Posted by: theoaks | December 7, 2011

When to Pay Utilities at The Oaks Tamarindo


Boring, this, but useful. How to pay utilities and how to prorate them when a tenant is moving in or out.

Utility Payments at The Oaks
• WATER. Payments are due the 1st day of the month, in arrears, and are delinquent the 5th day of the month. Example: Move in September 1, water is payable October 1, for September. The amount is 6,235 colones per month, approximately $12.50 depending on the exchange rate. Payable to the following accounts. If your bank account is not in BNCR, you can make an interbank transfer to either the dollar or colones account, or you can pay in cash at The Oaks office. Most people make payments to the colones account by internet.

ASADA Lomas La Josefina Los Robles de Tamarindo S.A.
cedula juridica 3-002-483894
cuenta en colones
sinpe

or

account in dollars
sinpe

• .ELECTRICITY. Payments are billed in arrears on the 20th day of the month and are payable no later than the 4th day of the following month. The meter is read on the 5th day of the month. The payment is made according to your contract number. Example: Move in September 1, if the bill has not been paid, then it must be paid by September 4 to avoid cut off. However, the period covered ends August 4, so the responsibility for the bill is that of the previous tenant or owner. With the next bill, received September 20th, the bill must be paid by October 4 to avoid cut off. This bill should be prorated so that the previous tenant or owner is responsible for use from August 5 to and including August 31. On move out, the final bill must be prorated also. With your contract number, you can pay at the CoopeGuanacaste office in Huacas, or you can pay through Banco Nacional or Banco de Costa Rica.

• CABLE TV AND INTERNET BY CABLE TV. Cable TV payments are payable in advance on the 1st of the month. You have 9 days to make payment before CableTica sends a truck to cut service, so payments must be received by the 9th of the month. However, CableTica can and will cut internet service automatically, without sending a truck. So it is better to pay by the 8th of each month. With your contract number, you can pay at the CableTica office in Plaza Conchal in Tamarindo, or you can pay through Banco Nacional or Banco de Costa Rica.

• INTERNET BY RACSA. On existing internet service contracts, there are two payments for internet received by cable, one payment to CableTica and a second payment to RACSA. The RACSA payment is due on the 26th of the month, for the following month. This payment covers one month in advance, starting on the 1st day of the month. Example: In order to move in September 1 and have internet service through RACSA, payment must have been made to RACSA by August 26. On new contracts, all payments can be made through CableTica, avoiding payments to RACSA. The total amount is the same, but you have one less payment to make. With your contract number, you can pay through Banco Nacional or Banco de Costa Rica.

• ICE TELPHONE AND INTERNET. Telephone payments are payable in arrears starting the 11th of each month. Payments must be received by the 30th of the month or service will be cut off from ICE’s central system. Example: Move in September 1, if the phone bill has not been paid, then it must be paid by September 30 to avoid cut off. However, the period covered ends September 10, so the bill should be prorated from September 1. You can choose to receive internet service by ADSL through ICE, or you can choose to receive internet service through CableTica. With your contract number, you can pay at the ICE office in Huacas, or you can pay through Banco Nacional or Banco de Costa Rica.

Pagos de servicios públicos en The Oaks

• AGUA. Los pagos se vencen el día primero del mes, en mora, y se retrasa el día 5 del mes. Ejemplo: Mover el 1 de septiembre, el agua se paga el 1 de octubre a septiembre. La cantidad es 6.235 colones por mes, aproximadamente $12.50 dependiendo del tipo de cambio. A nombre de las siguientes cuentas. Si su cuenta bancaria no está en el BNCR, usted puede hacer una transferencia interbancaria a cualquiera de los dólares o colones cuenta, o se puede pagar en efectivo en la oficina de Robles. La mayoría de la gente hacer pagos a la cuenta de colones a través de Internet.

ASADA Lomas de La Josefina Los Robles de Tamarindo SA
Cédula Jurídica 3-002-483894
Cuenta en colones
SINPE

o

cuenta en dólares
SINPE

ELECTRICIDAD. Los pagos se cobran en mora en el día 20 del mes y se pagará a más tardar el 4 º día del mes siguiente. El medidor se lee en el día 5 del mes. El pago se realiza de acuerdo a su número de contrato. Ejemplo: Mover el 1 de septiembre, si el proyecto no ha sido pagado, entonces debe ser pagado por el 04 de septiembre para evitar el corte. Sin embargo, el período termina 04 de agosto, por lo que la responsabilidad por el proyecto de ley es el del anterior inquilino. Con la próxima factura, recibió 20 de septiembre, el proyecto de ley debe ser pagado por 04 de octubre para evitar cortar. Este proyecto de ley debe ser prorrateado de modo que el anterior inquilino es responsable por el uso del 5 de agosto, e incluyendo, 31 de agosto. En el movimiento hacia fuera, el proyecto final debe ser prorrateado también. Con su número de contrato, se puede pagar en la oficina CoopeGuanacaste en Huacas, o se puede pagar a través del Banco Nacional o Banco de Costa Rica.

• TV CABLE E INTERNET POR CABLE TV. Los pagos de TV por cable se pagan por adelantado en la primera del mes. Le quedan 9 días para efectuar el pago antes de CableTica envía un camión para cortar el servicio, por lo que los pagos deben ser recibidos por el 9 del mes. Sin embargo, CableTica puede y va a cortar el servicio de Internet de forma automática, sin necesidad de enviar un camión. Por lo que es mejor pagar antes del día 8 de cada mes. Con su número de contrato, se puede pagar en la oficina CableTica en la Plaza Conchal en Tamarindo, o se puede pagar a través del Banco Nacional o Banco de Costa Rica.

INTERNET POR RACSA. En los contratos de servicios de Internet, hay dos pagos por Internet, por cable, un pago a CableTica y un segundo pago a RACSA. El pago de RACSA se debe el 26 del mes, para el mes siguiente. Este pago cubre un mes de antelación, a partir del día primero del mes. Ejemplo: Con el fin de avanzar en el 1 de septiembre y tiene servicio de Internet a través de RACSA, el pago debe haber sido hecho a RACSA el 26 de agosto. En los nuevos contratos, todos los pagos se pueden realizar a través de CableTica, evitar el pago de RACSA. El importe total es el mismo, pero usted tiene un pago menos que hacer. Con su número de contrato, se puede pagar a través del Banco Nacional o Banco de Costa Rica.

• ICE TELPHONE E INTERNET. Los pagos de teléfono se pagan en mora a partir del 11 de cada mes. Los pagos deben ser recibidos por el 30 del mes o el servicio se cortará a partir del sistema central del ICE. Ejemplo: Mover el 1 de septiembre, si la factura del teléfono no se ha pagado, entonces debe ser pagado el 30 de septiembre para evitar el corte. Sin embargo, el período termina 10 de septiembre, por lo que el proyecto de ley debe ser prorrateado del 1 de septiembre. Usted puede optar por recibir servicios de Internet por ADSL a través del ICE, o puede optar por recibir el servicio de Internet a través de CableTica. Con su número de contrato, se puede pagar en la oficina de ICE en Huacas, o se puede pagar a través del Banco Nacional o Banco de Costa Rica.

Paiements de services publics au Oaks
• L’EAU. Les paiements sont dus le 1er jour du mois, à terme échu, et sont en retard de la 5ème journée du mois. Exemple: Déplacement en Septembre 1, l’eau est payable Octobre 1, pour Septembre. Le montant est 6235 colones par mois, soit environ $ 12.50 selon le taux de change. Payable aux comptes suivants. Si votre compte bancaire n’est pas en BNCR, vous pouvez effectuer un transfert interbancaire soit la valeur du dollar ou d’un compte colones, ou vous pouvez payer en espèces à Le bureau Oaks. La plupart des gens faire des paiements sur le compte de colones par internet.

ASADA Lomas La Josefina Los Robles de Tamarindo SA
cedula juridica 3-002-483894
cuenta en colones
sinpe

ou

compte en dollars
sinpe

•. ÉLECTRICITÉ. Les paiements sont facturés à terme échu le 20e jour du mois et sont payables au plus tard le 4ème jour du mois suivant. Le compteur est lu sur le 5ème jour du mois. Le paiement est effectué en fonction de votre numéro de contrat. Exemple: Déplacement en Septembre 1, si la facture n’a pas été payé, alors il doit être payé par Septembre 4 pour éviter coupé. Toutefois, la période couverte se termine le 4 août pour la responsabilité de la facture est celle de l’ancien locataire ou propriétaire. Avec la prochaine facture, reçue 20 Septembre de la facture doit être payée par le Octobre 4 pour éviter coupé. Ce projet de loi devrait être calculé au prorata afin que le locataire précédent ou le propriétaire est responsable de l’utilisation du 5 août et y compris le 31 août. Sur déménager, la facture finale doit être calculé au prorata aussi. Avec votre numéro de contrat, vous pouvez payer à l’Office de CoopeGuanacaste Huacas, ou vous pouvez payer par Banco Nacional ou Banco de Costa Rica.

CABLE TV ET INTERNET • PAR CABLE TV. Paiements télévision par câble sont payables d’avance sur le 1er du mois. Vous avez 9 jours pour effectuer le paiement avant CableTica envoie un camion pour couper des services, alors les paiements doivent être reçus par le 9ème jour du mois. Toutefois, CableTica peut et va interrompre le service d’Internet automatiquement, sans l’envoi d’un camion. Donc il est préférable de payer par le 8 de chaque mois. Avec votre numéro de contrat, vous pouvez payer à l’Office de la Plaza CableTica Conchal à Tamarindo, ou vous pouvez payer par Banco Nacional ou Banco de Costa Rica.

INTERNET • PAR RACSA. Sur les contrats existants de service Internet, il ya deux paiements reçus pour l’internet par câble, un paiement à CableTica et un second versement au RACSA. Le paiement est dû RACSA sur les 26 du mois, pour le mois suivant. Ce versement couvre un mois à l’avance, à compter du 1er jour du mois.Exemple: Pour aller en Septembre 1 et avoir un service Internet à travers RACSA, le paiement doit avoir été faite au RACSA tard le 26 août. Sur les nouveaux contrats, tous les paiements peuvent être effectués grâce à CableTica, en évitant les paiements aux RACSA. Le montant total est le même, mais vous avez un de moins pour faire le paiement. Avec votre numéro de contrat, vous pouvez payer par Banco Nacional ou Banco de Costa Rica.

• ICE telphone ET INTERNET. Téléphone paiements sont payables à terme échu à partir du 11e jour de chaque mois. Les paiements doivent être reçus par le 30 du mois ou le service sera coupé du système central d’ICE. Exemple: Déplacement en Septembre 1, si la facture de téléphone n’a pas été payé, alors il doit être payé par Septembre 30 à éviter de couper. Toutefois, la période couverte se termine Septembre 10, de sorte que le projet de loi devrait être calculé au prorata de Septembre 1. Vous pouvez choisir de recevoir le service Internet par l’ADSL à travers la glace, ou vous pouvez choisir de recevoir le service Internet à travers CableTica. Avec votre numéro de contrat, vous pouvez payer au bureau ICE à Huacas, ou vous pouvez payer par Banco Nacional ou Banco de Costa Rica.

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Posted by: theoaks | November 21, 2011

CSI: Costa Rica


I am going to get in hot water for this because it is not the usual pro-paradise story.

This is a true story. Date: Thursday Nov 17, 2011. Time: 7:00 a.m. Place: The Oaks Tamarindo, Costa Rica. 

The facts. A resident at The Oaks, “Otto”, sees a security guard, let’s call him “Oscar”, staring into his bedroom sliding glass door at 7:00 a.m. On the table: a Polar exercise watch, value $550. Otto locks up, goes to work. Returns at 1:00 p.m. for lunch. The Polar watch is gone. In its place, muddy foot prints where “someone” has forced open a window, entered and left Otthe condominium. Otto calls the manager, “Roberto”, and reports a theft. He also reports his suspicions concerning Oscar. Roberto: tranquilo mae, vamos a ver.

4:30 p.m. Thursday. At the change of shift from day to night guards, Roberto calls Oscar into the office. Empty your bags. Empty your pockets. What falls out? A Polar exercise watch. Value $550.( By the way, Oscar earns $460 a month.) Roberto takes the watch from Oscar, puts it in a safe, gives Oscar a receipt, and asks him to come back tomorrow. Surely, there is a misunderstanding. Just bring your purchase receipt. It is all good, this is Costa Rica, Pura Vida. Roberto calls Otto. Come over, take a look. Is this your watch? Otto: oh yeah. It is synchronized to my exercise bike, here is how it syncs up. Roberto: cool. Come back tomorrow.

Friday morning. Roberto calls the OIJ, which is Costa Rica’s version of CSI. In Costa Rica, police cannot investigate crimes, by law. Only the OIJ has the professional expertise for this delicate task. The OIJ comes over within two hours. Great work! Roberto calls Otto, who comes back to The Oaks from work.  Otto shows the watch to Oscar and the OIJ, shows how it is synchronized to his exercise bike. Oscar stares at his feet. The OIJ hands the watch to Otto, signs papers. Time to go.

Whoa, says Roberto. How about arresting Oscar? How about swearing out a search warrant for Oscar’s house?  There have been other thefts. Isn’t Oscar a suspect? Says the OIJ, did anyone SEE the theft of the watch? Well, no. That is the point. The theft occurred after Otto left home!

BUT, Oscar signed in to work at 6:00 a.m. The watch was in Otto’s home at 7:00 a.m. The watch was not in Otto’s home at 1:00 p.m. The watch WAS in Oscar’s bag at 4:30 p.m. Do you think you can figure this out? No, we cannot. UNDER THE LAWS OF THE REPUBLIC OF COSTA RICA WE NEED AN EYEWITNESS. OSCAR IS HOME FREE.

OH WELL. Bye OIJ. Thanks for dropping by. Otto leaves with his watch. Oscar, the guard, turns to Roberto. What do I do now? Roberto: leave and don’t come back.

On the way out, Oscar complains to the guard at the front gate. What about my watch, mae? ( the one I stole.) Guard: If you want it, go back inside and ask Don Roberto for it. Oscar leaves.

This, my friends, is why Costa Rica is a paradise for petty thieves. The law simply does not provide a way to catch them, never mind punish them. If you want to keep your stuff, you have to watch it. Closely. Still, this same sneak thief culture is good, in a perverse way, since the culture promotes non-confrontation. You are, generally speaking, safe. Safer for sure than Miami, where Roberto hails from. You just have to keep your eyes open and your guard up.

By the way, CSI:Costa Rica is an oxymoron.

Posted by: theoaks | September 19, 2011

CRAZY LOW AIR FARES AND A CNN LOVE NOTE


Thanks to Jogi for bringing this great CNN article on Costa Rica to our attention. http://edition.cnn.com/2011/TRAVEL/09/17/destination.adventure.costa.rica/

There are crazy low air fares available right now. Starting November 17 fares from New York to Liberia are cut in half, as low as $299 RT. Round trip from Calgary as low as $643. Minneapolis $662. Chicago in the low $500s. Dallas from $461.

Grab these low fares while the sale is on, and we will help you with a great deal on lodging, car rentals and tours. This is the easiest site I have found to compare fares. http://www.kayak.com/ What is your favorite?

Posted by: theoaks | September 9, 2011

Which Republican Candidates Should Move to Costa Rica?


Number 8 – Ron Paul. Quote:

What I said is, theoretically, you could — it could be privatized, but who ends up doing the regulations on the drugs? They do as much harm as good. They don’t take good care of us. Who gets — who gets to write the regulations? The bureaucrats write the regulations, but who writes the laws? The lobbyists have control, so lobbyists from the drug industry has control of writing the regulations, so you turn it over to the bureaucracy.

We are way ahead of you in Costa Rica, Congressman Paul! Rox and I save hundreds of dollars by not having to go to a doctor, courtesy of the FDA, to get a prescription for a prescription drug, or to get a prescription for lab tests. One reason people in Costa Rica live longer than people in the U.S., at one-tenth the cost, is that we have the freedom to order our own tests and buy our own drugs, without the nanny state requiring us to go through an M.D. Of course, there are times when an M.D. is important, but that is for the individual to decide, not the government. Come on down, Ron Paul, you will feel at home.

Posted by: theoaks | August 24, 2011

Hurricane Irene, Way North of Costa Rica


With friends and family in Florida, North Carolina, Virginia, Maryland, New Jersey and New York, and a friend flying out of Richmond to visit The Oaks on Saturday,we have been following the track of Hurricane Irene and hoping that she is pushed East away from the U.S. into the Atlantic Ocean. Luckily, hurricanes are almost never a worry in Guanacaste, as Costa  Rica is south of prevailing hurricane tracks.

source: wikipedia

wikipedia hurricane tracks

Posted by: theoaks | August 7, 2011

TAMARINDO MARATHON AND HALF MARATHON


We are “fully committed”. Sold out. Five full weeks before the Tamarindo Marathon. This year’s event is going to be huge! If you need help finding somewhere else to stay during the marathon, give us a shout. Otherwise, ask us about our Mother’s Day Special this weekend.


I avoid public policy discussions, except to explain how policy affects your cost of living in Costa Rica, because I know 51% will be against a policy and 49% in favor, so why annoy one half or the other? Every once in a blue moon comes a discussion that is important and susceptible to facts. The following article, reprinted with permission, applies with equal force to European nations, Britain and yes, Costa Rica, simply changing the numbers and graphs. For my friends in Canada, whose public policy seems in better shape, apologies for the digression. Key points bolded by me, not the author, for those who skim and do not want to read 4,000 words.

Back to the Basics
By John Mauldin | July 15, 2011

This week we are going to revisit some themes concerning the problems of the debt and the deficit. I am getting a number of questions, so while long-time readers may have read most of this in one letter or another, it is clearly time for a review, especially given the deficit/debt-ceiling debate. I will probably offend some cherished beliefs of most readers, but that is the nature of the times we live in. It is the time of the Endgame, where things are not as black and white as they have been in the past.

Let’s begin with a question that is representative of a lot of the questions I have been getting, from reader John:

“John, it appears that you’re arguing that two contradictory things have the same effect: adding government spending doesn’t help the economy, and reducing government spending hurts the economy. Which is it? At first, you say that adding government spending doesn’t help, no new jobs are actually created, it fails the sharp pencil test, etc. So, we should reduce this waste, right? Well, yes, you say, but that will reduce GDP too. I just don’t get it. You seem to have it both ways: increasing government spending is bad, and reducing it is bad. What is your point?”

Yes, I am saying both things, and they are not contradictory. We are coming to the end of the debt supercycle in the US, and have reached that point in much of Europe, and soon will in Japan. So while I am going to focus on the US, at least this week, the same principles apply to all the developed world.

For some 65-odd years, we have added to the national debt – individually, corporately, and as governments. But as Greece is finding out, there is a limit (more on that later). Eventually the bond market decides that loaning you more money is not a high-value proposition. If your home or your government is debt financed, you are forced to cut back. While the US is not there yet, we soon (as in a few years) will be.

One way or another, the budget deficits are going to come down. As we will see later, we can choose to proactively deal with the deficit problem or we can wait until there is a crisis and be forced to react. These choices result in entirely different outcomes.

In the US, the real question we must ask ourselves as a nation is, “How much health care do we want and how do we want to pay for it?” Everything else can be dealt with if we get that basic question answered. We can radically cut health care along with other discretionary budget items, or we can raise taxes, or some combination. Both have consequences. The polls say a large, bipartisan majority of people want to maintain Medicare and other health programs (perhaps reformed), and yet a large bipartisan majority does not want a tax increase. We can’t have it both ways, which means there is a major job of education to be done.

The point of the exercise is to reduce the deficit over 5-6 years to below the growth rate of nominal GDP (which includes inflation). A country can run a deficit below that rate forever, without endangering its economic survival. While it may be wiser to run some surpluses and pay down debt, if you keep your fiscal deficits lower than income growth, over time the debt becomes less of an issue.

GDP = C + I + G + Net Exports

But either raising taxes or cutting spending has side effects that cannot be ignored. Either one or both will make it more difficult for the economy to grow. Let’s quickly look at a few basic economic equations. The first is GDP = C + I + G + net exports, or GDP is equal to Consumption (Consumer and Business) + Investment + Government Spending + Net Exports (Exports – Imports). This is true for all times and countries.

Now, what typically happens in a business-cycle recession is that, as businesses produce too many goods and start to cut back, consumption falls; and the Keynesian response is to increase government spending in order to assist the economy to start buying and spending; and the theory is that when the economy recovers you can reduce government spending as a percentage of the economy – except that has not happened for a long time. Government spending just kept going up. In response to the Great Recession, government (both parties) increased spending massively. And it did have an effect. But it wasn’t just the cost of the stimulus, it was the absolute size of government that increased as well.

And now massive deficits are projected for a very long time, unless we make changes. The problem is that taking away that deficit spending is going to be the reverse of the stimulus – a negative stimulus if you will. Why? Because the economy is not growing fast enough to overcome the loss of that stimulus. We will notice it. This is a short-term effect, which most economists agree will last 4-5 quarters; and then the economy may be better, with lower deficits and smaller government.

However, in order to get the deficit under control, we are talking on the order of reducing the deficit by 1% of GDP every year for 5-6 years. That is a very large headwind on growth, if you reduce potential nominal GDP by 1% a year in a world of a 2% Muddle Through economy. (And GDP for the US came in at an anemic 1.75% yesterday, with very weak final demand.)

Further, tax increases reduce GDP by anywhere from 1 to 3 times the size of the increase, depending on which academic study you choose. Large tax increases will reduce GDP and potential GDP. That may be the price we want to pay as a country, but we need to recognize that there is a hit to growth and employment. Those who argue that taking away the Bush tax cuts will have no effect on the economy are simply not dealing with either the facts or the well-established research. (Now, that is different from the argument that says we should allow them to expire anyway.)

Increasing Productivity

There are only two ways to grow an economy. Just two. You can increase the working-age population or you can increase productivity. That’s it. No secret sauce. The key is for us to figure out how to increase productivity. Let’s refer again to our equation:

GDP = C + I + G + net exports

The I in the equation is investments. That is what produces the tools and businesses that make “stuff” and buy and sell services. Increasing government spending, G, does not increase productivity. It transfers taxes taken from one sector of the economy and to another, with a cost of transfer, of course. While the people who get the transfer payments and services certainly feel better off, those who pay taxes are left with less to invest in private businesses that actually increase productivity. As I have shown elsewhere, over the last two decades, the net new jobs in the US have come from business start-ups. Not large businesses (they are a net drag) and not even small businesses. Understand, some of those start-ups became Google and Apple, etc.; but many just become good small businesses, hiring 5-10-50-100 people. But the cumulative effect is growth in productivity and the economy.

Now, if you mess with our equation, what you find is that Investments = Savings.

If the government “dis-saves” or runs deficits, it takes away potential savings from private investments. That money has to come from somewhere. Of late, it has come from QE2, but that is going away soon. And again, let’s be very clear. It is private investment that increases productivity, which allows for growth, which produces jobs. Yes, if the government takes money from one group and employs another, those are real jobs; but that is money that could have been put to use in private business investment. It is the government saying we know how to create jobs better than the taxpayers and businesses we take the taxes from.

This is not to argue against government and taxes. There are true roles for government. The discussion we must now have is how much government we want, and recognize that there are costs to large government involvement in the economy. How large a drag can government be? Let’s look at a few charts. The first two are from my friend Louis Gave, of GaveKal. This first one reveals the correlation between the growth of GDP in France and the size of government. It shows the rate of growth in GDP and the ratio of the size of the public sector in relation to the private sector. The larger the percentage of government in the ratio, the lower the growth.

I know, you think this is just the French. We all know their government is too involved in everything, don’t we. But it works in the US as well. The chart below shows the combined US federal, state, and local expenditures as a percentage of GDP (left-hand scale, which is inverted) versus the 7-year structural growth rate, shown on the right-hand side. And you see a very clear correlation between the size of total government and structural growth. This chart and others like it can be done for countries all over the world.

Now let’s review a graph from Rob Arnott of Research Affiliates. The chart needs a little setup. It shows the contributions of the private sector and the public sector to GDP. Remember, the C in our equation was private and business consumption. The G is government. And G makes up a rather large portion of overall GDP.

The top line (in dark blue) is real GDP per capita. The next line (yellow) shows what GDP would have been without borrowing. So a very real portion of GDP the last few years has come from government debt. Now, the green line below that is private-sector GDP. This is sad, because it shows that the private sector, per capita, is roughly where it was in 1998. The growth of the “economy” has been limited to government.

Notice that real GDP without government spending or deficits has been flat for 15 years (which, as a sidebar, also explains why real wages for private individuals are flat as well, but that’s a topic for another letter). Now, here is what to pay attention to. For the last several years, the real growth in GDP has come from the US government borrowing money. Without that growth in debt, we would be in what most would characterize as a depression.

This is why Paul Krugman and his fellow neo-Keynesians argue that we need larger deficits, not smaller ones. For them the issue is final aggregate consumer demand, and they believe you can stimulate that by giving people money to spend and letting future generations pay for that spending. And sine WW2 they have been right, kind of. When the US has gone into a recession, the government has embarked on deficit spending and the economy has recovered. The Keynesians see cause and effect. And thus they argue we now need more “hair of the dog” to prompt the recovery, which is clearly starting to lag behind what they think of as normal growth.

But others (and I am in this camp) argue that business-cycle recessions are normal and that recoveries would come anyway, and are not caused by increased government debt and spending but by businesses adjusting and entrepreneurs creating new companies. Correlation is not causation. Just because recoveries happened when the government ran deficits does not mean that they were the result of government spending. This is not to argue that the government should not step in with a safety net for the unemployed – again, a subject for another letter.

Let’s see what Rob Arnott says about this conundrum:

“GDP is consumer spending, plus government outlays, plus gross investments, plus exports, minus imports. With the exception of exports, GDP measures spending. The problem is, GDP makes no distinction between debt-financed spending and spending that we can cover out of current income.

“Consumption is not prosperity. The credit-addicted family measures its success by how much it is able to spend, applauding any new source of credit, regardless of the family income or ability to repay. The credit-addicted family enjoys a rising “family GDP” – consumption – as long as they can find new lenders, and suffers a family “recession” when they prudently cut up their credit cards.

“In much the same way, the current definition of GDP causes us to ignore the fact that we are mortgaging our future to feed current consumption. Worse, like the credit-addicted family, we can consciously game our GDP and GDP growth rates – our consumption and consumption growth – at any levels our creditors will permit!

“Consider a simple thought experiment. Let’s suppose the government wants to dazzle us with 5% growth next quarter (equivalent to 20% annualized growth!). If they borrow an additional 5% of GDP in new additional debt and spend it immediately, this magnificent GDPgrowth is achieved! We would all see it as phony growth, sabotaging our national balance sheet – right? Maybe not. We are already borrowing and spending 2% to 3% each quarter, equivalent to 10% to 12% of GDP, and yet few observers have decried this as artificial GDP growth because we’re not accustomed to looking at the underlying GDP before deficit spending!

“From this perspective, real GDP seems unreal, at best. GDP that stems from new debt – mainly deficit spending – is phony: it is debt-financed consumption, not prosperity. Isn’t GDPafter excluding net new debt obligations a more relevant measure? Deficit spending is supposed to trigger growth in the remainder of the economy, net of deficit-financed spending, which we can call our “Structural GDP.” If Structural GDP fails to grow as a consequence of our deficits, then deficit spending has failed in its sole and singular purpose.

“Of course, even Structural GDP offers a misleading picture. Our Structural GDP has grown nearly 100-fold in the last 70 years. Most of that growth is due to inflation and population growth; a truer measure of the prosperity of the average citizen must adjust for these effects.”

And thus the graph above showing private GDP and the difference in the GDP numbers that are reported in the media. I used Rob’s entire (and brilliant) piece as an Outside the Box last May. If you missed it, you can go to http://www.johnmauldin.com/outsidethebox/does-unreal-gdp-drive-our-policy-choices/ and review it.

The Trillion Dollar Question

Now, in our review, let’s get back to reader John’s question. I have used this chart before, but it bears another quick look. This is from the Heritage Foundation. It is a year old, and one can quibble about the specifics. That is not the point of today’s issue. The point is that, whatever the deficit is, it is huge. This is a chart of something that will not happen, as the bond market will simply not finance a deficit as large as the one that looms in our future. Long before we get to 2019, we will have our own Greek (or Irish or Portuguese or Japanese, etc.) moment. (Or Spanish or Italian or Belgian – so many countries, so much debt!)

For the sake of the argument and our thought experiment, let’s split the difference on that chart. Somehow we must then find about $1.2 trillion in cuts or taxes to get the deficit down to below the growth rate of nominal GDP. And another few hundred billion if we actually want to balance the budget.

And that, gentle reader, is no small hill to climb. Let’s say we cut spending and/or raise taxes by $200 billion a year for 6 years. That is more than 1% of GDP each and every year! Go back to the first chart. That means that potential GDP growth will be reduced by over 1% a year! Every year. We would need to rely upon private GDP growth, which Rob’s chart shows has been flat for almost 15 years! The growth of the last 11 years has been a government-financed illusion.

There are no good choices. The time for good choices was years ago. I was and still am a fan of the Bush tax cuts. They were not the problem; a few years after the cuts, tax revenues were up considerably. The problem was a profligate Republican Congress which allowed spending to rise even more. And you can’t just blame it on the wars. That contributed, but it was not even close to the lion’s share. If we had held the line on spending, we would have paid off the entire debt and been in good shape when the crisis hit in 2008. The following graph is from today’s Wall Street Journal editorial page. They use it to show how much Democrats allowed the budget in terms of GDP to rise and spin out of control.

I would point out that in the 8 previous years, under Bush/Hastert/Delay et al., there was also a rise in the growth of government, as the chart shows. While it was not as large, it was clearly there. The drop in the previous period was the Bill Clinton/Newt Gingrich years. How many people are nostalgic for that pairing? Say what you will about them, their collaboration was a good era for growth in the private sector – the last we have had.

And that is the crux of the problem. Either we willingly cut the deficit by a far more significant amount than anyone is discussing, or we hit the wall at some point and become Greece. $4 trillion? No, let’s talk about 10 or 12.

And that, John, is the problem. We have painted ourselves into the corner of no good choices. We are left with difficult and disastrous choices. We have condemned ourselves to a slow-growth, Muddle Through Economy for another 5-6 years, at best, as we are forced to right-size government. If we raise taxes to partially solve the problem, we have to recognize that higher taxes will result in slower private growth. That’s just the rules. There are no easy buttons to push.

So, we must cut spending and the deficit, and yes, it is going to slow the economy for a period of time. The economic literature suggests that a spending cut will have 4-5 quarters of effect and then be neutral going forward. But we are going to have to make those cuts year after year after year.

I know the Tea Party types want to do it all at once, but that would guarantee a decade-long depression. You just really don’t want to go there. It MUST be a slower, controlled “glide-path” approach. I wrote about this back in 2009, along with all the other options. Nothing has changed: http://www.johnmauldin.com/frontlinethoughts/the-glide-path-option-mwo110609/.

The present contains all possible futures. But not all futures are good ones. Some can be quite cruel. The one we actually get is determined by the choices we make.

It is getting time to close, so a few quick observations. While choosing a President and Congress next year will be a referendum of sorts, I would like to see a real, non-binding referendum appear on our primary ballots. How much Medicare do we want? Should we raise taxes? How do we get to $10 trillion in cuts? You would have to confirm you have read a 20-page document outlining the choices and consequences, and that should be posted everywhere and mailed to everyone. We need to have a real national conversation.

If Obama says he wants $4 trillion in cuts, then let him give us details rather than asking Congress to give him a plan, as he did today. He has his brain trust; surely they can come up with some details. The problem is that if he offers specifics he will have to show his supporters what he is willing to cut. And those cuts will not be without pain.

The real issue, as I have said, will boil down to how much Medicare we want and how we want to pay for it. Congressman Ryan’s cuts don’t get us even halfway there.

A Summer of Ultimatums

In closing, this from my friends at GaveKal:

“ In the past 24 hours, we have seen the Greek deputy finance minister announce that Athens would fall far short of planned asset sales (this can only come as a surprise to investors born yesterday) and the Greek prime minister publish an open letter to Eurogroup Chairman Juncker warning that Greece has done all that it could. Mr Panandreaou went on to say that the onus is now on European policymakers to meet in a closed forum, with no damaging press leaks, and emerge with a strong, unambiguous message – we have to assume that the irony of asking for more secrecy through an open letter to the general media was perhaps lost on the Greek PM. Diplomacy aside, it seems that Greece is placing an ultimatum on Europe and this for a very simple reason: the end game for the EMU is approaching much faster than most investors had expected. Indeed, the choice between fiscal union or disintegration may well have to be faced this very summer.

“In his eloquent letter, Papandreou boldly stated that, in essence, Greece is no longer prepared to make further concessions and will thus blow up Europe’s financial system if it is subjected to any more pressure. In other words, it is now time for all additional concessions to come from the side of Germany, the ECB and the EU. The willingness of Papandreou to speak so boldly is hugely important since it marks a recognition by the debtors that they now have the whip-hand in these negotiations. The Greeks (and Irish) for some reason failed to realize their power last year, but they do now. This transforms the balance of power in the negotiations. As a result, Germany and the ECB have reached the moment of truth – either they comply with the debtor countries’ demands or they abandon the euro. This ultimatum probably helps explain why the euro has been so weak and why it should be heading even lower.”

There will be yet another emergency meeting next Thursday. The crisis is coming to the final innings. Will Germany and the ECB finance Greece? Print money in a fashion that would make Bernanke and Krugman envious? But if we in the US do not get our own act together, in the not-too-distant future we will face our own moment of truth as the bond market forces us to choose between disastrous and worse. The cuts we will have to make under pressure will be far worse than those we can make now.

I will probably write about Europe next week. I think the brewing crisis could cause a banking crisis and a recession in Europe, which, just as our subprime crisis caused world pain and a global recession, will also bring their pain to our shores. We are not immune. Stay tuned.

Vancouver, New York, and Maine

In a few weeks I head to Vancouver and then to New York City and Maine for the annual fishing trip, one of the outings I truly look forward to each year. Both cities and Maine will afford me memorable times with great friends, which is one of the things that gives life meaning and makes it fun and keeps me young.

And speaking of young, I must admit to a guilty pleasure. I am a Harry Potter fan, and tonight I am going to see the final episode. Joe Morgenstern of the Wall Street Journal, and my favorite movie reviewer, gave it rave reviews. While I have not read the books, I have followed the story and am looking forward to the final chapter. But it is bittersweet, as I will miss my friends who I have watched for all these years. And to watch the film-making technology change over time has been a revelation, too. What a world we live in.

Time to hit the send button. Enjoy your week and spend it with friends when you can.

Your just another muggle tonight analyst,

John Mauldin
John@FrontlineThoughts.com

Copyright 2011 John Mauldin. All Rights Reserved.

Thoughts from the Frontline is a free weekly economic e-letter by best-selling author and renowned financial expert, John Mauldin. You can learn more and get your free subscription by visiting www.frontlinethoughts.com.”

Posted by: theoaks | July 9, 2011

HUACAS SHOE STORE OPENING WITH MARIMBA BAND


Drove by Huacas today to see if my pickup was ready. (Nope.) Found the grand opening of Zayte’s shoe store, complete with marimba band. You never know what you will find near The Oaks. We are almost full for the Tamarindo marathon.

Posted by: theoaks | July 7, 2011

TAMARINDO MARATHON AND HALF MARATHON


Since March we have promoted the advantages of The Oaks for the Tamarindo Marathon. Now we are almost 100% booked, overbooked if we count people who say they will come but have not yet confirmed their reservation with a deposit. However, without a deposit, you do not have a reservation, so we urge those in contact with us to confirm their plans before it is too late. We have checked our rental rates against those of our competitors, and are confident that we offer value for money.

Posted by: theoaks | July 5, 2011

HAPPY 4th of JULY!


To all of our American friends and owners, Happy 4th of July!  Here in Costa Rica, it is a holiday because the first two weeks of July are summer school holidays. The weather also is warm and sunny, with the rainy season making itself absent in Guanacaste so that vacationers can leave San Jose and enjoy the beach.

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