The International Monetary Fund (IMF) quietly dropped a bomb in its October Fiscal Monitor Report. Titled “Taxing Times,” the report paints a dire picture for advanced economies with high debts that fail to aggressively “mobilize domestic revenue.” It goes on to build a case for drastic measures and recommends a series of escalating income and consumption tax increases culminating in the direct confiscation of assets.
Forbes
The International Monetary Fund (IMF) quietly dropped a bomb in its October Fiscal Monitor Report. Titled “Taxing Times,” the report paints a dire picture for advanced economies with high debts that fail to aggressively “mobilize domestic revenue.” It goes on to build a case for drastic measures and recommends a series of escalating income and consumption tax increases culminating in the direct confiscation of assets.
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You can never defeat their revolutionary nihilism. Nihilists! F**k me,-I mean , say what you want about then tenets of national socialism, Dude, but at least it is an ethos.
Must be exhausting to be a TEA party member:). He expects wages to increase and wealth inequality to narrow starting next year. One of my favorite bears has turned positive- very interesting. Has the Fed won? He thinks labour market will tighten because LFP has dropped so much, capital spending has been weak and that unemployment benefits in the US have increased frictional unemployment. I am from Missouri. (He predicts a mild stagflation - something I have suggested would be the eventuality of the Fed policies). Fed is monetizing Federal Goverment debt. His strategy - Hedged Inflation Risk Protection. (Going long hard assets, shorting government bonds and going long corporates). OTOH, Hussman believes that economic activity remains at a level that is close to a recession.. then these charts are worth about 100,000. Via Business Insider (thanks to Brent who has directed me to so many useful links over the years)
Rising rates have taken away opportunities- so they say.
I said, "Lot of other interesting posts as well. (Balance sheet recession over)'
Brent said: "Do we count that last one (Bonddad) as counterprogramming?" I am not sure. There are stats I have seen that show that leverage has not decreased that much if at all- (theBonddad post includes one of them). I would guess most of the household deleveraging has come because of bankruptcies and represent impaired demand. That said, the car industry seems to have its replacement cycle well under way, housing seems to have hit bottom, the shale gas cycle seems to be lowering America's energy costs. The Fed, it seems, has kicked the can far enough down the road to allow for some stabilization of the American economy. While the Fed's actions have not been costless, they seem to have had a measure of success. I feel like I have underestimated the ability of the Fed. I have given my mea culpa before about my predicitions on the economy but I still expect a global synchronized sovereign debt crisis. Perhaps, this will ultimately be proven to be wrong just as my US recession prediction. Perhaps the worst is over and the Fed "won". Perhaps. I try to update my beliefs as new information comes in. At this moment my concerns and beliefs remain, for the most part, the same as they have been for years. The Fed has blown yet another bubble - a bond bubble and sovereign debt bubble. Policy makers have been lulled into a false sense of security for low interest rates, the message to the banking system from the Fed's actions is exactly 180 degrees from what is best for society. Corporate cronyism, Inequality and tax reform remain unaddressed. None of the major systemic factors facing the economy have been addressed in America or in Europe. My concerns that have been expressed since this blog's inception were eloquently expressed this summer by BIS. And I find it ironic that in the US, much of the market/economics establishment cheers the socialization of financial markets will deriding national socialism for healthcare or income inequality reduction. Government should have a unlimited role in backstopping the wealth of the elite but not the well being of the lower class. If the poor are supposed to save their way to prosperity, that channel has been destroyed by the Fed. The central banks as pied piper have lured everyone to the edge of the cliff. Let's hope the leap of faith we are all taking leads us to prosperity and not disaster. I see that John Hussman's performance post crisis has been abysmal- his franchise risk is growing daily. A mass exodus of his client base would be a good contrarian indicator that the end is near. Or, that I was wrong. Finally, Brent, in personal correspondence, has encouraged me to couch my pronouncements with less certainty and more probabilistic qualifiers. After reading Nate Silver's "The Signal and the Noise" this summer, I am now convinced of the wisdom of this advice. I still believe the global economy is a Goat Rodeo; with a high probability of systemic sovereign debt crisis in the medium term. Central Banks are working hard to prevent such an event by forestalling economic collapse in the face of weak demand - by conducting unprecedented levels of asset purchases. My personal belief is that there is a much better than 50% chance that history will show this was a pyrrhic victory for central banks. Among other things, there is a trade-off at work here - each year the central banks succeed in propping up demand is one that brings us closer to depreciating excess capital and allowing the global economy to get its feet underneath it (as well as strengthening the financial system). Unfortunately, it is also an additional year in which policy makers do not have to make tough fiscal decisions and forestall the fundamental changes needed to stabilize their economies in the long run. If the effects of the former out weigh the effects of the latter, with each passing month and improving economic statistic - Bayesian updating would require me to shift some of my "global reset" probability weight to "muddle through". But that's the rub, I am not sure whether the former out weighs the latter - when I consider inequality and unemployment in the US and Europe. I am not sure how to judge progress - which brings me back full circle to the start of this post. I don't know how to Bayesian update what I have been observing. It is fair to say I less sure of myself than I was when I started my blog. But I was also less sure of my predictions of global recession and $40 oil in the summer of 2007 than I when I had made those predictions in January, 2007. At the Global Petroleum show in Calgary, in May 2008, I sheepishly admitted to those predictions having been wrong. I guess I am sure that Brent was correct in suggesting I explicitly qualify my opinions more probabilistically,; particularly since getting the 2007 call correct has done nothing to advance my career (Nor the many other things I have gotten correct on this website since then). Going forward, I will hedge my opinions. Old Post (2012) by Mark Thoma on why weed need more redistribution- pretty much how I see the world.8/26/2013 Economist's View
Mark says: "My view on whether this problem will correct itself: I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field so that everyone has an equal chance. If we can do that – an ideal we are far from presently – then we should accept the outcome as fair. Furthermore, under this approach, people are rewarded according to their contributions, and economic growth is likely to be highest. But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality problems. We’ve given self-correction mechanisms 40 years to solve the problem of growing inequality, and the result has been even more inequality. ... Some people say education is the answer, but we have been trying to reform education for decades, yet the problems remain. The idea that a fix for education is just around the corner is wishful thinking. If we want to preserve a growing and socially healthy economy, and avoid moving to lower growth points on the inequality curve, then we will need to do much more redistribution of income than we have done over the last several decades. We must ensure that the rising economic tide lifts all boats, not just the yachts. That means the wealthy will no longer get it all, they will be asked to share economic growth with the workers who helped to bring it about, workers who ought to be rewarded for their growing productivity. We can expect considerable protest when the wealthy are asked to give up a portion of the growth that has been flowing exclusively to them for so long, and we’ll hear every reason you can think of and a few more as to why redistributive polices are bad for America. But sharing economic gains among all those who had a hand in creating them is the right thing to do. For the foreseeable future, redistributive polices appear to be the only way to ensure that workers receive their share of the growing economic pie. Many of the policies enacted during and after the Great Depression not only addressed economic problems but also directly or indirectly reduced the ability of special interests to capture the political process. Some of the change was due to the effects of the Depression itself, but polices that imposed regulations on the financial sector, broke up monopolies, reduced inequality through highly progressive taxes, and accorded new powers to unions were important factors in shifting the balance of power toward the typical household. But since the 1970s many of these changes have been reversed. Inequality has reverted to levels unseen since the Gilded Age, financial regulation has waned, monopoly power has increased, union power has been lost, and much of the disgust with the political process revolves around the feeling that politicians are out of touch with the interests of the working class. We need a serious discussion of this issue, followed by changes that shift political power toward the working class. But who will start the conversation? Congress has no interest in doing so; things are quite lucrative as they are. Unions used to have a voice, but they have been all but eliminated as a political force. The press could serve as the gatekeeper, but too many news outlets are controlled by the very interests that the press needs to confront. Presidential leadership could make a difference, but this president does not seem inclined to take a strong stand on behalf of the working class... Another option is that the working class will say enough is enough and demand change. There was a time when I would have scoffed at the idea of a mass revolt against entrenched political interests and the incivility that comes with it. We aren’t there yet – there’s still time for change – but the signs of unrest are growing, and if we continue along a two-tiered path that ignores the needs of such a large proportion of society, it can no longer be ruled out." If you want to see a pretty silly critique on this post read Mish. Brooks:
"But, surely, there has been some ineffable shift in the definition of dignity. Many men were raised with a certain image of male dignity, which emphasized autonomy, reticence, ruggedness, invulnerability and the competitive virtues. Now, thanks to a communications economy, they find themselves in a world that values expressiveness, interpersonal ease, vulnerability and the cooperative virtues. Surely, part of the situation is that many men simply do not want to put themselves in positions they find humiliating. A high school student doesn't want to persist in a school where he feels looked down on. A guy in his 50s doesn't want to find work in a place where he'll be told what to do by savvy young things." Taibbi: "Hmm. Men don't want to be put in positions they find humiliating? How many men out there today are working as telemarketers? As collections agents? How many grown men are working in fast-food restaurants, getting yelled at by people like Brooks when they put the wrong McNugget sauce in the take-out bag? And as for those 50-year-olds not wanting to work in a place where he'll be told what to do by savvy young things – it's the other way around. Usually, the savvy young things are turning down the older guy. If Brooks thinks there are 50-year-old men out there with families, people maybe facing foreclosure, who turn down jobs because they don't want to take orders from "savvy young things," he's crazy. All jobs involve taking humiliating orders from bosses and everyone who's ever had a job knows that. If you need a job badly enough, you'll take a job offered by Hermann Goering, Hannibal Lecter, Naomi Campbell, anyone." |
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