Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
In the same category

Is an Economic Deluge Nigh?

IMG Auteur
Published : May 08th, 2012
1929 words - Reading time : 4 - 7 minutes
( 5 votes, 4.4/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Editorials

 

 

 

 

If history has taught one certain lesson, it is that the less fettered an economy, the better humankind is able to do what it does best: run from trouble and run toward opportunity. In this way mistakes are quickly resolved and progress assured.


Conversely, the deeper the muck of regulation, mandates, taxes, subsidies and other bureaucratic meddling, the slower we humans are in following our natural instincts until the point that progress is slowed or even stopped.


It is said that history doesn't repeat itself, but it often rhymes. In the current circumstances, it appears that enough time has passed that current generations have completely forgotten the critical connection between the ability of humans to freely pursue their aspirations and economic progress.


You can see this ignorance in the popular demand for even more, not less, meddling in the affairs of humankind. Should this trend continue – and for reasons I will touch on momentarily, I firmly believe it will – then the aspirations of the productive minority will soon be dampened by ever higher taxes and other attempts to "level the playing field" and the global economy, already in tatters, will fall off the edge.


There is no more timely nor acute example of this growing trend than what is currently going on in France. I refer, of course, to the first round of the presidential election process, scheduled for this weekend.


In France, if no candidate attracts no better than 50% of the vote, then the two leading candidates go to a decisive runoff vote, this time around to be held on May 6.


The current president, Nicolas Sarkozy, a conservative in name only, was running at a fairly steady gait toward re-election (thanks to the head start awarded all incumbents), when leading socialist candidate Francois Hollande came out with a proposal to tax anyone with an annual income of over one million euros at a rate of 75%. He also promised to add a tax on all financial transactions and increase taxes on France's biggest companies to 35% – securing bragging rights as levying the world's third-highest corporate taxes, the US being #1. This all on top of a 25% VAT, one of the world's highest. By some calculations, the result of Hollande's new taxes is that effectively 100% of all incomes over one million euros will now be stripped away by the state.


For good measure, Hollande also promised to reverse the recent modest increase in retirement age from 60 to 62 pushed through by Sarkozy. While I am sure it is mere coincidence, I found it noteworthy that Mssr. Hollande's campaign slogan is "Change – Now!"


Remarkably, at least for those with some small understanding of economics, as a result of leaning into the microphone with these proposals Hollande has galloped ahead of all other potential contenders and is now projected to finish nose by nose with Sarkozy.


After which the also-rans will be removed from the race, freeing their supporters to share their affections elsewhere. Given that the leading contender for third place with an estimated 14% of the vote is one Jean-Luc Mélenchon – charitably categorized as "far left", a label that can be applied to most of the other candidates – it is projected that the "conservative" Mssr. Sarkozy will go down in double-digit flames come May 6.


Bringing to mind the prophetic utterance of Louis XV: "Après moi, le déluge."


The deluge in Louis' case manifested as the murderous affair commonly known as the French Revolution. In the case of Mssr. Hollande taking up residence in the Palais de l'Élysée, the deluge is likely to manifest in the form of rising interest rates as investors look to protect against an acceleration in the country's debt to GDP ratio, already projected to hit almost 90% this year, exacerbated by a flight of capital, investors, entrepreneurs and large businesses.


As is the nature of such things, because of the aforementioned predilection of humans to run from trouble, we likely won't have to wait for Mssr. Hollande to be formally enshrined in the gilded halls for the trouble to start – it will begin within days and maybe even minutes of the handicappers concluding that his ascendency is a sure thing.


Given that France is the third-largest economy in the already-troubled Eurozone, one can expect the deluge to spread, with potentially devastating consequences. That the guillotines may soon be rolled out across Europe can be better understood by taking into account that the Eurozone sovereign deadbeats are on the hook for roughly nine trillion euros in debt, some significant percentage of which has to be rolled over to ready buyers over the next couple of years. Adding weight to the problem is that, according to the latest figures out of the IMF, Europe's banks may have to sell off up to 3.8 trillion euros in assets, many of them questionable, between now and the end of next year. At least, if they want to remain solvent.


Across the pond, the United States also has aggressive funding needs, given that the "change" we experienced ourselves in the last presidential election has left the government gasping for about $1.4 trillion in additional funding each year. Then there is Japan, officially the world's largest debtor in terms of debt to GDP, where the easy availability of local funding has dried up, requiring that nation to go to the international markets for funding as well.


The phrase "an awful lot of hogs at the trough" comes to mind.


My point is not just that these governments are broke and are about to get a lot more broke as interest rates rise on their many debts and financings, but rather that the global trend toward a resurgence in public demand for socialism in response to a worsening crisis is a certainty.


How could it be otherwise when for decades now the schooling of children has been delegated to functionaries of the state?


For evidence, look no further than the screen swipe here. It is a quote from an essay by a college student in the United States on role the government should play:




The writer of those words was a member of a Valencia University economics class. The professor, Jack Chandliss, asked the class to write an essay on what the American dream means to them, and what they want the federal government to do to help them achieve that dream. Out of 180 students participating, only about 10% wanted the government to leave them alone and not tax them too much, but a whopping 80% wanted the government to provide pretty much the whole dream thing wrapped in a tidy bow – including free college tuition and health care, jobs, even the down payment on their future homes, money for retirement and hard cash, taken in the form of taxes from rich people. Please take a moment to watch a worthwhile interview with the professor.


Pretty eye-opening, eh?


The point here is not complex, but it is important.


With the apparatus of state education over many years serving to bamboozle the populace into the hardened belief that government has a positive role to play in virtually all aspects of modern life, it should come to no surprise to anyone that, when push comes to shove, people are now trained to look to government to solve the problems – even when it was the government that created the problems in the first place.


Thus, confronted with the intractable mess they have made, these governments have to keep alive the mythology they have created about their omnipotence. Which is easier said than done, because with things now swirling fairly quickly around the drain, the mob is beginning to lose faith – and even patience.


Which puts these governments in a very tight spot, because the only way they can actually fix things is by doing exactly the opposite of what people have come to expect from their governments, which is always to do more. Put simply, the only hope now is that these governments begin to reduce their roles in their respective economies, and dramatically so. Concurrently, they have to encourage people in their aspirations to greater wealth, by lowering their taxes and unwinding the tangle of regulations they have created over the last half-century.


But if the governments actually tried to take these actions, the brainwashed masses would be positively befuddled then outraged, as it goes against everything they have been taught. Why, it would be like the Pope shuffling his way to the balcony of St. Peter's Basilica and informing the doting faithful that there isn't a god and never has been.


Riots would follow.


So it is that we find ourselves at a particularly interesting juncture in the historical record.


On the one hand you have a majority of the world's population who have been carefully schooled into believing that the institution of government holds the solution to all problems and is the source of succor to all who need it. (Even that subset of the populace who has lost confidence in their current government invariably believes as doctrine that the next and better government can change things for the better and lead the way to the shining castle on the hill.)


In this mix are the politicians and their functionaries, 99.99% of whom believe that, if for no other reason than their re-election prospects, they have to do something to meet the demands of the public.


Of course, under normal circumstances the "something" usually consists of making grand-sounding speeches and otherwise blowing smoke. Today that's just not going to cut it, for the simple reason that the crisis is real, it is spinning out of control, and it's not going to go away unless and until the markets are allowed to breathe again.


Which brings us full circle to the simple truth that the brainwashed public won't stand idly by while the politicians lower taxes and regulations on the profit makers or cut back state pensions and guarantees or otherwise reduce any of the many services the state has taken on itself to provide.


"Between a rock and a hard place" is an inadequate phrase to describe the situation.


Meanwhile, the mob has started to gather, their dark mutterings heard by the politicos who quickly don the red caps themselves, the better to be viewed as one with the people and join in expressing outrage against the capitalists who have been selected as fall guys in this unfolding drama.


When confronted by reporters about the fact that his 75% tax on high-income owners would raise nowhere enough revenue to offset France's towering debt and social obligations, Mssr. Hollande was heard to respond:


"It's not a question of return. It's a question of morality."


When coercion and theft are considered moral, anything is possible, and none of it good.


While I certainly can't say how this is all going to end, I'm pretty sure it's not going to end well.


[Was David's pessimistic view of the future shared by most of the experts who spoke at the just-concluded Casey Research Recovery Reality Check Summit? If you weren't there, you can still learn the answer to that question – an audio collection of every presentation is in progress. You'll hear every speaker… see every graph and chart… learn what the experts are recommending for your investment portfolio to help you survive and thrive during the coming deluge. The Summit Audio Collection will be available on CDs or in instantly available MP3 format – order your copy now.]



 

 







Data and Statistics for these countries : France | Japan | All
Gold and Silver Prices for these countries : France | Japan | All
<< Previous article
Rate : Average :4.4 (5 votes)
>> Next article
David Galland is managing director of Casey Research,LLC., and the executive director of the Explorers' League. His career in the resource and financial services industry dates back to a stint working underground at the Climax mine in Colorado, following college. Over the course of his career, he has worked in a publishing and/or editorial capacity with Gold Newsletter, the Aden Analysis, Wealth Magazine and Outstanding Investments, among others. He currently serves as managing editor for Doug Casey's International Speculator, Casey Energy Speculator, BIG GOLD, Casey Investment Alert, Casey Energy Confidential, What We Now Know and Explores League. In addition to his work in financial publishing, David has served as the conference director for the annual New Orleans Investment Conference (1979 to 1987), as a founding partner and director for the Blanchard Group of Mutual Funds, and was a founding partner and executive vice president of EverBank, one of the biggest recent success stories in online financial services.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
Why we should abandon the State
28 Julovertheedge
What a gigantic pile of horse excrement. Cherry pick everything that has gone wrong. Completely discount the hard fact that the author and ...
Iran Agreement Boosts Peace, Def...
26 Julkeith95
How about the US invading Afghanistan in 2001, Iraq in 2003 ... leading to the current unrest in the middle east while supporting the 'Saudi's' ......
Take Possession of IRA Metals We...
24 Julericgolub
Internal Revenue Code 4975 language suggests that whether the gold is held directly by the IRA or by an IRA LLC (which is nonetheless still subject...
Gold Miners Nearing Rebound
24 Julsonora69
Silver has already made a 50 cent down and up round trip as of 3:30. This is happening on a Friday, with the stock markets failing to make an advan...
Why Pensions Are A (Big) Black Swan
25 JulS W.1
No (pensions) are not a black swan, which is totally random unforeseen event.
Iran Agreement Boosts Peace, Def...
23 Julsonora69-2
Doesn't anyone remember the Iran hostage crisis, when Iran held 52 American diplomats and citizens hostage for 444 days in 1979-1981. How about 198...
What Do Greece and Louisiana Hav...
23 Julovertheedge
"The US financial system isn’t any better. ... , Actual currency is just a little over $1.36 trillion. ..." And it is assumed that about h...
Why Are We Here?
23 Julovertheedge1
No "woe is me" here. Just another buying opportunity. Using leverage is not buying, it is borrowing. It ain't bought til it's paid off....
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Claude Resources(Au-Cu-Ngas)CRJ.TO
Provides Date for Q2 Results and Conference Call
CA$ 0.60+7.14%Trend Power :
Corporate news
Richmond Min.(Ur-Au-Gems)RMD.V
- Exploration Update
CA$ 0.09+0.00%Trend Power :
Corporate news
Arianne Phosphate(Ur-Mo-Ti)DAN.V
Extends the Term of Warrants
CA$ 0.84-4.55%Trend Power :
Financings
Anaconda Min.(Au)ANX.TO
Reports 12.83 g/t Gold Over 4.38 Metres and 8.55 g/t Gold Over 4.97 Metres from Channel Sampl
CA$ 0.05+25.00%Trend Power :
Corporate news
Capstone Mining(Ag-Au-Cu)CS.TO
Second Quarter 2015 Financial Results
CA$ 0.95+5.56%Trend Power :
Financials
Taseko(Au-Cu-Mo)TKO.TO
and Soda Creek Indian Band Sign Participation and Cooperation Agreement
CA$ 0.67+1.52%Trend Power :
Corporate news
Tinka Resources(Ag)TK.V
commences 10,000 metre drill program at Ayawilca zinc project, announces new IP results & tar
CA$ 0.17+0.00%Trend Power :
Corporate news
Sandstorm Gold(Cu-Mo-Au)SSL.V
Files Early Warning Report
CA$ 3.20+1.59%Trend Power :
Corporate news
Crown PointCWV.V
Provides Operational Update and Announces Executive Change
CA$ 0.13-3.70%Trend Power :
Corporate news
Cardero Res.(Ag-Au-Cu)CDU.TO
Announces Acquisition of the Advanced Zonia Copper Oxide Project in Arizona
CA$ 0.02+100.00%Trend Power :
Corporate news
Comments closed