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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: TobagoJack who wrote (45275)1/26/2004 8:42:12 PM
From: elmatador  Read Replies (3) of 74559
 
When the time comes to pay the deficit:

Once the USD loses its position as a reserve -which it took when Nixon, in August 1972, opted out the gold standard- investors will no longer subsidize the standard of living of the Americans.

Here is the script.

1) Jack up interest rates and government will suck 78% of private credit leaving the companies without financing.

2) Political process clogs up since no one wants to be the one to pay the bill. Horse trading in the Congress won't allow any bill to pass.

3) Governments depending on the votes of civil servants will not downsize the state machine.

4) Governments will not raise taxes outright but extract money form the economy by any means possible. If you go fish, you have a boat? There will be license for this and licenses for that.

5) As a result of 4), the informal economy will soar. A bureucracy, created to control this government rent-seeking, will cause corruption to increase.

6) As unemployment soars, employed people will fight hard against any change on labor laws that would allow unemployed to join the work force.

7) As the rich are much more skilled in defending their wealth, the ga between rich poor starts widening.

8) As the government tries to get its hands into the pockets of the rich they flee the US.

9) Unemployment soaring each state compete with each other for industries and businesses to settle there, there is a tax competion, the winner being the state that gives more tax holidays.

High interest rates, mediocre economic growth, social injustice, a divisive society... welcome to the Third World.
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