Category Archives: Freedom

India’s new tax code?

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This video reminds me of one of my college classes relating to Asia.  We discussed how China was leading the way with its foreign direct investments, and creating capitalistic free zones.  Unfortunately, we are seeing how that played out, but it was a good run and if they can figure out their water and pollution issues they will probably be quite successful.  Half of the quarter was dedicated to India.  Our professor was Indian and seemed so frustrated with India and the amount of bureaucracy and red tape.  To have anything done required stamps, signatures, and more stamps and signatures before a final approval.  It kind of reminds me of Obama’s health care proposal, and what it will do to free enterprise.

The first time I visited India we drove from Agra to Jaipur.  Now the road is four lanes, and paved.  However, when I went in 2005 it was a two lane road filled with scooters, camels, donkeys, cows, buses, cars, and I’m sure I’m missing a few things (many of these are still on the road in 2009).  At that time the road was under construction, which made the drive even more precarious not to mention we almost slammed head on into a bus going 60 Mph  (I was luckily asleep, and found out afterwords).

For the dividers and to have traffic change lanes they were using bricks.  At first I just couldn’t belief it, and then I sort of nodded my head and thought well it is India after all.  All along the journey there are small cones sticking up into the sky spouting smoke, and all around were bricks.  So, from a semi-practical standpoint I can understand, but imagine trying to move all these bricks when the time came.  No barricades to hopefully prevent being run over, but a small series of bricks.

I was just there in 2009 and some things have changed, but much is the same.  A lovely country in many respects, but very 3rd world at the same time.  Getting horrendously sick in Agra didn’t help matter nor did being at the hottest place on the planet.  However, what struck me was the construction of the underground.  They already have one, but it is being expanded at a rapid pace for the upcoming Commonwealth Games Delhi 2010.  All around the ground is being ripped open, but there  are dividers, there are areas you can’t go so it seems like a step up.  For the rest of the country I can’t speak.

Now we get to the big news.  I think it is big new because simplification of the tax code is no small feat.  Watch the following video.  Instead of raising taxes, India is proposing to drastically simplify its code.  No tax up to a certain point (in the video), a 10% tax on incomes above said level.

Without knowing all the details… what does this potentially mean?

Let’s start with a few basics about the government and taxes:

1) Governments don’t have an income  — I know someone will try to refute this, but the majority and I mean majority of income comes from two places.  Its tax base meaning you and me, and through inflation.  You know that thing that Ben Bernake is so fond of doing these days.  Right we aren’t experiencing drastic price inflation at the moment, but he is monetizing debt like crazy, which means printing money out of thin air and buying crap with it.

2) As a government provides more services it needs more cash.  How do they get that?   See #1

3) Government doesn’t like to reduce its tax income because that means it has to provide fewer “services”, subsidies, welfare programs, etc…  This makes getting elected more difficult, because people want to be provided for.

4) With a smaller government due to a reduced “income” there is less of a foothold on controlling its society.

5) Less control over its society means more free will to the people.

You may or may not agree with me about points 1-5, which is fine as I won’t take it personally.  What it does mean is that people will have more money in their pockets to utilize as they see fit.  Who wouldn’t want more of their hard earned cash to spend as they wish.

I imagine if India passes this reform, and it is what they say it is there will be a boom in India.  Business will flourish, people will come out of their shacks, and start producing on a grander scale.  For clarification when I say shacks I mean it literally.  There is a staggering amount of poor people in India, crippled, sick, and desperate.

As businesses grow due to increased retained earnings, which will be used as productive capital there will be an increased demand for employees.  Greater demand for work, wealth increases all around, and everyone’s living standard rises.

For the sake of the people of India if this proposal is what it might be I hope it passes.

So, take a couple minutes and watch this!

Guns and Ammo

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So, I’ve heard about the legislation that doesn’t have sponsors at this point on gun control. I’m talking about H.R. 45. You can find the link here: http://thomas.loc.gov/cgi-bin/query/C?c111:./temp/~c111tCkvxA

Essentially the bill will severely limit gun rights once again impinging on our freedoms. Don’t expect this to pass unless we have a national emergency. The financial deterioration could have such implications.

I wasn’t all that suprised to learn about this bill, but I was recently suprised to learn about various states introduciing legistalation tracking all ammo purchases via a database and having a laser imprint on all ammo.

So, essentially there will be a record of all your ammo purchases including which calibers your purchased. There are other details about owning non-coded ammo and taxes that vary per each state proposing the laws.

Check it out here: http://ammunitionaccountability.org/

I just can’t help but wonder 1) the implications if such legislation is passed, and 2) why such legislation is being proposed.

Something is amiss and doesn’t feel right. All I can say is that it isn’t for the better. We are about to hit the transition period in the crisis. It is the inflection point where the crisis was only affecting various groups of people to affecting almost everyone.

I think many people are still in denial that anything is wrong or if they realize something is wrong they think it is a temporary blip in the timeline. They don’t understand the global reach and implications of the present crisis, what caused it or when it began.

All I will say at the moment is that subprime is only a piece of the puzzle.

Now is the time to start taking actions. Now is the time to think about various scenarios that may or may not happen. Think about planning for a major natural disaster and that will give you some food for thought. Hey if nothing happens at least you prepared for the possibility and if an earthquake hits you will be ready.

Congressional Budget Outlook :: CBO

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Hold your hats folks as here are some of the forecasts for 2009 (link):

  • GDP falling by 2.2%
  • Slow recovery in 2010
  • > 9% unemployment by 2010
  • Decline in inflation (hmmmm… if monetary policy says anything this will reverse or at least eventually destroy the dollar)
  • Continued decline in housing prices
  • Decline in real consumption of more than 1%
  • Indeterminate on the financial system

And the best of all

$1.2 trillion dollar budget deficit for 2009*

*That doesn’t include the proposed stimulus package
*That amounts to 8.3% of GDP

So, we have an economy in decline, and digging a deeper and deeper hole to climb out of.  What I really want to know is how are we going to pay for 1) a 1.2T dollar deficit, and 2) a large fiscal stimulus package of a indeterminate size.

Let’s see our foreign friends have been purchasing our debt, which enabled us to essentially live off of their productive labor.  China for example is seeing a marjor reduction in exports, its economy is contracting, and eventually it is going to have to decide if it is worth supporting the American lifestyle at their own expense.  Presently, everyone is so intertwined I think there is a fear that if one jumps the house of cards falls down and we all lose.  However, is it possible for say China to pull out of the house of cards with minimal damage?  Is there a way they can reduce their exposure to US debt, and not have their savings collapse?  This is something I’d really like to know.

Seems to me that if they slowly shift some of their dollar reserves into commodities and other currencies SLOWLY, especially when there is increased demand they will be able to lessen their exposure.  The US import market is tanking, and has been tanking.  With unemployment increasing Bloomberg people are going to have a smaller income and will be forces to save thus hurting exporting countries.  This isn’t a US phenomena alone as Europe and frankly the rest of the world is contracting simultaneously, while being fed a mouthful of credit from central banks to re-inflate the bubble.  Last I checked it is very difficult to inflate a popped bubble.

Let’s take the latest number from Taiwan Bloomberg.  Their exports dropped by a record 41.9%.  We all know that Taiwan exports electronics, which have been a major boon ever since the technological revolution, which also saw a major hiccuup in 2000-2003.  So, this is confirmation of a major exporting taking a major hit.  There will be ramifications for the Taiwanese economy.

I can’t imagine that after the dust settles the world’s economies will look the same.  The sea of money will shift to where is sees the most opportunity and in its movement will tear apart the economies of many.

Here are a few more headlines on Bloomberg alone that tell a um telling story:

Fed Revives Discussion of Inflation Target to Counter Risk of Price Slide

ECB Expanded Balance Sheet by 36 Percent Last Year to Revive Bank Lending

Apartment Rents Fall, Vacancies Rise to Four-Year High on U.S. Job Losses

Shopping Center Vacancies in U.S. Approach 10-Year High as Stores Fail

Procter & Gamble Fights to Refinance as U.S. Borrowings Reach $2 Trillion

U.S. Banks Will Need to Raise More Cash in 2009, Meredith Whitney Writes

I’ll leave it at that, but what I’m seeing is RECESSION coupled with the Fed trying to stave it off through any means necessary, which is now including outright purchases of securities on the open markets.  Again we have no savings and are either monetizing debt or borrowing it from somewhere.  To do this will be disastrous to the dollar and our reputation as a solid financial center of the world.  Sure there are plenty of other economies in dire situations, but in the end who will come out with the heads up high and who will come out still in the sand?

Taxes oh My

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Taxes:

The ubiquitous “necessity” that engulfs us continually. That sentence reminds me of just how complex and absurd the tax code is to follow and comply with every year and every day. On another board there was recently a discussion about the Auto companies with respect to their inefficiencies. Simply looking at all the rules and regulations they must follow in addition to the UAW well no wonder they need a bailout. Henry Ford was on the cutting edge and now Ford is close to falling off a cliff.  If I had to pay a worker $70.00 an hour for a repetitive task how could I be competitive?

So, back to the issue of taxes. I’d love to say they we don’t legally have to pay them, but you go right ahead and give that a try and see where you end up. The IRS will find you or your money and take it. Remember they have the backing of the US Government, which has plenty of people who will enforce the IRS rules if you decide to not comply.

Today is December 31, 2008 and in a few hours 2008 will be put in the history book. There will be plenty to say and perhaps in five years it might be considered the beginning of the end. Who knows…

I obviously have plenty to say about 2008, but at the end of each year investors have to decide if they are going to take any unrealized gains or losses to offset their other gains and losses to minimize tax consequences. You then have to wait 30 days before interacting (buying/selling short) with that particular equity if you want to take the loss.

Something about this just doesn’t sit right with me. So, 2008 draws to a close and I have to close out positions just for tax reasons, but I can’t buy them back for 30 days. Heaven forbid if I entered the market at the wrong time and want to reenter prior to 30 days. I’m sure someone gave a great reason when instituting this law, but really it punishes even a swing trader unless they are designated as a trader (which there are plenty of stipulations for). Once designated a trader you can elect mark to market status, which eliminates the wash rule as well as eliminates the limitation on carry forward losses.

Ultimately, I just don’t see how these laws benefit anyone except by “decreasing volatility”. If you trade more often than an “investor” you may be penalized. What happens if a trade is accidentally executed that then puts you in the wash rule category and you can’t take the loss? Bummer.

All in all these rules are supposed to “help” the taxpayer and average citizen, but really I’m missing something here. For all you commenters out there I’m sure someone will have something to say as to why it is needed. Go right ahead and show me.

Don’t we pay enough in taxes from inflation?

A potential future?

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I’ve had this nagging in the back of my head saying something foul might be looming out in the near future.  Normally I don’t watch Bush on TV or listen to him on the radio as I can’t stand it.  That aside I watched and listened to his speech today.  It sounded good… all this talk about suporting the free markets and free trade… mind you we have neither.  It felt like a pep talk to make everyone feel warm and fuzzy inside when the exact opposite was going on behind the curtain.

He mentioned revamping the current financial systems and having a organization oversee markets.  Without saying it he was essentially saying yeah free markets are great in theory, but this was all caused by free markets.  Therefore we are going to create more bureaucracy in the name of the free market to prevent a future failure.

Last time I checked business come and go, the economy goes up and down, and that is okay.

So what is this potential future I speak of?  …>

The election is over yet the transfer of power hasn’t occurred.  What could happen to delay the transfer? A major crisis of sorts would do just that. Why isn’t Obama going to the G20 meeting? Why is he so reluctant to play a larger role during the transition?

Did anyone notice how Bush was almost smirking when he was talking about the wealth destruction that has occurred in people’s retirement accounts. I had this sinking feeling that he was telling someone that it is time to initiate plan X (whatever that may be).  He said GLOBAL MELTDOWN in a very strange way.  He said it a couple times with an emphasis and as though it was a joke.  It really seemed as though he was telling someone something.

To create the larger oversight organizations on an international scale there will have to be a crisis of much larger magnitude than at present. People will have to be in full panic mode and asking to be saved. Once people are in that frame of mind the government will be able to usurp all the power they want. Best of all they won’t have to take it because the people are freely giving it to them.

What might cause such a ripple….
War: Iran, Russia, Pakistan…
Financial Crisis:
Domestic Riots:
Terrorist Attack:

These are a few and there exist others. Hopefully none of this will transpire, but I find it difficult to believe that our present financial panic is the last in a string of events that began with 911. From this perspective I think it prudent to see it as a real possibility if minimal, but possible. Really no different from preparing for an earthquake, hurricane, or tornado.

Lastly, war is generally considered the acceptable means to get out of a financial crisis.

Look both ways before crossing the street

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I received an email from a friend and here is my response.  You ought to be able to decipher what the questions were about.  These are my opinions of the present situation, and are by no means recommendations.  

—-
1) Voting for McCain…

I really don’t think voting for A or B is going to matter.  I’m voting for Ron Paul because I believe that change has to come from going against the herd.  I refuse to be partially responsible for either of them being in office.

The odds are in favor of the democrats getting into office and taking over Congress.  I’m actually a bit frightened by this, but either situation is grim. Hopefully it will be better than the last 8 years.

2) Deflation / Inflation
This is tricky and something I’ve been trying to better understand.  There are many many many factors at work here.  We are headed into a MAJOR recession… thus your cutting spending was a wonderful idea.  A recession is a drag on the stock market.  Many think that after a brief rally it is going to drop much further.  I know you are invested at the moment.  One way to hedge against a drop is to invest in a inverse ETF fund such as SDS, QID, DXD, or TWM (these are leveraged 2x FYI).  These ETFs have saved me much pain.  The overall trend in the market is down.  Bear market rallies tend to be severe and swift to the upside, while the markets overall continue to decline.

As for Deflation and Inflation what this means is a decrease or increase in the money supply.  Generally during inflation when the Fed is creating money prices of everything goes up because there is a surplus of money that has to go somewhere.  When the money supply contracts either by the Fed reducing the money supply or debt is paid off.  Then prices decrease.  However, under a fiat monetary system credit and continued inflation are essential to keep it up.  At the moment with the Fed creating TONS of money we are looking at the potential for hyperinflation in the future, which nobody wants.  So, the Fed is walking a tightrope between deflation and inflation.  I imagine they will lean towards inflation over deflation ultimately.  At the moment we are primarily seeing deflation as prices are coming down everywhere (commodities, housing, stocks).

During deflation the market will come down as will all prices.  I think that regardless the markets will continue their descent due to the upcoming recession, decrease in consumer spending, decrease in imports and exports, and increase in unemployment.  Once the recession takes hold and the effects of the monetary inflation occurring now start to be felt we will probably start to see increases in commodity prices across the board.b  With companies facing difficult times I don’t foresee the created money moving into equity markets.

3) War with Iran
The conflict between Iran and Israel is heating up.  I received a report that said Israel won’t be doing anything until after the election, but who knows.  In this case we would see the value of gold skyrocket, oil go through the roof, and the dollar go through the floor.  This is slowly moving from a remote to more plausible reality.  I hope this doesn’t happen as the US can’t afford to be involved in another conflict.  We are already spread so thin.  Because of this and the enormous debt load the US government (its citizens) now carries I fear for the support and longevity of the dollar.  At this point I think it important to own some gold and have some money invested in foreign currencies.  <Thank you Gary North and Chris Martenson>  These are for the long-term and may lose significantly in the short term.  There are many uncertainties at the moment.

Oh and least I forget… At this juncture in the Republicans and Democrats are but different sides of the same coin.

Another bailout, more credit… when will we learn?

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It seems that the tune to march to these days is credit o credit we need more credit.  Somehow somewhere we forgot quite quickly that credit got us into this mess.  If credit is expanding much faster than real economic growth the outcome will be instability in the economy.  That is like an individual taking on more debt while their income stays steady or worse is in decline.  At some point in the future the debt will become unmanageable.  Once debt is too great a burden that individual is going to have to either sell assets to pay off the debt, declare bankruptcy, increase their income, or default.  The one thing that makes the government lucky or so it seems is that they can increase “income” through inflating the money supply event hough it is really illusionary.  All they have done is take money from every taxpayer to service the ever growing debt burden.

I find it distressing that Bernake and Co. are talking about further fiscal stimulus to the tune of $150 billion dollars and Democrats want double that.  We are already over $1 trillion in debt for this year.  Where o where are we to find this money?  Perhaps a leprechaun will appear beneath the rainbow and we will be saved.  If the politicians and bureaucrats have their way this is exactly what will happen.  

American’s have no or very little savings to invest in capital goods.  We are laden in debt and attempting to service that debt.  If unemployment rises substantially then servicing that debt will become even more burdensome.  Another stimulus package will probably be used to payoff existing debt, which does nothing for stimulating growth.

So, what do we do…  Many have proposed various solutions.  

Why not reduce the size of the government for one. 
– Yes, people will lose their jobs.  However, with time they will find other jobs as that money can now be used for other things.

Reduce taxes, and the size of the tax code.
 —  Our tax code is way to complicated and confusing.  I would love to know the cumulative hours wasted on tax returns every year by companies and individuals.  Imagine if we had a flat tax of 10-15%…  get rid of tax incentives, credits, exemptions, etc…  Not everyone is going to be happy about it, but a reduction in the tax burden in actual numbers and time would enable people to use their money elsewhere and as they choose versus having someone decide for them where to best put it to use.   

Return our currency to one backed by a physical commodity — GOLD and SILVER
 — The government would hate this, but it would eliminate the major booms and busts and enable constant growth.  Money would again have a true value versus the value instilled by the gov’t.  Money’s value would be returned to the people and taken away from the money printers, and confiscators of our savings.

Bring our troops home
 — We don’t need to be the world’s police.  Occupying over 140 countries is absurd and very costly.  I agree that we need to have an army to defend the country, but it needs to be defensive and not offensive.  Our paws are in too many honey jars.  We are bound to piss off the bees, which we are continually doing and then blame them for getting upset at us.  Ironic don’t you think.

Remove all subsidies and tariffs
 — All they do is distort the market place and what people produce.  For example why do we have corn syrup in our soda, but in the rest of the world they use sugar?  Corn is highly subsidized, while sugar has many tariffs on it.  Corn Syrup is cheaper due to government policy.  Corn farmers love this, while it hurts all of us.  We pay for those subsidies, and also pay high sugar prices.

I’m going to leave it at that, but there are plenty more options.  People say that ignorance is bliss.  NO it isn’t bliss it is being LAZY.  Will you get out of a parking ticket or a speeding ticket if you claim ignorance?  Not unless you are really smooth with words.  

What happened to being responsible? If you take on too much debt then you have a problem.  American’s have a virus, and it is contagious.  We live beyond our means, and then when we get in trouble someone bails us out at the cost of everyone.  The one’s who really pay are the responsible ones who are living within their means.

Your Vote?

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I’ve been trying to educate people why voting for candidate A or B isn’t the only option.  This article  explains it nicely.

Constitution Party candidate Chuck Baldwin recently published an article entitled “A Wasted Vote,” in which he expounds the virtue of voting on uncompromised principles, viz. voting for Chuck Baldwin, as opposed to casting one’s vote for what Chuck calls “the evil of two lessers.”

Here, I would like to offer an addendum to Mr. Baldwin’s points; I have a couple of observations of my own with regard to the old “wasted vote” argument I often hear when I make it clear to well-meaning McCain and Obama supporters that I do not intend to participate in perpetuating the American two-party duopoly this November:

1. In the grand scheme of things, in a national election, one’s vote is insignificant. That’s right, your vote is insignificant. The notion that a single individual’s vote might sway a presidential election one way or another is completely out of touch with reality. In reality, an individual’s vote has virtually no say over who gets elected president. With that in mind, on an individual basis, why would one not vote for a candidate one actually wants to be president, as opposed to a candidate one imagines has close to a 50% chance of winning and who kinda sorta represents one’s ideals, or who is perhaps a little better than “the other guy”?

2. Voting for a losing candidate has ramifications beyond the immediate outcome of an election. In other words, winning isn’t everything. Granted, as per the above point, the impact your vote will have is an infinitesimally small one, but nonetheless it will have an infinitesimally small impact. The support third-party candidates receive is duly noted by the Democrats and Republicans. Votes garnered by “far left,” third-party candidates–Ralph Nader, for example–are incentives for the Democrats to “move left” in an attempt to obtain those votes the next election cycle. Likewise, votes garnered by “far right,” third-party candidates–Chuck Baldwin, for example–are incentives for the Republicans to “move right” in an effort to secure those votes. On the opposite side of the coin, if you cast your vote for an establishment candidate, you are essentially assenting to the status quo via the voting booth. You are sending a message to the Democrats or Republicans that you accept the candidate, however lukewarm or otherwise terrible, that they have presented to you this election cycle, and that you will complacently vote for more like him or her in the future.