You are really wrong, GUC. Faber has been right on the money leaving most if not all competition far behind. I could give you a dozen examples but will give you just one to show the amazing feeling he has for both short term and longer term market trends. November 21 (C at 3.77$ a share) Citigroup could see its shares rally by 100 percent or sink to nothing, investor Marc Faber told CNBC Friday. "We've gone down from over $55 to $4 (a share), you could easily see a bounce of 100 percent before the stock goes to zero," Faber said. http://www.cnbc.com/id/27835292/Citi_Shares_Could_Double_or_Disappear_Faber Where was C at november 28? At 8.29$ a share. Where did it go to afterwards? 1.03 a share. I guess he was wrong about it going to 0.... by 0,04 cents. Anyway, let's not get into the he called this right or that wrong... but to call him a joke is really a bit of a stretch in my view.
All the massive weapons that have been made, will fire one day. So World War 3 is the ultimate fate of mankind.
someone recently posted a link to a table of inflation in germany in the 20's. there was also very brief moment of deflation. please post link again.
Great post, Ed. A lot of information to think about. My question is how can the USA government end this downward spiral, if at all?
Kass , the only way to repay debt is with income. The only way to increase income is through growth. Growth, in a nation, is a matter of fiscal policy that is not interferred with by monitary policy. The solution is that we need to grow faster and stop spending so much. In order to grow faster we need to put in place a fiscal policy and culture of positive future expectation that you can make an after tax profit on risk capital in the U.S. A good start would be to repeal corporate income tax so that dividends are taxed only once as regular income. Reducine capital gains tax to zero or at leas keeping them at 15% would also help.
Long term I think this is a great plan. But in the short term, don't you think this could actually serve to decrease confidence? Unless the government can reduce spending by more than revenues are reduced, net debt will obviously increase. I have no idea how far in debt the USA can go before the breaking point, but eliminating any source of revenue surely will speed up the process. In my opinion, the first step should be to reduce spending in order to reduce the deficit. I think a deficit reduction via reduced spending will serve to create a culture of positive future expectation that you can make an after tax profit by giving businesses confidence that the country is headed in the right direction with respect to fiscal responsibility. Once reduced spending is in place, then tax cuts can be made to further improve the positive culture and thus growth. I just think it's too risky for the government to eliminate a source of revenue without first bringing spending in line. There is no easy solution, but clearly something must be done.
ok - some jabs here... Really? In fact in the past few decades inflation and in particular asset inflation was much more common way to repay. are we talking in nominal or real terms here? are we talking per capita or total income - big differences! well that is a bit rich even for Keynes^2. haha - no shit sherlock. yeah - that would certainly help. i would also love to live without taxes. the question is who is going to finance all these deficits? maybe if you suggested we start another war in middle east i'd have to say "deja vu"...
Posted in other forum-: The *world* will go to war...over what??? The Why answer is that it might provide political cover for the bad economy. Some also believe that the winning side always gets freebee stuff and it juices up the economy when the troops return home....hungry, for families, property, kids....family. In any event if the economies of the world are collapsing...then countries may go to war as another option versus default on loans. Isn't that what eventually occurred in pre-WWII Germany with Hitler ? War as a means to "work out" of your debts ? War is usually the response to some need to control resources, populations, or fixing economies some way. Options: 1. Inflation: print out of your situation...but ONLY if your local fiat currency has any value remaining...if its worth nothing...then Zimbabwe. 2. Austerity: riots will follow or destruction of the economy...similar to deflation. 3. Restructuring/Default/Bankrupt: similar to austerity...just much quicker....may end up here anyway from austerity. 4. Reset: worldwide, global, restructuring...in the worx now ? 5. War All are "viable" options in a dismal economy.
We are a mature economy. We have not had real (sigificant) growth for over 40 years. It's all been manufactured by defense spending, other types of government spending, and an expansive monetary system whose inflation was masked by productivity advances in agriculture and global wage arbitrage. Grow faster? Doing what? We have entered an era where fewer people produce more than ever. To consume all this increased production, we elevated ponzi finance. But debt, in the aggregate always surpasses the productive ability to service it. What we need is to replace the current irredeemable currency with something that truly extinguishes debt. And we need to accept the fact that we live in a finite system and excessive expectations of growth need to be reined in. I think you misunderstand Faber as well. Faber speaks simply to the masses on TV interviews, his writings are more nuanced. Have you ever heard of John Exter or Antal Fekete? I highly encourage serious ET'ers to read Fekete. You may not agree with everything he says, but your understanding will expand: http://www.professorfekete.com/articles/AEFPositionPaper1.pdf
Kassz7007 and Dhpar, you both set up a false straw man by saying that I suggested that there would be no taxes. Look at what I wrote exactly...I suggested that we eliminate corporate income tax....Right now corporate income tax is a very small part of the total revenue stream. In addition I suggested that dividends be taxed as regular income...right now they are taxed at 15%...regular income is top 36% and after Bush cuts expire 39%...that is a tax increase for diviends paid to shareholders. Right now Corporate top tax is at 36% and subsequent remaining dividend is taxed again at 15% if distributed...present proposal is to increase dividend to the same as income...that would mean that total tax on dividends adding in corporate tax levied before dividend is currently, 51% and is set to rise to 78% next year. I suggested eliminating corporate tax and raising dividend tax to 35% / 39%....hardly a tax reducing strategy...you would actually collect more tax at that rate and you would attract foreign direct investment and create jobs. Under present double taxation of dividends the corporate tax revenue stream to the government is very small releative to other sources as is the dividend tax receipt. The change I suggested would likely result in corporations paying more dividends...it would likely also encourage more sub-s corps to convert to C corp and pay dividends. It is really is a no brainer that would not make any material reduction in the income we presently collect from these sources and is very likely to increase government revenues materially. You would not loose much revenue reducing capital gains tax to zero either, but I suggested the curren 15% should be maintained at very least. The proposal to raise capital gains to regular income rates is a money loser, history shows that. Zero capital gains would lose some revenue for a short time but then the growth created by the increased capital available would more than pay back the temporary reduction. It is capital that you need to grow, and it is capital that combined with labor increases productivity. You are right that you can inflate debt as a way of reducing the cost of debt...but that is a form of theft...it steals from the creditor and it steals from the saver...so you really don't pay the debt back...its a stealth default that people tolerate becuase they are stupid. My point of view in these posts is that the current credit contraction is preventing the attempts at reflation, which as you comfortably, though immorally, endorse that strategy, I am sayin in my posts that it is not working, as I explained. If it is so easy, then why after the Fed has increased its balance sheet to over 2T, almost two years ago, the largest expansion of base money in history...why don't we have inflation...why will the YOY Core PCE show decline when it is released tomorrow at 8:30 a.m. ?