T’s

Welcome to the SwiftEconomics.com Glossary! Each word will come to life using witty jokes, satire, and colorful examples. The glossary is meant to amuse and educate; not to be traditional or academic. The SwiftEconomics.com team wants to hammer home a few vital ideas throughout the vocabulary lesson. For example, keep an eye on asymmetric information’s effect on health insurance. Please share the SwiftEconomics.com Glossary with colleagues, friends, and family!

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Tariffs

Free traders disapprove mightily; this describes a discouragement to trade with another country by imposing taxes on their imports. Could be used to help solve moral dilemmas or apply game theory to political negotiations. If a country is violent and rife with terrorism it may be morally bankrupt to sell weapons and machinery to them. For example, GE has traded airplane parts with Iran through subsidiaries. In game theory to avoid war with a country, economic pressure can be applied. Tariffs or complete trade refusal can be used as a bargaining chip.


TARP

Acronym for the Troubled Assets Relief Program. Passed on October 3, 2008, this was the central effort of the U.S. government to purchase assets and equity of sinking financial firms, to save sinking financial firms. A $700 billion taxpayer-funded pool, TARP money is controlled by the Treasury. Rules for distributing these funds have changed as time goes on. For example, it wasn’t until February 5, 2009, that the government realized companies were paying out TARP funds as employee bonuses. So, the Feds outlawed the practice of companies, who received TARP funds, granting bonuses to their top 25 highest-paid employees. This was the brainchild of Senator Chris Dodd, Chairman of the Senate Banking Committee, as the Obama administration was preparing to sign the $787 billion stimulus, in addition to the TARP, on February 17th, 2009.

The TARP was sold to the public as possibly being a “great investment” for taxpayers. The U.S. Treasury would gain equity positions in some of the largest financial institutions in the world, and everything would be fine and dandy! The way that TARP is designed, when a company returns or pays interest on TARP funds to the government, it goes back into a government fund. The money can then be reinvested into the economy as the Treasury sees fit. The question is: will returned TARP funds or interest on TARP funds ever be returned directly to taxpayers? Will it ever be used to pay down government debt? Or will the “great investment” be in the form of politicians using the money for whatever programs and special interests they desire? That is, if the banks the Federal government, and thus the taxpayer, have equity positions in don’t become insolvent first; despite all the Federal stimulus being pumped into them.


Tax Avoidance

Legally avoiding tax burdens.


Tax Base

Definition of taxable income or some component of wealth that’s being taxed and by how much.


Tax Burden

The total forked over to the government in a given time period. The fact it’s called a burden is pretty telling of the general public feeling surrounding it.


Tax Competition

Companies can operate anywhere given the modern global supply chain. Entrepreneurs may be attracted to countries that don’t put their hands in the cookie jar as much.


Tax Efficient

It’s efficient if I’m not paying much. From the perspective of the tax payer, low tax burdens are efficient.


Tax Evasion

Illegal. Not paying one’s tax liabilities; a la Obama Treasury Secretary Timothy Geithner, Obama Health Secretary Nominee Tom Daschle, Congressman Charlie Rangel, who is chairman of the Ways & Means Committee that co-authors the tax code and actor Wesley Snipes, who plays a mean vampire.


Tax Gap

What the Internal Revenue Service (IRS) auditors are after; the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily, and on time. In police terms, it can be thought of as the sum of non-compliance with the tax law. The IRS makes great “returns” for their law enforcement auditing activities, to the tune of about $7 collected to every dollar spent. In 2009, $7.5 billion will be appropriated specifically for collecting “tax gap” revenues.


Tax Haven

Off-shore tax havens are places that give favorable tax rates to the entrepreneur. Swiss banks are popular not just because the Alps are a destination but because they keep information under wraps. Secrecy, low taxation, and beautiful real estate make for great tax havens.


Tax Write-Off

Although not a subsidy, this is a form of government spending because policy makers surrender collectible revenue. For example, the Internal Revenue Service (IRS) allows homeowners to deduct mortgage interest from their taxable income. This homeowner perk sounds harmless but it brings a cross-section of new homeowners into play. People on the margin use this perk as a reason to buy a home. The result is greater demand for homes, inflated home values, and builders who go nuts trying to meet the influx of new demand.

Unfortunately, while it still sounds relatively good, the home value increase isn’t sustainable; new homeowners may not be capable of servicing a mortgage and builders overbuild. Now an overheated market is left with a bunch of empty homes (over-supply which is difficult to remedy) and correcting prices.

Part of the reason housing bubbles occur is because of government policy that knocks markets way off their equilibrium; even when the policy sounds harmless, and nice, like a tax write-off.
Technology

A powerful mother. Technology increases production in the home, production at work, communication, and efficiency. Virtually every great thing in your life stems from technology when you really think about it; especially if you’re a test tube baby. Technology is dangerous when placed in the wrong hands. Look alive.


Third Way

Pragmatist economics. Third Wayers believe that pure capitalism and pure socialism don’t get the job done so create a hybrid: capcialism. Capcialism can end up anywhere on the continuum a politician wants like 90% capitalism and 10% socialism or vice versa. Pragmatic politicians may be trying to appease two diametrically opposed ways of thinking with Third Way rhetoric.


Tiger Economies

Tiger Woods y’all. Tiger Woods y’all (of Chris Rock show fame). Well, he is his own economy but actually “tiger economies” was the namesake for burgeoning Asian economies.


Time Value of Money

A dollar is worth more today than it is in the future. If an investor decides to lend out a buck they need to get more than a buck in return. A dollar today can be earning interest. If it is not earning interest, the dollar is defenseless against inflation.


Transaction Costs

Prices do not always reflect actual costs incurred. For one it takes time to find, research, and cost compare products in the marketplace. Sometimes there are bargaining costs to negotiate an acceptable agreement and draw up a contract. Even better there can be legal costs to have lawyers referee a transaction for their client. Don’t forget commissions, origination fees, recording fees, title search fees, etc. By the time the fine print comes to light, costs can be pretty ballooned.


Transfers

Children allowance sometimes goes under this category; a transfer payment without an actual product or service performed or rendered in return. Get to work and finish your chores kids. Charitable giving is a form of a transfer payment which I contend should be the name for some family’s “allowance.”


Transition Economies

Metamorphosis from communism to capitalism.


Transmission Mechanism

Fancy name describing a Central Bank technique of infusing new money into an economy. The higher an economy’s money supply, the higher its demand level, ceteris paribus. More money translates into more transactions and a multiplier effect. Higher demand levels result in higher prices, ceteris paribus. “Higher prices” is synonymous with inflation. Milton Friedman warned us that increasing the money supply causes inflation.


Transparency

Do what you say and say what you do…say what you mean and mean what you say…and release information to prove it. If there’s nothing to hide, why not set information free about an economic activity?


Treasury

A government entity, the Treasury runs the Internal Revenue Service (IRS) and controls the printing presses for new money creation. The role of this institution is being revised as they now engage in buying preferred stock of private companies, namely financial firms. The Treasury can make it rain. Not in a meteorologist sort of way.


Treasury Bills

Short-term U.S. government debt. Long-term U.S. debt takes the form of bonds and has a coupon (interest) payment every six months. The U.S. government uses T-bills and T-bonds to finance their budget deficits. Who loans the U.S. this money? Other countries like China, Japan, U.K., oil exporting countries, and Russia. Go Ducks.


Treasury Secretary

An appointment of the President, this position runs the Treasury. Along with the Federal Reserve Chair, the Treasury Secretary has immense control over individual’s money. He or she can devalue it in a moment’s notice without asking, order an IRS audit, or influence tax policy and government spending. Along with the Treasurer, the Treasury Secretary signs money off the printing presses before it becomes legal tender. The Treasury Secretary is an economic advisor to the President with actionable power.


Trough

Only identifiable looking backwards, these are bottom points of an economic activity. Stock prices, recessions, and unemployment figures are all examples of an economic activity and thus feature bottoming value points. Once a trough is reached, the capitalist pigs begin a recovery.


Trust

Asymmetric information is a principle reason why markets can fail. If one party knows more than another during a transaction, trust is vital. Without trust, the problem of asymmetric information is amplified.

If governments spend into oblivion and devalue its own currency, regulatory bodies are incompetent, and individuals are out to screw one another to line their own pockets, long run economic prosperity is going to be an uphill battle.

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