 4,800,000
12. National Palace Museum, Taipei, 4,361,000
13. National Gallery of Art, Washington D.C., 4,200,000
14. National Museum of China, Beijing, 4,100,000
15. Centre Pompidou, Paris, 3,800,000
16. Musee d’Orsay, Paris, 3,579,000
17. Victoria & Albert Museum, London, 3,232,000
18. National Museum of Korea, Seoul, 3,128,000
19. Geological Museum of China, Beijing, 3,000,000
20. Science Museum, London 2,990,000

ok, i have to get myself to Washington and Beijing. And Taipei..well, to their museums anyway lol

Confessions of a Black Mr. Mom" by Ta-Nehisi Coates

Kannu

This is an interesting article but before that some other points. 

As an economic and psychological aspect, children raised in a family turn out to be better citizens, more educated, more economically active and happier. 

That said, divorce is quite high in western societies so quite a lot of families are not a twin parent family. 

Also the welfare state ensures that if you have a child out of wedlock then you have benefits and child support. Plus many other issues and factors mean that for some groups, some countries, the number of children being brought up in families without a father is extraordinarily high. And that has high individual, family, social, economic and societal costs like imprisonment, low income, drug abuse etc etc. 

difficult to fix this issue but some try to do so. Here's an article by a black father who is trying to be a father! Personally and emotionally speaking, I find this totally bewildering as to why a father wouldn't be 100% involved with his children. But as an economist I understand that this behaviour of black and other men abandoning their children is a natural outcome of the economic and social incentives. 

Society and the family structure   is changing dramatically, and will need careful observation for lessons learnt. 

Love

Baba

"Confessions of a Black Mr. Mom" by Ta-Nehisi Coates
http://www.washingtonmonthly.com/features/2001/0203.coates.html

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Respond to this Article March 2002

One man’s crusade to redefine African-American fatherhood.

By Ta-Nehisi Coates

In one of his more interesting comic sketches, Chris Rock compares one group of African Americans, “niggas,” to another more wholesome group, “black people.” “You know what really bugs me about niggas is the way they always take credit for stuff a normal man would just do,” says Rock. “Like, ŒI raised my kids.’”

By Rock’s definition, I know exactly where I belong among African Americans today. For I am sure that even for this meager deed of fatherhood I am performing, I deserve a lot more than credit. My mission sounds simple enough: carting my young son through West Manhattan to visit another friend, working in Chelsea. I have logged enough baby hours to earn the title “stay-at-home dad,” so I’m not exactly new to this. But our trek into the city elicits terror because of three converging factors: 1.) I am a hefty 6’4” black male—-anything can happen. 2.) It’s Manhattan—-everything might happen. 3.) My son is 7 months old—-something always happens.

King João II of Portugal “O Príncipe Perfeito” and the Jews (1481-1495)

A paper that i was sent was quite interesting. King Joao II of Portugal is quite an interesting chap. I was interested in him not just because of what he did in Portugal but of his funding of expeditions to India (people who think that the Portuguese were fun chaps should really read up on what these guys did in the Indian Ocean, they were true barbarians, unbelievable savages).

Second was the fact that this chap was responsible (during the time of Columbus), to divide up the world between Spain and Portugal.

Third was that this king was supposed to be the personification of Machiavelli’s work..Very interesting indeed.

But I digress, as is usual with Europe for a very long time, the Jews got it in the neck. This paper, Sefarad (Sef)
Vol. 69:1, enero-junio 2009, págs. 75-99, ISSN 0037-0894 by Francois Soyer of the University of Southampton tells all about how this fellow was an absolute infamous horrible man with the Jews. I quote:

 

A central element of this reputation has been João II’s treatment of the thousands of Jews who were expelled from the neighbouring kingdoms of Castile and Aragón in 1492 and who came to Portugal. King João has become particularly notorious because of his enslavement of a
number of these Castilian Jews as well as his decision to deport Jewish children seized from their parents to the inhospitable island of São Tomé in the Gulf of Guinea. Somewhat unsurprisingly, the Portuguese sovereign gained the reputation –both in contemporary Jewish accounts and in the work of modern historians– of a callous tyrant who pitilessly persecuted the Jews;
resorting to cruel methods in order to extort funds from the Castilian Jews and coercing many of them to convert to Christianity. By way of illustration, Isaac Abravanel (1437-1508), one of the foremost Jews at the Portuguese Court until his exile in 1483, used the epithets “tyrannical,” “deceitful” and “iniquitous” to describe João II in his work.
Likewise, the Cretan Rabbi Elijah
Capsali (c. 1490-1549), who interviewed many Iberian Jews, presents João II
in his famous chronicle as an inveterate enemy of the Jews and describes the
monarch as a “repulsive” and “wicked” king. In his work, Capsali went to the
extreme of including an extraordinary paragraph in which God punished João
II for his cruelty towards the Jews by sending an avenging angel to slay him
and thus avenge his Jewish victims.

The paper is just amazing to read. Here’s one more quote:

the episode recorded by Solomon Ibn Verga, who himself
came to Portugal in 1492 with his family, is particularly moving:

There was a [Jewish] woman from whom they had taken six children.
When the unfortunate woman heard that the King was leaving the church
[where he had just attended mass], this woman [started to] implore his mercy and threw herself at the feet of his horse, pleading with him to return her
youngest child to her but the King would not listen to her.
The King ordered his servants: “take her out of my sight!”
[The woman] continued to plead her case with yet louder screams and
[the servants] abused her.
The King then exclaimed: “Let her be, she is like a bitch whose pups
have been taken away from her!”

Europe, your history is full of ill-treatment towards minorities. Why just blame the Nazi’s? there is good form for anti-Semitic attacks in pretty much every country.

Are human rights and economic well-being substitutes? The evidence from migration patterns across the Indian states

This was a very interesting paper. But the highlights and abstract first

Highlights

• Intra-national migration as a tool to measure revealed preferences for human rights protection and economic well-being

• Economic well-being can serve as a substitute for bad protection of human rights

• Results are not driven by discrimination against particular ethnic or religious groups or type of human rights violations considered

• Human rights complaints are interpreted in the opposite way by migrants to states with high and low trust into the government

• The effect is driven by states with high TV penetration

---

Abstract

The objective of this paper is to study the relationship between the demand for human rights and the demand for economic prosperity from the “exit” perspective, looking at migration patterns. We investigate intra-national migration in India, which is a federation of various states that feature significant economic and political differences. The paper finds that the quality of human rights protection and the economic well-being in the target state are substitutes with respect to determining patterns of migration. These results depend on framing effects; human rights complaints appear to be interpreted differently by migrants, depending on the trust in the government in the target state.

First. Here’s the regression model

for all i ≠ j

where Migr_ij denotes the number of migrants from state i to state j; Inc_i and Inc_j represent the income per capita in states i and j, respectively; HR_i and HR_j indicate the number of human rights violations complaints in states i and j, respectively; Dist_ij is the highway distance between the capitals of these two states;CommonLang_ij is a dummy that is equal to 1 if both states belong to the same linguistic zone; and Controls_iand Controls_j represent the set of control variables for states i and j, respectively. Thus, the estimated equation is essentially a gravity model in which we regress the number of migrants from one state to another state on the income per capita in the target state and the origin state, the human rights violations complaints in these two states, and interaction terms between human rights violations complaints and income.

I really really like this formulation. Fascinating, very well done indeed. Simple but very intuitive.

But with the elections coming up, people need to think through how states approach their twin goals of security (as per human rights maintenance and enhancement versus economic growth. The news isn't as clear cut. When you are poor as a state, people will take off from your state if you are bad at human rights. But people can go to a state with higher economic growth but with potentially lower levels of human rights.

Fascinating.

Show me the money

Another very interesting paper trying to explain the drop of the US savings rate. The savings rate dropped from 8.6% in 1980-90 to 5.5% 1990-2000. The reasons are multiple, such as technology improvements, labour productivity, medical care cost increases, asset appreciation, improved credit access, etc. etc.

The abstract

This paper investigates the effect of mortgage equity withdrawal on saving in the US over the period 1993–2011. A multivariate time series analysis based on a vector error correction model (VECM) is carried out. The saving rate, mortgage equity withdrawal, net wealth, interest rates and inflation are included in the empirical model. The results show that the equity withdrawal mechanism plays a relevant role in explaining the saving rate pattern.

People tend to think that the bankers are to blame for the crisis, yes, sir, but as I have already pointed out so many times, don't be a bloody economic illiterate and then blame the Jews for everything. That ship has sailed a long time back and all it does is to expose you as one of the Daily Mail readers. Just like we did pogroms way back and blamed the Jews for everything, blaming the bankers for everything just tells me that you are a doofus :P

Our economic conditions and civilisation is undergoing some serious changes but at the end of the day, one has to recall that basic economic laws are fairly constant. Don't spend more than you have, if you are going to take on debt, then you will have higher fixed costs, the business cycle cannot be wished away, etc. etc. So having more savings is good, very well. So like the paper shows, people shouldn't goose the mortgage market so much. Rental is a perfectly good alternative, see the situation in Germany for one example of a housing market which is not driven by home ownership lemming like behaviour.

How the government helped the banking crisis

not this one, the one before. I quote the abstract:

This essay examines how the Banking Acts of the 1933 and 1935 and related New Deal legislation influenced risk taking in the financial sector of the U.S. economy. The analysis focuses on contingent liability of bank owners for losses incurred by their firms and how the elimination of this liability influenced leverage and lending by commercial banks. Using a new panel data set, we find contingent liability reduced risk taking. In states with contingent liability, banks used less leverage and converted each dollar of capital into fewer loans, and thus could survive larger loan losses (as a fraction of their portfolio) than banks in limited liability states. In states with limited liability, banks took on more leverage and risk, particularly in states that required banks with limited liability to join the Federal Deposit Insurance Corporation. In the long run, the New Deal replaced a regime of contingent liability with deposit insurance, stricter balance sheet regulation, and increased capital requirements, shifting the onus of risk management from bankers to state and federal regulators.

Remember the partnership structures of the investment and other banks were unwound quite a lot. Once you have removed this contingent liability and make it public, well, you see what happens. Here’s an idea for the banking industry, bring back the partnership model (I know, I know, I am kidding)