When the numbers add up...

Having endured April 15th, American taxpayers find themselves looking into the future asking "what's next"? and "how much worse can it get"? Both questions point toward rather negative answers. The burdens of entitlements (Social Security, Medicare, Medicaid, and the new health care), property taxes, and ballooning national and state debt are growing at a rate that will soon overwhelm the private sectors' ability to service the interest due plus current liabilities, much less pay down any principal. Our Congressional leaders can manipulate their "budgets" only so much, and then the sheer magnitude of their spending is going to be nakedly exposed (given those members of Congress, a truly terrifying visage) for all to see, with the signature of their votes permanently engraved in the mass of indebtedness.
One of the little "ways" that the politicians have minimized the capability of the American taxpayer to fully comprehend their tax burden is to spread out the payments, making the amount seem much less than it really is.  Our income, FICA, and state income are examples.

Consumption taxes are much the same.  Sales taxes, gasoline tax, hospitality, travel, parking, amusement, liquor and others are all paid on transactions.  People almost never really know their total tax burden.

Perhaps it's time for the American taxpayer to become fully informed as to the taxes they are paying.  To do this, all we need is a little computing power, the internet, and a few small modifications in existing software code.

Every taxpayer would have a small software application that would be able to record every expenditure that involves payment of a tax of any kind.  Bar codes would make this very easy to do (by scanning) or by receipt over the internet.  Every type of tax, be it federal, state or local, would be coded and recognized by personal finance programs.  These programs would keep a running total of the taxes paid.

A taxpayer would be able to see, at any time, how much they have paid to federal, state and local governments in each category of tax.  These numbers could be shown as raw totals, a percentage of taxable income or percentage of total income.

There's a classic management maxim that says that what gets watched gets managed.  What do you think will happen when the American taxpayer knows, in real time, how much money is going to the government?  Might the issues of accountability and prudence become decidedly prominent priority?

Our democratic leaders have decided that it's within their 'right' to mandate citizens pay several thousand dollars a year for health care.  Here's a better idea:

For about $100 a year every taxpayer gets a recording device and the software to privately track the taxes they pay.  We'll know how much in taxes we've paid, gain greater control as to how and what our taxes are spent on, and hopefully whether we should be paying certain taxes at all.

Till next time


The Instigator

I think I'll go back to sleep...

There's an old joke about a man who falls into a coma, and finally wakes up 100 years later.  Remembering he had a bank account with $10,000, he goes to the bank to find out what happened to his money.  Low and behold the balance is now over $10, 700,000.  Ecstatic, he withdraws $1,000 and leaves the bank.  Wanting to plan his next steps, he stops for a cup of coffee.  He is shocked out of his good mood when the cashier says "That will be $2,150 for the coffee, please".

Markets are recovering around the globe.  The valuations of securities are reflecting the efforts of managers to control costs and do more with fewer resources.  Governments, meanwhile,  have done little to control their costs.  In fact, they've spent more and expanded both their fixed and variable costs.  To do this they've borrowed more money, expanding the money supply far beyond its normal bounds.

All that paper money is now finding a home.  It's moving into commodities and equities, seeking fungible assets that reflect value magnified by liquidity, or lack thereof.

Yes, the major stock indices are up 65 to 90%.  But crude oil is up 165%.  Food commodities are up 50 -100%.  Residential real estate is not rising much, if at all due to the lack of demand (check the unemployment rate) and stagnant personal income levels.  Emerging market countries are growing much faster than the US, and their appetite for resources is voracious.

Inflation is very much like a tsunami:

• Starts with a violent shift or upheaval (banking crisis).

• Initial movement is underneath the surface (consumers don't experience the 1st price increases).

• Covers great distances and large areas.

• Becomes overwhelming as it approached the mainland and large populations.

• Engulfs everything as an irreversible series of waves.

The inflation wave is on its way, and we will feel its effect for the next one to three years.  Since it is unstoppable, prepare now to survive.

• Commodities will do well - pick what you're confident in.

• Get out of long term bonds, unless you can hold them to maturity.

• Figure out who makes money when inflation is high.  (I'll have more on this subject in future blogs).

Summer Oil


I've suggested the price of crude oil would rise going into the summer.  It's up 3 to 4 dollars since then, and looks to move up more in the near future.  Odds are still good that we'll see $90 - 95 before the July 4th holiday this year.


Till next time,


The Instigator

Headines for Today

 Obama call for repeal of health care

President Obama today announced that he is calling for the repeal of the health care legislation he just signed into law.  Stating “ I never realized this was going to cost so much.  Once you read this I understand why people are so upset.  We need to re-think this whole thing”  He’s asking Congress to bring him legislation limited to less than 100 pages, written in language “that a fifth-grader could understand”.

Pelosi switches to Republican Party

Speaker of the House of Representatives, Nancy Pelosi, at her morning press conference, confirmed her switch to the Republican Party.  “I just can’t go along with this senseless spending anymore.  If we keep taking money away from the people who have rightfully earned it through hard work and intelligence, pretty soon there won’t be anything left”.

Mayor Daley admits he’s been wrong for years

Chicago’s Richard Daley today admitted he’s been entirely off-base with his financial decisions for years.  “I can’t believe I set my friends up and they still couldn’t keep the deals hidden.  And I never should have done the parking deal.  Boy, did we get ripped off!”

Rush Limbaugh buys New York Times

New York woke up today to a new owner of the New York Times.  Rush Limbaugh, the conservative talk show host has bought 100% of the New York Times.  Limbaugh said he has exciting plans for the newspaper, and indicated he has a consulting agreement with Rupert Murdoch to bring in ‘new talent’.

Jay Leno gives back “Tonight Show” to Conan O’Brien

Saying he didn’t realize how much work the show had become Jay Leno is giving “The Tonight Show” back to Conan O’Brien.  “Conan was really doing a great job.  I can’t do this anymore.  Oh yeah, he can keep the severance package too”.

Democrats to allow honest vote in Illinois

Illinois House Speaker Michael Madigan, Governor Pat Quinn and Mayor Richard Daley jointly announced today that from now on when people vote in elections for public officials the results will be honored by Democratic officials and the will of the people will be respected. They all agreed that “all this stuff done behind closed doors stops here and now!”

Hugo Chavez asks to be annexed to the United States

Standing before the United Nations General Assembly, Venezuela’s Hugo Chavez announced he has negotiated an agreement with the United States to be annexed.  Stating that “I just can’t have my people suffer any more, I, I mean we need help.  This socialist – dictator stuff is tougher than it looks!”

Oh yeah,
April Fool’s!!!

The Instigator