Yesterday I wrote about the passing of the 'budget deal', and pointed out that it was a sham, a fake and a public lie. I went on to quote several references to the true (and very parlous) state of the US economy.
Today I came across this article from Casey Research, an investment firm based in Stowe, Vermont. I found it very thought-provoking; so much so that I'm going to quote part of it here.
For some time we have warned of what seems to us to be an indelible trend for the hopelessly bankrupt government to take increasingly desperate measures in the attempt to escape its eventual and nearly inevitable ruin.
The signs of this trend are now appearing here, there, and everywhere. Ominously, one of the most visible signs is an upwelling in the popular media of calls for punitive levels of taxation on anyone considered wealthy.
Having made no real attempt at cutting spending, the president is encouraging this upwelling, saying stridently that he won’t sign any bill that further delays reinstating the taxes cut by Bush.
On that topic, I briefly tuned in to a call-in program on public radio yesterday and was unsurprised to hear the callers unified in what came across as spitting anger at the "rich and the corporations".
For the record, American corporations rank sixth-highest in the world in terms of the taxes they pay, and the top 10% of Americans pay 70% of the income taxes collected in the country.
But this isn’t about fairness, or even logic. It’s about a government that has financially blown itself up, yet refuses to accept responsibility, and to own up to the fact that it’s bankrupt.
That makes the government itself particularly dangerous. And not just overtly, by raising taxes or ratcheting up law enforcement efforts designed to strip assets from the citizenry, for example.
We have long warned of coming exchange controls. In time, they will be overt. But covertly, the process of trapping wealth in the country is already well advanced.
. . .
I don’t have the time to tally up all of the various signs on the ground of what’s coming, and I probably don’t need to - because you’d have to be blind not to clearly see the tracks for yourself.
From a broader perspective, the one based on the Economics 101 class that members of government seemed to have flunked, the continued stripping of capital from private hands in order to either redistribute it, or waste it as bombs in Libyan deserts, assures the economy will only worsen.
In the radio program I referenced above, one of the irate callers said, and this is almost a direct quote, "The wealthy need to stop ducking their obligations and pay their fair share! The people of the country are struggling, but to a rich person the money they have will just be spent on another car!!!"
That the person is unable to connect the dots between "another car" and jobs and a thriving economy says a lot about the world we now live in.
More important is the reaction of the successful on seeing the gathering mob and their guillotines (figuratively, at least so far). Predictably, the people with the capital to invest in new business ventures and who can still afford to buy things like cars, houses, and so forth are getting nervous.
And when people start viewing the future with uncertainty and nervousness, it is natural - no matter how much money they have - to squirrel money away. Rather than going about with business as usual, they will actively look for ways to shift that money out of harm’s way. Moving it overseas, for example. Or by taking full advantage of tax-planning vehicles such as trusts.
What that means is that rather than buying that other car that so outraged the caller, the people with money will leave that money in their wallet, adding even more pressure to the economy.
The next phase in the current economic crisis, which we are entering now, will be of a different nature than the sharp market reaction that occurred in 2008, though we are likely to see such a crash as well.
In the next phase, the nature of the crisis will shift to what effectively becomes a war between the government and the most productive elements of society. Sure, the same corporate quislings will still be pulling strings behind the scenes in Washington, seeking preferential treatment for their companies or industries, but families with any net worth are increasingly going to be targeted.
This targeting will only intensify as the government is forced to cut back, however slightly, on the massive overhang of nanny-state operations it has created over the past 50 years or so - especially in that the populist media, with the government’s full blessing, will link each new announcement of a painful cutback in government programs to the excesses of the more well-off. Simply, each $10 million cut from some subsidized school lunch program will invariably be contrasted to some symbol of the lavish life style or a preferred treatment enjoyed by the nation’s wealthy.
In addition to inflaming the increasingly worn-down masses, this will serve to finally discredit the entire notion of a free market where people are able - through hard work and fiscal probity - to make something of themselves. Henceforth, building personal wealth will be conflated with taking money out of the mouths of poor children, and "corrective measures" will be taken that will assure the economy continues in its death spiral.
This is a clear and real threat, given the latest census data showing that only 12.5% of American households make over $100,000 a year. Fully 60% earn $49,000 or less. And even those amounts are being quickly eroded: if you credit the inflation statistics provided by ShadowStats - and we do - inflation in the U.S. is now running at about 10%.
It doesn’t take a genius to recognize that people are falling behind, and badly. And it’s not just here, but around the world. One story on that front points this week to a freefall in consumer spending in the UK. Things are only going to get worse.
That is why it is so tragic that, instead of admitting that the problems emanate from decades of political mismanagement and addressing them at that level, the very same politicians are succeeding in their efforts to redirect rising public anger toward the very same entrepreneurs who have the capital and - in a more stable environment - the willingness to take the big risks needed to start new businesses and get the economy going again.
There's much more at the link. I highly recommend reading the whole article. If you do, and you find it valuable, you might wish to consider subscribing to Casey Research's free Daily Dispatch newsletter. I've just done so. I look forward to lots of interesting reading from them.
My thanks to Casey Research for a very thought-provoking article - one which both agrees with, and adds a new dimension to, the warnings I've been publishing here for several years now.