Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
FED Balance Sheet Current State - 5th Mar 21
The Global Vaccine Race Against Time and Variants - 5th Mar 21
US Treasury Yields Rally May Trigger A Crazy Ivan Event (Again) In Stock Market - 5th Mar 21
After Gold’s Slide, What Happens to Miners? - 5th Mar 21
Racism Pandemic Why UK Black and Asians NOT Getting Vaccinated - NHS Covid-19 BAME - 5th Mar 21
Get Ready for Inflation Mega-trend to Surge 2021 - 4th Mar 21
Stocks, Gold – Rebound or Dead Cat Bounce? - 4th Mar 21
The Top Technologies That Are Transforming the Casino Industry - 4th Mar 21
How to Get RICH Crypto Mining Bitcoin, Ethereum With NiceHash - 4th Mar 21
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Is an Economic Deluge Nigh?

Politics / Social Issues May 04, 2012 - 11:22 AM GMT

By: David_Galland

Politics

Best Financial Markets Analysis ArticleDavid Galland, Casey Research writes: If history has taught one certain lesson, it is that the less fettered an economy, the better humankind is able to do what it does best: run from trouble and run toward opportunity. In this way mistakes are quickly resolved and progress assured.

Conversely, the deeper the muck of regulation, mandates, taxes, subsidies and other bureaucratic meddling, the slower we humans are in following our natural instincts until the point that progress is slowed or even stopped.


It is said that history doesn't repeat itself, but it often rhymes. In the current circumstances, it appears that enough time has passed that current generations have completely forgotten the critical connection between the ability of humans to freely pursue their aspirations and economic progress.

You can see this ignorance in the popular demand for even more, not less, meddling in the affairs of humankind. Should this trend continue – and for reasons I will touch on momentarily, I firmly believe it will – then the aspirations of the productive minority will soon be dampened by ever higher taxes and other attempts to "level the playing field" and the global economy, already in tatters, will fall off the edge.

There is no more timely nor acute example of this growing trend than what is currently going on in France. I refer, of course, to the first round of the presidential election process, scheduled for this weekend.

In France, if no candidate attracts no better than 50% of the vote, then the two leading candidates go to a decisive runoff vote, this time around to be held on May 6.

The current president, Nicolas Sarkozy, a conservative in name only, was running at a fairly steady gait toward re-election (thanks to the head start awarded all incumbents), when leading socialist candidate Francois Hollande came out with a proposal to tax anyone with an annual income of over one million euros at a rate of 75%. He also promised to add a tax on all financial transactions and increase taxes on France's biggest companies to 35% – securing bragging rights as levying the world's third-highest corporate taxes, the US being #1. This all on top of a 25% VAT, one of the world's highest. By some calculations, the result of Hollande's new taxes is that effectively 100% of all incomes over one million euros will now be stripped away by the state.

For good measure, Hollande also promised to reverse the recent modest increase in retirement age from 60 to 62 pushed through by Sarkozy. While I am sure it is mere coincidence, I found it noteworthy that Mssr. Hollande's campaign slogan is "Change – Now!"

Remarkably, at least for those with some small understanding of economics, as a result of leaning into the microphone with these proposals Hollande has galloped ahead of all other potential contenders and is now projected to finish nose by nose with Sarkozy.

After which the also-rans will be removed from the race, freeing their supporters to share their affections elsewhere. Given that the leading contender for third place with an estimated 14% of the vote is one Jean-Luc Mélenchon – charitably categorized as "far left", a label that can be applied to most of the other candidates – it is projected that the "conservative" Mssr. Sarkozy will go down in double-digit flames come May 6.

Bringing to mind the prophetic utterance of Louis XV: "Après moi, le déluge."

The deluge in Louis' case manifested as the murderous affair commonly known as the French Revolution. In the case of Mssr. Hollande taking up residence in the Palais de l'Élysée, the deluge is likely to manifest in the form of rising interest rates as investors look to protect against an acceleration in the country's debt to GDP ratio, already projected to hit almost 90% this year, exacerbated by a flight of capital, investors, entrepreneurs and large businesses.

As is the nature of such things, because of the aforementioned predilection of humans to run from trouble, we likely won't have to wait for Mssr. Hollande to be formally enshrined in the gilded halls for the trouble to start – it will begin within days and maybe even minutes of the handicappers concluding that his ascendency is a sure thing.

Given that France is the third-largest economy in the already-troubled Eurozone, one can expect the deluge to spread, with potentially devastating consequences. That the guillotines may soon be rolled out across Europe can be better understood by taking into account that the Eurozone sovereign deadbeats are on the hook for roughly nine trillion euros in debt, some significant percentage of which has to be rolled over to ready buyers over the next couple of years. Adding weight to the problem is that, according to the latest figures out of the IMF, Europe's banks may have to sell off up to 3.8 trillion euros in assets, many of them questionable, between now and the end of next year. At least, if they want to remain solvent.

Across the pond, the United States also has aggressive funding needs, given that the "change" we experienced ourselves in the last presidential election has left the government gasping for about $1.4 trillion in additional funding each year. Then there is Japan, officially the world's largest debtor in terms of debt to GDP, where the easy availability of local funding has dried up, requiring that nation to go to the international markets for funding as well.

The phrase "an awful lot of hogs at the trough" comes to mind.

My point is not just that these governments are broke and are about to get a lot more broke as interest rates rise on their many debts and financings, but rather that the global trend toward a resurgence in public demand for socialism in response to a worsening crisis is a certainty.

How could it be otherwise when for decades now the schooling of children has been delegated to functionaries of the state?

For evidence, look no further than the screen swipe here. It is a quote from an essay by a college student in the United States on role the government should play:

The writer of those words was a member of a Valencia University economics class. The professor, Jack Chandliss, asked the class to write an essay on what the American dream means to them, and what they want the federal government to do to help them achieve that dream. Out of 180 students participating, only about 10% wanted the government to leave them alone and not tax them too much, but a whopping 80% wanted the government to provide pretty much the whole dream thing wrapped in a tidy bow – including free college tuition and health care, jobs, even the down payment on their future homes, money for retirement and hard cash, taken in the form of taxes from rich people. Please take a moment to watch a worthwhile interview with the professor.

Pretty eye-opening, eh?

The point here is not complex, but it is important.

With the apparatus of state education over many years serving to bamboozle the populace into the hardened belief that government has a positive role to play in virtually all aspects of modern life, it should come to no surprise to anyone that, when push comes to shove, people are now trained to look to government to solve the problems – even when it was the government that created the problems in the first place.

Thus, confronted with the intractable mess they have made, these governments have to keep alive the mythology they have created about their omnipotence. Which is easier said than done, because with things now swirling fairly quickly around the drain, the mob is beginning to lose faith – and even patience.

Which puts these governments in a very tight spot, because the only way they can actually fix things is by doing exactly the opposite of what people have come to expect from their governments, which is always to do more. Put simply, the only hope now is that these governments begin to reduce their roles in their respective economies, and dramatically so. Concurrently, they have to encourage people in their aspirations to greater wealth, by lowering their taxes and unwinding the tangle of regulations they have created over the last half-century.

But if the governments actually tried to take these actions, the brainwashed masses would be positively befuddled then outraged, as it goes against everything they have been taught. Why, it would be like the Pope shuffling his way to the balcony of St. Peter's Basilica and informing the doting faithful that there isn't a god and never has been.

Riots would follow.

So it is that we find ourselves at a particularly interesting juncture in the historical record.

On the one hand you have a majority of the world's population who have been carefully schooled into believing that the institution of government holds the solution to all problems and is the source of succor to all who need it. (Even that subset of the populace who has lost confidence in their current government invariably believes as doctrine that the next and better government can change things for the better and lead the way to the shining castle on the hill.)

In this mix are the politicians and their functionaries, 99.99% of whom believe that, if for no other reason than their re-election prospects, they have to do something to meet the demands of the public.

Of course, under normal circumstances the "something" usually consists of making grand-sounding speeches and otherwise blowing smoke. Today that's just not going to cut it, for the simple reason that the crisis is real, it is spinning out of control, and it's not going to go away unless and until the markets are allowed to breathe again.

Which brings us full circle to the simple truth that the brainwashed public won't stand idly by while the politicians lower taxes and regulations on the profit makers or cut back state pensions and guarantees or otherwise reduce any of the many services the state has taken on itself to provide.

"Between a rock and a hard place" is an inadequate phrase to describe the situation.

Meanwhile, the mob has started to gather, their dark mutterings heard by the politicos who quickly don the red caps themselves, the better to be viewed as one with the people and join in expressing outrage against the capitalists who have been selected as fall guys in this unfolding drama.

When confronted by reporters about the fact that his 75% tax on high-income owners would raise nowhere enough revenue to offset France's towering debt and social obligations, Mssr. Hollande was heard to respond:

"It's not a question of return. It's a question of morality."

When coercion and theft are considered moral, anything is possible, and none of it good.

While I certainly can't say how this is all going to end, I'm pretty sure it's not going to end well.

[Was David's pessimistic view of the future shared by most of the experts who spoke at the just-concluded Casey Research Recovery Reality Check Summit? If you weren't there, you can still learn the answer to that question – an audio collection of every presentation is in progress. You'll hear every speaker… see every graph and chart… learn what the experts are recommending for your investment portfolio to help you survive and thrive during the coming deluge. The Summit Audio Collection will be available on CDs or in instantly available MP3 format – order your copy now.]

© 2012 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules