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
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Fiscal Cliffs Precede Fiscal Valleys

Stock-Markets / Financial Markets 2012 Dec 28, 2012 - 02:55 AM GMT

By: Barry_M_Ferguson

Stock-Markets

It is not the fall that kills us. It is the collision with the ground. It is not the ‘fiscal cliff’ that we should fear. It is the fiscal valley that lies beyond the fiscal cliff that will kill us. Can a fall from the cliff be prevented?

The answer is ‘no’. The ‘fiscal cliff’ is Fed Chairman Bernanke’s metaphor for the expiration of the Bush-era tax cuts. Congress must act to again extend the lower tax rates as they did previously or taxes rise starting in January of 2013. The fiscal cliff is therefore a tax increase on the American public. Get ready. The ground is approaching quickly.


Allow me to shine a ray of truth into the pitch black dungeon of government mendacity so readily accepted by the cognitively impaired followers of the ‘spread the wealth around’ crowd.

First. taxes are going to rise no matter what. If Congress does nothing, taxes rise. If Congress does anything, they will accept the regime’s proposal of higher taxes for the wealthy. Taxes go up either way. We will enter the Valley of Austerity.

Second, the Obama regime knows their constituency. These poor people actually believe the party line that 98% of us have nothing to worry about. Mr. Obama has preached that taxes should only rise for the wealthiest Americans or about 2% of the population. Send the kids out of the room for a moment while we discuss the truth. Okay, here it is. Rich people don’t pay taxes. They offset taxes by raising prices for goods sold through their companies or properties. The consumers pay the taxes through higher prices. The Valley of Austerity is cold and barren with no visible exit.

Third, we must consider the big picture. Tax revenue, wherever it comes from, must rise to pay for the increase in government spending that is currently around $3.5 trillion a year. The Treasury currently takes in about $2.5 trillion in tax revenue. Of course, Congress could reduce government spending but I think we all know that is not going to happen. Taxes must rise. Well, only for the wealthy like Warren Buffet who do not mind the increase. Yeah, right!

Fourth, government spending cuts cannot, and will not happen. Here’s why. We have already entered ‘the valley’. We ran off the fiscal cliff years ago. Government responded by starting wars and redistributing vast wealth to elite bankers. All of this was on the back of more debt. Of course, the populace would revolt if they knew the truth of the Valley of Austerity. So to keep the populace under control, they had to be distracted by an ‘economic recovery’. That recovery was evidenced by a rising GDP (Gross Domestic Product). The problem is that allowing the government to become a bigger part of GDP through spending does nothing but push us further and further over the cliff. Eventually, gravity kicks in. Of course, there is no way that the average American can understand this so let’s look at the real numbers. 

Supposedly the US economy totals some $15 trillion in GDP. We know that the US government spent $3.7 trillion of which a trillion or so was borrowed. The US government accounts for some 25% of GDP spending. Should the government resist tax increases and cut back the trillion in spending that they currently borrow, US GDP would fall by that trillion and post a figure of $14 trillion. That would be a GDP decline of 6.7%. Of course, we know that government spends everything they take in and then some. We also know that a reduction of government spending cuts would trickle down to other parts of the economy and GDP would likely contract even further. Not that the government would admit it but this scenario would imply a deep recession is at hand. That would be downright Greekish.

Spending cuts would likely do more damage to GDP than we can currently calculate. Again, GDP equals money velocity (MV) times money supply (MS). We know that the true story of our economy is that the current MV is at an all-time low. People can’t spend money they don’t possess. Government spending cuts would eliminate some of the deficit spending and therefore it would curtail money supply as necessitated by debt. The math would indicate a pretty severe GDP contraction. This does not even consider that the US government is going to run out of money at the end of December, 2012, and the overall debt of $16 trillion plus still oppresses real growth. No, the US ran off the cliff years ago. We are just waiting on the collision with the valley floor below.

Therefore, regardless of what we might hear from politicians, the fiscal cliff is simply a hefty tax increase. Spending will not be addressed. Taxes will rise. And here is the final point. Who benefits most with a tax increase? We would think that the largest holders of US debt paper need to see tax increases to further insure interest coupons can be paid on such debt. That large holder would be the Federal Reserve Bank. As we know, they are our masters and we only exist to serve them. The Fed will again benefit as our misery grows. Truth only hurts liars. Spread it!

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

© 2012 Copyright BMF Investments, Inc. - All Rights Reserved
Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented.


© 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