Hola Amigos!
We hung close to the Santa Fe Trail while coming across New Mexico. What a sight the first settlers were treated to where the grasslands of the high plains are painted right into the dense forests of the Rockies. Of course, when the lightening and rains and 40-50 mph winds hit we just slowed down from 85 to 10 mph and enjoyed the lght show. Not sure how pleasant that would have been slogging through the mud in a covered wagon.
The country and the people are great and the scenery is epic. Frankly, however, I wish I could be encouraged (economically) by our trip through the great states of Nebraska, Colorado, New Mexico, Arizona and California.
At each stop, I met with folks “preparing.” Preparing to close their businesses, preparing to sell assets and properties before taxes go back up in 2011. So far, I have only spent time with one guy “thinking” about expanding but he is a new entrepreneur who just recently lost his job. Even there, he spoke of hiring commission only, part time workers with no benefits…“no way you’d hire a full-time guy given the mandatory health care expenses.”
Anecdotally, it appears that folks are losing some of the hope they had when I was here last year. They really want to be hopeful but, quietly one-on-one, it is not showing up in their bank balances. They are in worse shape than they were a year ago when I last saw them. Though lower interest rates have allowed them to keep paying on their operating and personal debts, they are in aggregate…deeper in debt; trapped in assets/properties that have declined in value, while operationally, their sales/revenues continue to stagnate/decline. I think the Tea Parties are going to get more interesting. Political/fiscal revolution may be needed.
The Actuarial Nightmare…
Unfunded entitlements dwarf the size of today’s public debt, typically by a ratio of 8 or 9 to 1. A research paper prepared for the European CommissionDirectorate-General for Economic and Financial Affairs examined unfunded entitlements in Europe and the US. This problem has has always existed, however, the time horizon is getting shorter and will render governmental near-term tax policies to a purely reactive position to the entitlement promises made in the past.
How much could it cost to pay these entitlements when/as they come due?
According to Michael Cembalist at JP Morgan:
· By 2020, the average EU country would need to raise its tax rate to 55 percent of national income to pay promised benefits
· The U.S. could fund its shortfall by doubling the 15.3 percent payroll tax on employers and employees (forever)
· Alternatively, the U.S. could reduce discretionary spending by 80%, on things like education, defense and environmental protection. Why so high? There’s not enough discretionary spending left (the OMB estimates that mandatory spending will make up 71% of government expenditures by 2016)
I hate politics and have never really met a politician I would fight to spend time with, but I want to propose the establishment of a new politacal party… the new LESS Party.
Less Expenses for a Stronger Society…
Let’s Eradicate Stupid Spending…
Let Everyone Save Some…
No smart thoughts about what it stands for really but, the answer appears to be LESS. Less government, less entitlement spending, less lawsuits, less insurance premiums, less taxes, less fees, less tax code pages.
NO TAXATION WITHOUT REPRESENTATION…All governmental spending must be slashed including all items, that in aggregate, cost productive members of society their hard earned funds-WITHOUT A VOTE. How about a 60% majority vote online to pass spending legislation at the City, County, State and Federal level.
It really is a great country, but too many “Smart Guys” need to get the boot. If these guts were an Etch-a-Sketch, we would all be shaking those things frantically to wipe them off.
Soberly I have noticed that there is a renewed slowdown in spending, labor, housing, manufacturing, confidence, small business sentiment and exports that began in June. Here are the not so pretty pictures of a couple of items. Hope this holds to just a second dip and does not blow through the lows and become something far worse.
All the best,
Leon
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