Sunday, June 29, 2014

Miscellaneous referendum news

Switzerland, November 24th, will vote on a referendum prohibiting any business from paying anyone more than twelve times the salary of their lowest earners. Also, there will be a referendum on a minimum wage of 2500 Swiss Franks. ("regardless of whether or not they have a job.") And a short time ago, a referendum passed to eliminate golden hellos and good byes.
Financial Times "Swiss Referendum on Wages of iIgh Earners Stirs Debate" by James Shotter November 12th

Coed Bathroom Law Referendum-- 620,000 signatures have been collected. If passed, it would overturn a law about coed bathrooms.

Cash Shortage in China

Many business are exchanging IOU's, guaranteed by banks, instead of paying their bills in cash. Also banks are extending loans rather than declaring them nonperforming. (Note that China's total money supply is is 110 trillion yuan (about 18 trillion dollars). And their total corporate debt is 145% of GNP with interest payments being nine percent of GNP--more than the US. Total debt is 210 per cent.) of which sixteen percent are these IOUS. Less than a quarter of business surveyed report having access to bank credit. (Although ocassionally these are electronically, most of the the time they are real paper. Each company that eøxchanges them puts their seal on them, sometimes attaching a piece of paper if there is not enough room for all the seals.)

"With Yuan Scarce, Firms Get Stuck with IOUs" Wall Street JournalFriday, April Fourth 2014 page C1 and C2.

China's Minsky Moment by John Mauldin

Parks Referendum

Portland is having a referundum on whether to sell part of a park. This editorial argues that referendums increases polarization rather than reduces it. The referendum will prevent the City Council from giving up any of its park land; editorial says that :
If the accountable elected leaders can’t be trusted to weigh the various factors that make a city livable, then who is?

This election is not a choice between good guys and bad guys – it’s about what process we want to use to make decisions that don’t lend themselves to yes-or-no answers."

Referendum Process Referendum

The city of Springfield, Missouri attempted to make several changes in the referendum process in one Yes/no vote. It narrowly failed. And in learning about YES/NO votes, they decided to split this into several votes. But they did not consider relationships between them. ``

Spain wants Monarchy Referendum

62 of Spaniards want a referendum "at some point" to decide onthe future of the monarchy. I read in Spanish class that the king who just abdicated was very instrumental in bringing in democracy denying the wishes of the dictator Franco who picked him to continue his dictatorship after he died. Yet polls say the vote would be 49% in favor of the monarchy with 32% against. The prime minister argued that the Constitution which set up a ceremonial monarchy was approved overwhelmingly by the people. (But I bet it was a take-it-or-leave-it vote. Wikipedia article on Spanish Constitution referendum says that vote was 91% yes; there was no indication of any options, just yes or no.)

College Debt by Share Mechanism

Federal "Pay As You Earn Repayment Plan" expands and it is anticipated that five million would be eligible. All federal loans are subject to a program where monthly payments are fifteen percent of after-tax income. However, unlike share economy paradigm, it is forgiven after twenty-five years, ten years if the person works in the public sector. The "Pay as You earn repayment Plan" applies to those with loans going to 2007 and earlier, and the rates are lower (only ten percent of monthly income and forgiveness comes after twenty years). And if the participants income rises, they can switch back, possibly automatically, to the ten-year plan. Six hundred thousand student loan borrowers have defaulted. 40% of college students don't graduate in six years. 45% of those who did graduate had jobs that did not require a degree.

Lumni is a private company doing this--so far with five thousand students. I researched this myself. The bankruptcy code states that student loan debt is not dischargeable; thus one can't get a student loan, declare bankruptcy, then enjoy one's high income. However, this only applies to something guaranteed by a non-profit. So a bank, or an individual investor, who does an income-share agreement with a college student can be stymied by the person declaring bankruptcy. Lumni are mostly active in South America; they are working with House of Representative members to give these agreements legal significance. Probably, the agreements would be required to limited to thirty years, to have an exemption for those earning under ten thousand dollars, and "not dictate career choices." I have a problem with the thirty-year limit. One or more fourty-year olds might support some college students. After thirty-years, the loaners would probably still be enjoying their retirement and wanting the income and the students would be in their highest earning years.

By the way, they were inspired by another income-share agreement. David Bowie sold shares in future revenue to finance his income. Milton Friedman also briefly mentioned the idea of income shares.

College Debt: Easing the Burden, Saturday/Sunday June 14-15 2014 B7 and B9, Wall Street Journal Volume CClXIII B1 138.

"Escaping the Student Debt Trap" Saturday/Sunday June 14-15 2014 The Wall Street Journal Page A11

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