Generational Dynamics World View

[Warren Dew]

(03-01-2017, 11:03 AM)John J. Xenakis Wrote: Well, Warren, maybe you're right and there's a way to "thread the
needle" and devise a border adjustment tax that won't be a total
international disaster like the Smoot-Hawley tax.  But as you might
imagine, I'm way too cynical to expect success.

I really began to understand how the game was played in the 1970s.
First there was Nixon's wage-price controls, which were supposed to
reduce the inflation rate from 4% to 2%, but instead caused it to
increase to 12% and were a disaster for the economy of such
proportions that the economy didn't recover for a decade.

Then in 1976 Jimmy Carter was running for president.  He promised to
reduce the number of government agencies.  I don't recall the exact
numbers, but I think he said that of the 2,500 existing agencies, he
would eliminate 500 of them.  Which 500 would he eliminate?  He
wouldn't say.  Well, he was elected, and he didn't eliminate any
agencies.  Instead, his administration added two new cabinet-level
departments, the two DOEs -- the dept of energy and the dept of
education -- and added hundreds of new agencies.

So let's fast-forward to Barack Obama.  He was going to reduce the $8
trillion deficit by spending another $1 trillion in a stimulus package
that would stimulate growth and reduce the deficit.  The growth in the
economy would wipe out the deficity.  Instead, the economy didn't
grow, and it was a total waste of money.  The deficit today is $10
trillion higher.  Obama was also going to reduce medical costs with
Obamacare.  Instead, medical costs have exploded under Obamacare.
Obamacare is an incredibly destructive economy policy, even worse than
Nixon's wage-price controls, and it will take at least a decade for
the medical services industry to recover from the disaster.

So now let's take a side-trip to Greece.  In 2010, Greece would need a
temporary bailout to give the economy a chance to grow again.  The
growth in the economy would wipe out the deficit, and allow Greece to
repay its loans.  Instead, the economy didn't grow, and Greece has no
chance of repaying its loans.  Greece will be facing a major new
crisis by July.

So now we have a new president, Donald Trump.  He's going to cut taxes
for the middle class and spend $1 trillion on infrastructure.  And how
will this be paid for?  Why, by the Border Adjustment Tax, of course.
And his proposal to repeal and replace Obamacare will reduce medical
costs.  So, in summary, after 8 years of total economic disaster under
the Obama administration, we're facing the possibility of a new
economic disaster under the Trump administration.

That reality doesn't seem to affect investors.  Champagne corks are
popping this morning, after the Dow breached 21,000.  This is being
called the "Trump stock market rally," because the Dow is up 2,500
points since the election.  So the already huge stock market bubble is
now even more explosively huge, just waiting for the bubble to pop,
which it will with 100% certainty.

What nobody wants to talk about, the so-called "elephant in the room,"
is the velocity of money.  This indicates the rate at which people are
willing to spend money.  You can't have economic growth if people
aren't willing to spend money, which means that the velocity of money
would have to increase.  Instead, we have this:



So the reason that there's been no growth since 2008 is that the
velocity of money has been plummeting since 2008.  I posted the above
graph a year ago, but I've just checked, and the velocity of money has
continued to fall in the last year.

And so, Warren, maybe you're right that the Border Adjustment Tax,
along with a realignment of corporate taxes, will lead to great
economic growth and solve all our problems, as the Trump
administration hopes.  As for myself, I've seen too much in the past
that I can't unsee.  I would laugh, except that I'm too tired to
laugh.

You do recognize there's a large middle range between "fix everything" and "total international disaster", right?