Wednesday, January 30, 2008

Negative Interest Rates

Why not? People seem to think the Fed runs out of bullets at 0%. No such luck. But face it, as soon as rates go negative relative to inflation we'll just have another round of asset bubble reflation. I know I'd be tempted. There are many issues to weigh. Personally I think Bernanke is interested in the best interests of governments. Not just minimizing the mess that will be dumped in their lap and procting the GSEs from insolvency, this might also be a case where the Fed is concerned for the muni bond market. California is up against a wall wrt taxation. There just isn't any more blood in those stones. Mello-Roos was the last tap in the vein. We are seeing municipalities across the nation "struggling" to "cut" even 5% from budgets. There just isn't a model to address the 20% revenue shortfalls coming. One sure bet is the floating of some of the worst "self-insured" muni paper that ever managed to slip past the waste treatment plant. And there's your topical tie-in. Real insurance is going to be expensive and the markets will command huge premiums on uninsured so look for hybrid products with the worst aspects of both.

Want to know how desperate municpalities can get? This is only the tip of the iceberg:

Ventura OKs fee for 911 service
$1.49 to be added to telephone bills

By Kevin Clerici (Contact)
Wednesday, January 30, 2008

Seizing on a way to free up money to hire additional police officers and firefighters, Ventura will become the first city in Southern California to levy a monthly fee on telephone users for emergency 911 service.

The monthly $1.49 fee for "Emergency Services Access," approved by the City Council on Monday night, is scheduled to take effect May 1 and will be collected on all Ventura cellular and land-line telephone bills.

Critics say the fee is a tax in disguise and should be put to voters. Others argue the city should live within its existing $90 million annual operating budget.
...
Ventura added a new wrinkle to strengthen its legal case: Residents can opt out of the monthly fee by agreeing to pay $50 any time they call 911 for a personal emergency.

I don't have to say anything do I?

11 comments:

Brian said...

They are the first in the nation to do this, no?

spooq said...

I guess everyone is too shocked and/or awed to claim MURSTMURSTMURSTMURSTMURST.

spooq said...

DOH

Rob Dawg said...

call 911, spooq just hurt himself. ;-0

Rob Dawg said...

Blog post to Rick Cole:

This is great. I don't see why Venturans aren't overjoyed at the tens of millions this will save them in other taxes. now that the City has adopted a policy of charging for police services they won't need to fund the department at all except for those functions they actually use. Now that arrestees are going to pay the entire cost of their arrest, processing and incarceration the rest needn't pay anything. you could even give criminals the option of a monthly charge or per arrest payment.

Enough snark, it has no effect on people who have already convinced themselves they can say "fee" with a straight face. Instead I'll bring up the one thing your staff couldn't identify; the inevitable unintended consequence.

What do you want to bet that tens of thousands of mobile numbers currently registered inside SBV suddenly move billing addresses to unincorporated areas or across the river? In fact I sense a business opportunity I'll look into providing a $1.48/mo P.O. Box storefront. I wonder if Oxnard would be interested in granting me a forms based zoning waiver on the basis of inter-city cooperation?

chickenlittle said...

I think it's just peachy, especially with the $50 opt out plan for the cranky seniors living in prop 13 tax shelters.
What you mean 911 emergency service wasn't something I've been paying for these past 40 years?

Can't wait for the John and Ken snark today.

Mynn said...

I'd like to see how they implement it on my pay-as-you-go-cell that has no fee, just use-minute-purchase fill cards.

Kenneth said...

I thought that most phone bills (both land line and celluar) already had some sort of tax/fee/service charge to pay for 911 service?

David said...

How would those negative interest rates work? You borrow money. As long as you make your minimum payment, the amount you owe is reduced in addition to your payment. If you fail to pay there is a payment of negative five percent and your balance is reduced even more.

Ogg the Caveman said...

@ David:

I believe that's called a win-win scenario.

spooq said...

@David:

Negative -real- interest rates, but I suspect you already know that.