There is little doubt that higher taxes, fees, tickets, and penalties will be headed our way, as this is always govt’s “solution” for mismanaged budgets. Chicago’s “solution” for rampant debts (that have caused credit downgrades) is a steady increase in taxes, which have caused people and businesses to leave the city and state. Now they are proposing a 30% increase in property taxes, and “appreciation bonds” that pay no interest, a ploy that even Puerto Rico deemed too risky. Cities and counties across the nation will be targeting property taxes to fund the ever-increasing public sector and public pensions. As previously discussed, raising taxes on illiquid real estate during a cycle of higher interest rates that will last for decades will certainly reduce the demand for real estate. Since real estate is the biggest investment for Americans, Europeans, and Asians, the global deleveraging process is going to be very painful for homeowners, resulting in many walking away from their homes, just as they did in Rome.
London will impose a hefty tax on foreigners that have bought property in the city. Washington just raised the gas tax by 7 cents per gallon. France is paying informants to confiscate wealth, and the capital controls imposed on Greek citizens to prevent them from taking control of their own assets is grinding the economy to a halt. How brain-dead does a politician have to be to not realize that people and businesses can move, taking their purchasing power and jobs with them? I guess the answer is – as long as brain-dead voters keep believing that the solution is more govt, which always results in more fraud, abuse and mismanagement. Fortunately, there are limits to the madness, which the world will see as the sovereign defaults start in earnest after 9/30/15.
The Greek businesses discussed in the article above, that can’t pay for raw materials because they can’t get access to their funds, had many months if not years of warnings that capital controls were coming. Only economic ignorance kept these Greek businesses in their banking system. If one does not understand how an economy prospers to raise the living standards for all, then how can they understand the interconnectivity of a world economy and how govt’s desperate need for cash is shutting down global commerce? Maybe they could just ask themselves, once govt has it all, then who will make the goods and provide the services on which they depend?
As business activity declines and deflation sets it, how are govt’s going to continue to spend at an increasing rate? Of course, govt’s incompetence, hubris, and inability to reform will cause it to try to get blood from a stone; but these efforts, as witnessed in Greece and Puerto Rico, only make the problem worse. This is the peak in govt that will start to spread on 10/1/15.
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