Beyond the Cusp

December 24, 2015

United States Potentially About to Fall

 

The United States is precariously balancing between solvency and being revealed as bankrupt. The United States has mortgaged thousands of acres of virgin lands which hold resources above and below the ground. The resources include but are not limited to coal, uranium, lumber, wheat, grazing lands and potential oil deposits or precious metals etc. There are other questions which are relegated to conspiracy theorists and fear mongers but the fact that China has been purchasing gold and could be said to be hoarding gold for quite some time as the gold buying by China in a graph from 2012 displaying the situation in raw numbers as shown below.

 

 

China Gold Purchases of 2012

China Gold Purchases of 2012

 

 

The graph in and of itself is a solid display of a potentially damaging effect on the balance of gold holdings but in all honesty we need to make a confession; the number in metric tons is used as an alarmist shock figure which is a form of deception as taken as a percentage of the total holdings of all nations and one immediately realizes the minor difference eight-hundred-thirty-five metric tons is but three and a third percent of the over well over twenty-five-thousand metric tons owned by all the nations of the world. Perhaps a listing of the top ten nations in gold holdings according to the International Monetary Fund’s records will make a difference and put everything into perspective. Below is a list of the top ten national gold holdings listed below.

 

1) United States   with gold holdings of   8,133.5 metric tons
2) Germany          with gold holdings of   3,391.3 metric tons
3) Italy               with gold holdings of   2,451.8 metric tons
4) France            with gold holdings of   2,435.4metric tons
5) China              with gold holdings of   1,054.1 metric tons
6) Switzerland      with gold holdings of   1,040.1 metric tons
7) Russia             with gold holdings of     937.8 metric tons
8) Japan              with gold holdings of     765.2 metric tons
9) Netherlands      with gold holdings of     937.8 metric tons
10) India             with gold holdings of     557.7 metric tons

 

As can be note, 835 metric tons are a mere drop in the bucket providing these are the sole gold acquisitions made by China. There are claims that China has, as well as bringing in the amounts of gold in the graph through Hong Kong, has also established a surreptitious route through the gold markets in Shanghai and that they have acquired an additional 7,000 metric tons through this untraceable route over the past half a decade making China the largest gold reserve on the planet, providing these claims are valid and not just the ravings of conspiracy mongers living in some basement, likely their own basement, but basement all the same (we are located in a basement free apartment, so we can be trusted, well, that along with our track record of opinions over the past half a decade plus). The main problem with the seven thousand metric tons theory would be that such purchases would exceed the amount of gold available for purchase each year. The only way that China could have amassed that seven thousand metric tons would be if a state holding, or a number of state holdings, were to be being liquidated or transferred to China as payment of debts but being done under the radar through gold merchants in Shanghai, but even then one would expect the trade of such amounts would raise some suspicions and keeping them under wraps would be the best kept secret since the hiding of the Ark of the Covenant, itself constitutes a good amount of gold and things far more valuable than mere gold. That would beg the question as to who might be selling gold in such quantities.

 

This aside, China is on a definite path to acquire as much gold as they are able to buy and mine in efforts to improve its position and possibly having delusions that they could one day exceed the gold holdings of the United States, providing that China has not already cashed in their bank notes and other United States debt holdings, demanding payment in gold and routed this through trusted merchants in Shanghai who are actually Chinese government employees, high level Chinese government employees holding really cushy positions living the life in Shanghai. There was an increase in the interest rates charged by the lenders to top line banks by one-fourth-of-one-percent which some are claiming is a sign that the all but free money supplies are about to be tightened over the next year or so. While this very well may be in the plans, it is not what this tightening was about.

 

 

Gold Gold Gold Piled in Stacks Gold Gold

 

 

We can expect the Federal Reserve to hike the rates again this coming spring by as much as one-half-of-one-percent which will send panic waves through a fair number of investors and exactly the opposite through the other bulk of investors as there are going to be arguments that this is the end of expansion of the stock market and a slowing of business as lending will have become tighter and more expensive. Wrong again. These maneuvers are all being manipulated for political reasons and have absolutely nothing to do with the economy as that picture has not changed. After raising the interest rates the Federal Reserve will drop them announcing a reversal of policy claiming there was a misreading of economic indicators and it has become obvious that tightening the money supply is unwarranted and thus the return to the lower rate or an even lower rate. This announcement will be made about mid-September and will unleash a flurry of activity as stocks will soar, jobs will magically appear, most to deal with the holiday seasonal employment jump plus the coming available jobs held by students over their summer breaks. These replacement workers will demand a slightly higher rate of pay than did the summer employees working for near or at minimum wages. This will show a marked improvement in the jobs rate, lowering unemployment and even bringing some who had been dropped from the employment picture may return making the numbers all around look far better going into the fall campaign season. The improved picture will be claimed by President Obama as validation of his handling of the economy and his approach to growing jobs through government investment in the economy, also known as corporate welfare and crony capitalism. This will also make the Democratic candidates claims that theirs is the correct path to a bright future appear less Pollyannish and the claims that the tightening of the belt on government spending is actually necessary. This has been the path the Federal Reserve has taken ever since President Clinton needed a jobs, finances, and general boost in order to gain reelection and is now being extended when there is no President seeking reelections, more specifically a Democrat President seeking reelection, and the hope is to provide the best possible scenario for the election of another Democrat and keeping the republican Party out of the White House.

 

I can hear the skeptics already writing their comments screaming for us to quit with all of the conspiracy craziness and return to planet Earth. The problem is this has gone from crazed theory to actual reality as the economic health of the Western world depends on there never coming to fruition the exploding of the debt bubble. What the Western world, especially Europe and almost as deeply indebted United States, are facing is a huge and unpayable debt which has gotten to the point that there are no longer any credible sources of funding. This has caused these governments to do something which is euphemistically called Quantitative Easing which is where a loop is invented where one party loans funds they do not presently have to the government and then buy that money from the government in order to repay their debt but instead the monies are instead invested by distributing it to banks to lean and thus stimulate the economy. This might have functioned far more efficiently if the Federal Reserve had not already lowered the interest rates to where any corporate venture could be financed almost fee free thus there was no demand for these funds and the banks saw no upside to lending the funds anyways. Thus these funds which have come from a series of Quantitative Easings have basically sat in the larger banks vaults collecting electronic dust as these funds exist solely in the computers which run the economic system. This is known as stagnation of funds and means that the cash has no velocity, simply put the cash is not flowing through the system and thus has had absolutely no effect on the system which is good for keeping inflation low as had these funds been forced into the system then prices would have risen commensurate to the amount of increase is available monies for purchasing of goods and services.

 

So, when will these funds enter the system and what will be their effects? Well, they will come into play when the interest rates rise sufficiently that it becomes advantageous to the banks holding these funds to let them flow into the lending market. The situation will come about most likely when the prime interest rate set by the Federal Reserve reaches around four-and-a-half to five-percent which will mean rates of anywhere from six percent on up depending on one’s credit rating, the amount borrowed and whether the loan is backed by hard goods as in a mortgage or many business loans or if it is unbacked as are investment loans and purchases. There is a side problem which does not often figure into your or my daily life, and that is the Federal Debt which has about exceeded five-trillion dollars for the United States and a similar level in Europe which will only grow worse as more countries end up like Greece where the money flows in but nothing ever comes back including payments on these debts, they have become economic black holes where they take in but even small change cannot escape their borders. Once the IMF along with the Federal Reserve increase the interest rate it will effect an enormous upward jump in the short term interest rates which nations and the European Union all use to finance their debts and this will mean a jump in the interest payments, the minimum payment required for solvency.

 

The current rate is around one-half-of-one-percent for the best rates nations to probably two-percent for the riskiest of nations say Greece. Should the rate on these loans increase as expected for each level of increase in the prime rate, then the best rated nations could be looking at four or even five-percent and the worst risk nations clearing ten percent. Imagine if the United States, as a prime example, faced a change in their interest rates. Currently they receive a generously low rate, let us say one percent to make the numbers easy. Should the rate increase to one-and-one-fourth the United States would see their interest payment on their debt increase accordingly by one-quarter-of-one-percent, something easily handled. But what if the rate increased to around five-percent? Currently the United States uses approximately fifteen percent of their budget to pay their interest on the debt. Should that increase five-fold they would be spending seventy-five-percent of their budget on paying interest on their debt and thus they would reach the point of no return as this could not be sustained and still pay the salaries of the Federal Employees nor could they pay for the vast majority of programs and the military would be necessarily decimated to such an extent as to being unable to even be capable of protecting the mainland from attack. This would be the end of the United State and along with them the world economy as Europe would crash and the only way out for the world would be a total reset. The other definition for a total reset is a world war at whatever level of destruction required allowing for a complete restarting of all economies and the cancellations of all debts. The individual nations would then be dependent on their gold reserves to demand their seating as viable powers in this new world and this may be behind China, Russia, India and Brazil all buying gold and other precious metal and gems at a dizzying rate. Perhaps they know something the rest of us would be wise to note and understand.

 

Beyond the Cusp

 

Advertisements

July 6, 2015

Greek Debt, the ‘No’ Vote, and the European Union

 

The first domino has fallen and Greece has laid down their challenge to the European Union (EU) basically asking if the European body will respect them the morning after the vote to thumb their noses at the demands made on the Greek government and its people demanding that they be further bailed out for free. The Greek people have chosen to support their government in firmly demanding they be granted support from the rest of the EU, European Central Bank (ECB) and International Monetary Fund (IMF) for restructuring the repayment schedule and not be so strict and mean demanding that the Greek government act what they define as responsibly using the restrictive austerity measures forcing the struggling nation to tighten its fiscal belt and stop the generous expenditures giving literally free tickets to the people and retired workers and other items standing directly in opposition of the demands for austerity measures for the struggling nation to be imposed by the EU, IMF and the ECB to prevent the very default on Greek debt which occurred late last week. The Greek default on their debt payment made them the first EU member to fail to meet their financial obligations slapping them in the face and throwing down their gauntlet. Now all that remains is a seemingly simple vote for the members of the EU on whether to hold the Greek government to impose strict terms in order to meet the financial demands of those attempting to collect on their ‘loans’ made with demanding Greece now act in good faith and honor the terms imposed on them and the restructure of the Greek governments debts such that they would be capable to repay those debts. The crisis was brought to a head with the Greek failure to meet the $1.7 billion payment to the International Monetary Fund as part of a previous set of further loans and restructuring made to avoid a similar crisis last year. Now an apparent ‘No’ vote is a direct challenge for all that entails.

 

The Greek people have now, with their ‘No’ vote, rejected the imposition of the austerity measures demanded of Greece by those holding the notes of indebtedness from the Greek government. This is forcing a crisis which has very few options and will now test the EU and whether its single currency policies are functional or inherently flawed. This threat to the EU single currency system was set into motion the second that there was not any central monetary planning unifying the disparate desires and quirks of the independent nations. Without such a system, the Euro was bound to produce just such a financial disaster leaving only the question as to which nation would be the first to fall off the fiscal cliff, the first to dare to tread beyond the cusp of financial responsibility. The predictions of an eventual default had raised its ugly face before threatening the very foundations of the Euro system and posing the exact challenge being faced today with the Greek rejection of the financial restraints being foisted upon them by the centralized powers within the EU. I suppose that Greece was as likely a candidate as any to be the first to face the imposition of external financial limits or simply defaulting thus threatening the stability of the Euro shared currency system. What are the questions needing to be answered and the actions available to be decided defining the path forward?

 

The questions are simple ones that get down to the basis of the Euro and through that to the entire EU. The writing is on the wall for anybody with the nerves to read the warnings telling the tale that there would be a day where a people made comfortable by the very structures put in place as a universal safety net designed to care for those unable to afford the necessities of life due to unemployment or other difficulties eventually making living off the government’s various programs sufficiently comfortable that work becomes an option and not a necessity. With such a system in place it becomes not only possible, but in some cases preferable to live a simple life permitting government to foot the bill. Eventually such a life would become far more attractive living large off the government than working and living not all that much differently and people would realize that not working was as much an option, and a far more enticing option, and simply choose to live an easy life seeking other means by which to have the government pay for more and more until there is no more and they start borrowing. This works for a while and the government stimulates the economy with infusions of money and the Ponzi scheme becomes the way of governing always staying one step from ahead of defaulting on loans. Finally there is a downturn of the economy and a country with finances so fragile becomes a nation unable to recover sufficiently to pay its debts. A nation unable to repay its debts is recognized immediately to be a threat to the entire system so this government cannot be permitted to collapse and start anew and is instead propped up by the wealthier governments and international bankers whose sources of income have always been shady and now are becoming downright unsustainable.

 

Soon another country teeters at the edge and begins to go down the exact same path as the previous, only more rapidly, then another and another until it becomes the crisis that is so large it can no longer be ignored or swept under the rug and propped up under auspices that this next new solution, austerity being the latest, will save the system, a system so broken that saving it is well past any possibility. The eventual default was set in motion at the very outset as was predicted by British Prime Minister the Lady Margaret Thatcher when she wisely refused to allow Britain to become dependent on the Euro and instead reached a balancing point that her merchants and industries would accept Euros as payment but that such payments must always be transferred into the Pound Sterling on the British ledgers and thus met by the EU. The Lady Thatcher once stated it referring to exactly this problem when during an interview with Thames Television’s This Week on Feb 5, 1976 she was quoted as saying, “I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them.” This is exactly where Greece now finds itself and where Spain, Portugal, Italy and soon potentially others find themselves all in different points on that slippery slope, it is simply further along and at a steeper point that Greece finds itself, the point where other people’s money has run out and they have become reluctant to continue providing, period, or have they. There is one option where Greece is freely given yet another infusion of monies and the marry-go-round will continue. The debt will be restructured except this time there will be no set repayment process set up but instead a demand that Greece show its good faith of intent to eventually repay the debt once profitable times return, and those providing the crutch will continue to pour good money after bad with no false expectations of ever being repaid. Greece will have become that poor wretched relative who nobody ever speaks about but find themselves constantly meeting their bills for them. This eventually leads to the next crisis, what happens when most of the family of EU nations becomes Greece?

 

The EU cannot financially choose to continue supporting Greece but not because it would be a strain on them financially, it would hardly be noticed as such is how small a percentage of the total EU financial institutions that Greece requires even if it were to totally fail and every Greek citizen were receiving government livable wages. The problem is one of precedence. Once the EU sets the precedent financially holding Greece’s hand and paying its way then the path is set for other nations to demand similar treatment should they fall upon hard times. Should one look far enough down the road and it is not difficult to paint the picture they will envision, an EU that half its nations survive and are carried by the other half, and the wealth produced by the providing half is completely consumed supporting the rest. The entirety of the EU production and profits are consumed by the other nonproductive half. That is not a system that will survive even the slightest of difficulties and that will spell the end of the EU right behind the end of the Euro. But is the other option going to end any differently?

 

Imagine if the EU forgives the parts of the Greek debts it is able and forces Greece to return to their own currency yet remain in the European Union, where will that lead? Again it becomes a matter of precedent as now any nation which is approaching insolvency will demand the same generous exit strategy gaining a partial bailout which does not need be repaid and a return to their native currency without any penalty. There will come a point where the EU will no longer be the panacea promised and instead will become a small block of successful and wealthy nations having paid the exit fee for the remaining nations who now use their own currency and benefit from EU membership solely when conducting trade within the EU. This will have greater effects outside the EU as the EU will set their exchange rates for the Euro against their own national currencies until they are determined to be financially readmitted to the Euro club once again. There will always be the possibility that these less productive and less affluent nations will find their stride economically and be capable of rejoining the Euro based nations but most would be relegated to using their own national currency. The real problem will strike when even those nations which had been marginally able to keep astride the powerhouse economies of the likes of Germany will now constitute the least wealthy of nations still using the Euro and there may come during a time of economic stress where they too may be forced to return to their own currency or an even more frightening scenario would be the most productive nations decide to be like Britain, namely accepting the Euro in payment for trade deals or from tourists but operating using their own national currency as they would realize that would benefit them in deals outside of the EU and they also would no longer be pressed into supporting the economically weaker nations.

 

Any path taken would necessarily result in the end of the Euro and the stresses from the nations all returning to their own national currency eventually dissolving the EU as it would no longer serve any purpose beyond setting unified trade agreements through the Euro. Anyway one might slice this rotting cake that started with the Greek default; the result is the same, the unraveling of the EU starting with the demise of the Euro. The Euro might continue on much as Roman coins and the Spanish Pieces of Eight hung around well after their issuing nation no longer held the sway and influence they had in their prime. The question then comes as to what Europe may look like down the road without the EU as a calming inclusiveness that it once provided largely through the sharing of a common currency. Would this signal the return to the epidemic of conflicts, much as was the way of things throughout history? What will happen when the EU dissolves and there is no European unified front and each nation is now unleashed to trade completely without any concerns or other brotherly obligations. The initial return to cutthroat trade practices with each nation set against its neighbor may, over time, exacerbate old rivalries leading to skirmishes and even on to open warfare? Violence is only one part of the problems as there may be demands for reparations from the nations which had debt forgiven under a moment of weakness and magnanimity more forced by the EU than entered into with willingness and a smile. The failure of the Greek economy to sustain any kind of parity with the major economic powers within the EU will necessarily result in the end of the Euro as a trans-European unified currency, also as Lady Thatcher had predicted in her actions to forestall and eventually put to rest any hope that Britain would fully resign control over her own currency. This will prove to be the death of the Euro, the necessity for every nation to control its own currency unless they would willingly surrender their fiscal and economic planning to a central budgetary committee appointed and solely answerable to the EU and acting independently of the member nations forcing upon each their assignments for production and receipt of funds from Brussels. Nationalism or completely collective socialism, which would Europe choose. Britain would never enter such a trap, but could the entirety of the rest of the EU nations join such a group and actually make it work, that’s a tall order for any organization. Nope, could never happen, not in a million years. The other question that would remain to be seen is how the death of the EU would affect the relations out of Europe with the remainder of the world. These are interesting times, and they appear to be getting ‘curiouser and curiouser.’

 

Beyond the Cusp

 

January 11, 2014

Minimum Wage, Livable Wage, and Income Inequality

President Obama will soon give his “State of the Union” speech before Congress and the American people. President Obama has promised that he intends to stress his feelings of urgency in taking on the challenges pertaining to income inequality as well as transforming the United States from the idea of a minimum wage to the ideals of a livable wage and even a guaranteed minimum salary which would be received from the government for those who are not employed. President Obama is continuing down the road to transform the United States Constitution from a guarantor of negative liberties which limit the ways that government is permitted to act and influence any individual’s life, into a guarantor of positive liberties where the government takes an active role in everybody’s’ lives guaranteeing things the government must provide and perform for every citizen. Never mind that President Obama aims to fashion the United States by implementing every failed concept ever attempted by any European country, exactly the opposite of what has separated the United States from European fantasies and experiments in socialist policies and central planning which combined to make the United States so successful where many European governments and nations have failed. This is the final push to complete President Obama’s promises from his initial campaign for the Presidency when he peddles the mantra of “Hope and Change”, “Fundamentally Changing the United States”, “Altering the Constitution from an Interpretation of Negative Liberties to an Interpretation of Positive Liberties”, and finally “Changing the Concepts to Ones Supporting Equality and Fairness” which stands for central planning for the economy thus guaranteeing to lessen wage disparities and providing employment, salaries and benefits for every American. But what do all these high sounding phrases mean going forward for the average American?

 

Taking them in some form or order, let’s start with minimum wages. The one truth which has been proven by virtually every study of minimum wages done outside of government subsidized studies has shown a marked decrease in the number of positions earning minimum wage in the job market. This is despite one of the consequences of raising the minimum wage which takes those who have worked their way up from the minimum wage and are showing some degree of promise find themselves back making the minimum wage as the increase either brought the minimum wage up to their salary level or took it beyond their salary level which gave them a backhanded raise in salary though less of one than those people who had been making merely the minimum wage before the increase. The loss of positions available after the government raises the minimum wage is obvious just as when the price of apples is raised people will buy less apples in order to remain within their allotted food budget. The total effect of raising the minimum wage is difficult to measure as it remains unknown if the number of positions available for employment ever reaches the identical level as it would have done if the minimum wage was never changed. Then there are the sarcastic arguments that if raising the minimum wage by a dollar or two is such a great idea, then why not simply raise the minimum wage to $20.00/hr or higher still to whatever price one believes is necessary to support the average family of four.

 

That argument brings us into the livable wage argument which claims that the minimum wage be scrapped and the livable wage be substituted. There are some among those supporting a livable wage who actually agree that in such a system the livable wage be calculated for every individual area such that the livable wage for New York or Los Angeles would be different than the livable wage for Wasilla, Alaska and Rawlins, Wyoming. Calculating the livable wage such that a family of four can afford to live at an agreed defined level of comfort if one person working at a livable wage was their sole source of income would have a wide disparity depending upon where one sampled in order to make such a determination. As stated above, the differences between major metropolitan areas and small towns and rural areas would have little commonality. The one truth is that in almost every location a livable wage being implemented would spike the minimal salaries far higher than any proposed adjustment which has been proposed for the increased minimum wage. The damage and loss of positions available in the job market under a livable wage law would be far more drastic than should the minimum wage be raised rather than replaced by a livable wage. So, the arguments both for and against a livable wage system and a simple raising of the minimum wage are close to identical with the main difference being the predicted results effect on the job market. Either idea being implemented currently with the still sluggish rate of the recovery would be a shot through the heart on the economy and would still any recovery for the immediate future until equilibrium was reestablished. The new equilibrium is also another argument that raising the minimum wage either to a higher level or drastically raising it to meet livable wage standards has to be addressed. Eventually prices will catch up to the increased minimum wage and inflation will have erased any amount of additional salary earned at the lowest level of wages. If a family has their gross income increased by five percent because the minimum wage was increased five percent, they will initially feel the benefit but within a year or possible two the family will find that their new higher level of income no longer has any effect on their purchasing power. Prices will eventually track upwards and remain at the same or only bear a slight difference from the percentage of income the family paid at the previous level. There is little to any residual improvement when the minimum wage is raised except that government debt gets reevaluated lower but only because of inflation making each dollar worth less and eventually could render the dollar worthless.

 

That brings us to income inequality. The first thing one needs to understand is that government has very little effect on income inequality or income disparity. Anything the government could enact to lessen the amount of income disparity has to have one or the other effect, either it raised the bottom end of the salary scale or it lowers the upper end of the salary scale. Raising the lower end we discussed when looking at minimum wage and livable wage programs and realize that these tactics really have little if any permanent effect. When the government raises the minimum wages of worker that initially will decrease the disparity between the bottom and the top temporarily but over time such changes will only result in an even larger amount of disparity. This is due to a simply principle that the top salaries tend to reflect the level of the salaries of those at the bottom. The top salaries will usually stay at a certain multiple of the lowest end wages. If you increase the bottom end of the wage scale by two percent, this will work out to increase the top salaries by two percent in close order. That mean that the total amount of wages will increase by the same percentage but that also means that the top scale rises faster and farther than the bottom. A simple example is one person makes $20,000 per year and another makes $2,000,000 per year. Then let’s say that both people receive a five percent increase but that the person at the higher level has that increase take place over a two year span while the lower paid person gets their increase immediately. At the end of two years the higher paid person will be making an additional $100,000 while the person at the lower end will receive an additional $1,000. This makes an increase to the difference of their two salaries of $99,000 even though both people got a two percent increase. The real question is if we consider the person at the higher level has a steady, straight-line increase for the two years, how long will it take before the higher salaried person eclipses the totality of the increase of the other person. Remarkably enough, it would take one week for their respective salary increases to balance dollar-wise, give or take a day; and after that first week, every subsequent week would represent an increase in their wage inequality. Obviously raising the bottom salary range upward with no restraints of the top salaries would prove completely ineffective.

 

This leaves placing limits of some kind on the salaries of those earners at the top end of the scale in order to limit income inequality. The easiest way to curtail higher incomes is to raise the taxes beyond a certain point; even to the point of making salaries beyond whatever is considered the maximum reasonable wage taxed at or over one-hundred percent. Relying on this application of limiting wages has been implemented in the past and all it proved was that the people at the top of the wage scales are not idiots. They, almost to an individual, took far lower salaries and replaced the rest of their earning into stock options, a company vehicle, company house, company jet, company membership to a gym, country club, exclusive restaurant privileges plus any additional privileges and other dispensations as replacements of dollar salary. No matter the restrictions or limitations placed to force the appearance of wage equality, there will be no lifestyle equality as the people at the top have direct control of the levers and accommodations which they will receive as compensation, otherwise known as salary except that the salaries at the top and even some mid-level positions will be given in a form which is not attacked by the income tax rate. That is why raising the tax level actually is counter-productive and will not actually change the most important inequality, the inequality of the quality of life at the various levels of the wage scale. The reality is actually even more depressing than income inequality; almost any method which is implemented to erase income inequality through government intervention actually results in increasing lifestyle inequality and makes it more difficult for those people aspiring to climb into the ranks of the top echelons in compensation in succeeding in their quest. The reason this is true is the disparity between the very rich and the average and poor is not a function of income or even compensation but is a result and measure of wealth which is not taxed. This is in no way a call for such taxation and even if it were, the very people in Congress would never pass such a law as it would have dire effects upon them and their well-heeled moneyed backers. A true wealth tax would not be simply a tax on savings, like the theft of savings from the banks as was committed by the Greek government, but would encompass all wealth including homes, cars, jewelry, gold, silver, precious metals, gemstones, stocks, bonds, real estate and an almost endless list of assets. Should such a tax ever be levied, even if it advertised as an emergency one-time tax, then it is time to worry and worry deeply as such a bald-faced theft committed by the government is a definitive sign of insolvency and possible imminent threat of default on debt payments. Such an act would be an act of desperateness and would shake the very foundations of the economic system under which such a desperate act was resorted to. A nation in such a desperate state as to literally legislate such a theft is a nation where income inequality is the least of their worries, keeping civil order in the aftermath would be the immediate problem as any government which resorts to stealing from the people cannot be expected to stand and would become a pariah among nations as their promises would no longer be trustworthy. Even a simple savings tax as proposed recently by some from the IMF (International Monetary Fund) would be an indicator that the government has gone economically beyond the cusp and into the valley below the cliffs, a valley from which climbing out takes generations if it is even possible without dissolution of that government and the implementation of new governance. Such is a very painful place to live and there are few examples other than Zimbabwe or, from history, the Weimar Republic. Under such conditions even tulips may become a basis for currency, but I have heard even that was tried and failed.

 

Beyond the Cusp

 

Create a free website or blog at WordPress.com.