Tag Archives: Bankruptcy

Two Easy Predictions: Wealth Tax and Windfall Tax, by Charles Hugh Smith

Governments are broke and rapacious. From Charles Hugh Smith at oftwominds.com:

Looks like we need another $500 billion or so. Hum baby!

Predictions are hard, especially about the future, but two predictions are easy: 1) governments that do not yet impose wealth taxes will do so within the next five years and 2) governments will impose windfall taxes on all outsized unearned gains, from any source, anywhere on the planet.

Glancing at the chart of federal tax revenues, we note a steep increase–hum baby! Governments have financial commitments, and these never seem to decrease, they only increase.

It’s nothing personal, we just need more money. We have responsibilities and we made promises.

A few nations already have wealth taxes: for example, Norway, Spain and Switzerland. In Switzerland, the wealth to be taxed is self-reported, and the top rate is 1%. The Swiss wealth taxes account for 3.6% of tax revenue. It doesn’t sound like much but every little bit helps, right?

That 3.6% of tax revenues applied to the U.S. tax revenues equals a cool $108 billion. That’s a useful sum.

Self-reporting isn’t going to cut it once tax revenues are viewed as inadequate. Third-party reporting will be required so wealth can’t be under-reported, and the Foreign Account Tax Compliance Act (FATCA) already requires foreign entities to report U.S. account holders’ data.

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Gradually, Then Suddenly, by Jim Quinn

The U.S. has been circling the drain for some time, but now it’s caught in the vortex of the whirlpool. From Jim Quinn at theburningplatform.com:

“How did you go bankrupt?” Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises

Gradually, then suddenly”: How the Protecting Our Democracy Act addresses institutional decay | ACS

“I do not say that democracy has been more pernicious on the whole, and in the long run, than monarchy or aristocracy. Democracy has never been and never can be so durable as aristocracy or monarchy; but while it lasts, it is more bloody than either. Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide. It is in vain to say that democracy is less vain, less proud, less selfish, less ambitious, or less avaricious than aristocracy or monarchy. It is not true, in fact, and nowhere appears in history. Those passions are the same in all men, under all forms of simple government, and when unchecked, produce the same effects of fraud, violence, and cruelty.” – John Adams

Hemingway’s famous quote about going bankrupt connects with so many because it is true on a personal basis and a civilization basis. It applies to individuals and empires in decline – like the American democracy. John Adams realized two centuries ago democracy was no better than monarchy or aristocracy over the long haul. We were handed a Republic by Franklin and his fellow revolutionaries, but we failed to keep it almost from the very birth of this nation.

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Are You Vulnerable to Physical Violence? by MN Gordon

Make no mistake, the US government is on the road to ruin, and the consequences will ripple far beyond finance and economics. From MN Gordon at economicprism.com:

The U.S. government’s 2021 fiscal year came and went like Dow 36,000.

With respect to the latter, authors James Glassman and Kevin Hassett were only off by 17 years in their 1999 forecast of Dow 36,000 by 2005.  At this point, the attainment of their prediction is a giant letdown.

With respect to the former, we have a question: Does President Biden have any idea that the government he pretends to oversee is skirting the edge of insolvency?

Most Americans, like Biden, could care less about how the fiscal year’s final ledger tallied.  Three generations of budget deficits without pain have spread complacency about the ability of Americans to consume without paying.  Deficits don’t matter to voters.

Presently, only conspiracy theorists and wackos still place any importance on the archaic practice of government accounting.  Why bother, when you can buy shares of Tesla and hold on for the end of the world?

In case you missed it – and actually care – here are a couple of the high points and low points…

Receipts for the full 2021 fiscal year, which ran from October 1 through September 30, totaled $4.046 trillion.  This marked an 18.3 percent increase of $626 billion from fiscal year 2020.

However, 2021 fiscal year spending jumped by 4.1 percent, or by $266 billion, from fiscal year 2020 to $6.818 trillion.  So, while receipts went up, spending went up too.  The difference between the two, known as the budget deficit, totaled $2.772 trillion.

Quite frankly, a $2.772 trillion budget deficit is a disgrace.  It represents an extreme failure of government.  But it is a slight improvement over the $3.132 trillion budget deficit that was racked up in fiscal year 2020.  Regardless, the U.S. government is spending like a banana republic.

Let’s take a closer look…

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Unreal Coin of the Realm, by Tim Hartnett

If you just keep borrowing, you never have to pay it back. That’s probably the opening sentence on Economics PhD dissertation somewhere. From Tim Harnett at lewrockwell.com:

There’s no need to worry about the US defaulting on its debt – for the moment, at least. People already get handsomely paid to do that. Most of them have an interest in driving it upwards. Reading their ravings doles out some hyped up gallows humor but lenders holding IOUs from the government aren’t quaking in their boots. Something will be worked out. If you don’t toil in the “crisis” exploitation industry don’t get distracted. All the danger to you comes in how this principle and vig will be covered. The possibility it won’t be, is equal to that of billionaires giving up arriving at climate crisis conclaves by private jet.

According to Zachary D. Carter, on the pages the Washington Post’s Outlook section, “We are…captives of a technicality established during WWI – an era when the Bank of England called the tune for the global economy and money was denominated in different weights of gold.” You can sense the man’s shudder recalling a day when the money supply had more constraints than the speed of a printing press or the flip of an electronic switch. After explaining how war conveniently forced Washington to borrow like a drunken gambler with unlimited credit, he goes on:

“A formal limit on the amount of debt Treasury could sell was imposed to prevent bureaucrats from running wild with their new responsibilities.

So the debt ceiling was not designed to be an important instrument of economic policy: Congress retained the power to set all spending and tax terms, as it does today. Congress also must vote every now and then to raise the limit on the Treasury’s authority to borrow. Failing to do so means the government can’t meet the obligations it has already approved.”

Did we get that right? Legislation to prevent debt towering into the stratosphere “was not designed to be an important instrument of economic policy”? Has the word “bankruptcy” been purged from college textbooks by social justice censors?

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The Trillion-Dollar Lie, by Matt Taibbi

Who says student loans can’t be discharged in bankruptcy? It’s not easy, but it happens. From Matt Taibbi at taibbi.substack.com:

Universities built palaces and financiers made fortunes in part through a lie: that student loans can’t be discharged in bankruptcy. But a series of court cases is helping unravel the scam

Stefanie Gray explains why, as a teenager, she was so anxious to leave her home state of Florida to go to college.

“I went to garbage schools and I’m from a garbage low-income suburb where everyone sucks Oxycontin all day,” she says. “I needed to get out.”

She got into Hunter College in New York, but both her parents had died and she had nowhere near enough to pay tuition, so she borrowed. “I just had nothing and was poor as hell, so I took out loans,” she says.

This being 2006, just a year after the infamous Bankruptcy Bill of 2005 was passed, she believed news stories about student loans being non-dischargeable in bankruptcy. She believed they would be with her for life, or until they were paid off.

“My understanding was, it’s better to purchase 55 big-screen TVs on a credit card, and discharge that in a court of law, then be a student who’s getting an education,” she says.

Still, she asked for financial aid: “I was like, ‘My parents are dead, I’m a literal fucking orphan, I have no siblings. I’m just taking out this money to put my ass through school.”

Instead of a denial, she got plenty of credit, including a slice of what were called “direct-to-consumer” loans, that came with a whopping 14% interest rate. One of her loans also came from a company called MyRichUncle that, before going bankrupt in 2009, would briefly become famous for running an ad disclosing a kickback system that existed between student lenders and college financial aid offices.

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When the Money Supply Dries Up, by Jeff Thomas

The most ostensibly rich and powerful empires have gone bankrupt and collapsed. From Jeff Thomas at internationalman.com:

Money Supply Dries Up

In 1944, the US had been the primary supplier for arms for the allies during World War II and, as such, exited the war with more wealth than any of the other nations that had entered the war earlier, draining their treasuries of money. Since payment was largely demanded in gold, the US held three-quarters of the world’s gold and therefore was in a position to call the shots with regard to the free world’s economic future.

At Bretton Woods, the US took advantage of this situation, setting up the World Bank and the IMF and declaring the dollar to be the default currency for all countries concerned. From that point on, the US was in the catbird seat, able to dictate economic terms to other countries and even to behave irresponsibly, eventually creating previously unheard-of levels of debt, thereby inspiring other nations to do their best to create their own debt in order to keep pace as best they could.

Eventually, of course, such irresponsible economics will cause any country, no matter how powerful, to collapse economically, no matter how many Keynesian economists such as Thomas Piketty, Paul Krugman, and Larry Summers declare otherwise.

Beginning in 1944, the US became the world’s foremost empire, for the strongest of reasons—it held the world’s wealth. This advantage led to a period of great power and, in the latter years, as the empire began to stumble economically under its own great weight, led to the creation of organisations and legislation designed to bring in new revenue, as the old forms of revenue declined.

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The Ugly Truth About Printing Press Money, by MN Gordon

The monthly budget deficit in March of this year was $660 billion, which was the annual budget deficit in 2017. It takes a PhD in economics to believe a government can perpetually borrow and never go broke. From MN Gordon at economicprism.com:

Weeping and gnashing of teeth shall come…

We don’t know when, exactly.  But we do know a certain catastrophe’s approaching.  In fact, we can see it on the horizon.

Does anyone in Washington give a rip the nation’s beyond broke?  Does anyone in Congress care that outright money printing is what’s financing their stimulus bills?  Does House Financial Services Committee Chair Maxine Waters think it’s all a real hoot?

Surely, someone in the legislature is aghast at federal spending that’s gone completely out of control.

Are you aghast?

We are.  But there’s nothing we can do to stop it.  Nearly all remnants of fiscal conservatism have been quarantined from federal government.

The majority of the electorate have voted for generous gifts from the public treasury.  They want free education, free food, free phones, free transportation, and free drugs.  They want debt forgiveness.  Most of all, they want free money.

Many representatives are pushing the President to give the voters what they want…and what the politicians have promised.  Specifically, more stimmy checks.  According to MoneyWise:

“More than 75 members of Congress say that until the pandemic is over, there should be regular stimulus checks.  President Joe Biden is being urged to wrap them into the $2.3 trillion infrastructure spending plan he’s now promoting.”

Stimmy checks, as far as we can tell, have nothing to do with infrastructure.  Yet that’s the beauty of perpetual stimmy checks in the interminable pandemic era.  The legislature can “wrap them into” just about anything.  All it takes is a simple stimmy check earmark.

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Are You Easy Prey? by Jeff Thomas

Broke governments, particularly the broke American government, are growing increasingly rapacious. Unfortunately, the only way to protect yourself may be to leave the country. From Jeff Thomas at internationalman.com:

easy prey

For many years, I’ve been predicting the coming of a crisis of epic proportions. I’ve focused on the economic and political aspects, although the social aspects will be no less severe.

This is not the stuff of crystal balls, nor is it mere guesswork. The fundamentals for economic crisis have remained essentially the same for thousands of years, and if we’re diligent enough to study history and analyse the present, we can identify the fundamental ingredients of a crisis in the making. Once we’ve done this, the actual prediction of the event itself is no more inspired than recognising that if we have a bomb filled with explosives and we light the fuse, it will go off.

The predicted bomb was long in coming, but in 2020, it arrived on our doorstep and the fuse is lit.

Governments understand that, if they wish to give the shaft to their own citizens and still remain in power, they must deflect blame for their actions to another party.

In 2020, they outdid themselves by creating perhaps the most ingenious distraction ever created. Whether or not the coronavirus was consciously created and/or consciously released, governments’ handling of it has been brilliant.

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Another Nail In The Coffin Of Big Cities, by John Rubino

Many of America’s cities are toast. From John Rubino at dollarcollapse.com:

The riots, political turmoil, and other banana republic embarrassments seem to be ending – for now. So let’s get back to examining the real problems of this hyper-leveraged, dangerously-complex world. Like how big cities might soon be obsolete:

Pretend it’s 2019 and you’re living in a major US city. You, your spouse and two kids have a fairly nice (though admittedly very expensive) apartment in a relatively safe neighborhood, and life is pretty good. There’s a park nearby, dozens of great restaurants within walking distance, and plenty of interesting friends. And of course your high-paying jobs are right there.

Then comes 2020. A pandemic causes your mayor to panic and lock down the city. There go the park, friends, and restaurants. And before the horror of this new normal has a chance to sink in, civil unrest explodes and turns your once-iconic neighborhood into a Mad Maxian war zone of burned-out cars and boarded up storefronts.

If it was just you, you might stick it out. But with a family, this life is now untenable. So you look into moving, preferably to somewhere semi-rural where neither a lockdown nor riots will ever be a problem and the kids can actually play outside. Maybe it’s time to indulge your fantasy of working remotely from a homestead in a gorgeous place.

But you immediately hit a technological speed bump: Broadband Internet, which up to this point had seemed both ubiquitous and a basic human right, isn’t available on the homesteads you now covet. The only option out there is low-tech, unreliable, molasses-slow satellite Internet that, if the reviews are to be believed, is worse than nothing at all.

You realize that if you want to keep doing your work at a high level, you’ll have to stay urban, or at best suburban, with all the health and safety risks that that now implies. Big cities and their burbs, it seems, will live on for a while as necessary places for sophisticated professionals to do their thing.

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“People Are Fed Up”: California Out Of Excuses As Coronavirus Defies Militant Lockdowns, by Tyler Durden

People might not be quite as angry if all the lockdowns and masking had done any good, but they haven’t. The hypocrisy hasn’t helped, either. From Tyler Durden at zerohedge.com:

California’s response to COVID-19 ranks slightly below China welding people inside apartment buildings in terms of militancy, yet the for all the measures taken by the Golden State, it’s become one of the nation’s worst epicenters for the pandemic, according to Politico.

Registered Nurse Allison Shiftar puts on protective glasses as she gets ready to go into one of the triage rooms to care for a Covid-19 positive patient in the emergency department at Sutter Roseville Medical Center in Roseville, Calif. | Renee C. Byer/The Sacramento Bee via AP, Pool)

And if Politico is calling out California, whose Democratic governor deems himself above his own rules, you know it’s bad.

America’s most populous state has become one of the nation’s worst epicenters for the disease, setting new records for cases, hospitalizations and deaths almost every day. Things are so bad in Southern California that some patients are being treated in hospital tents, while doctors have begun discussing whether they need to ration care.

The turnabout has confounded leaders and health experts. They can point to any number of reasons that contributed to California’s surge over the past several weeks. But it is hard to pinpoint one single factor — and equally hard to find a silver bullet. –Politico

The state of nearly 40 million residents has seen almost 2 million cases and 22,000 deaths despite strict mask mandates, school and playground closures, and restrictions on dining that are destroying small businesses across the state.

“Nationally, there has been a kaleidoscopic application of every imaginable type of lockdown order with California being the most restrictive and inflicting the most devastation on small businesses and the most economically vulnerable service workers. And still, we are none the better as far as COVID is concerned,” said California Restaurant Association President and CEO Jot Condie, adding “In fact in L.A. where indoor and outdoor dining are completely shut down, with indoor dining [closed] since July, the virus rages on.”

Meanwhile, the state – like many others, is suffering from spikes in crime, mental illness and suicide.

At more than 100 new daily cases per 100,000 residents, California’s case rate is second only to that in Tennessee, according to the nonprofit tracking site Covid Act Now — though it’s a state that does not mandate mask wearing and allows indoor gatherings of up to 10 people. The website Covid Exit Strategy shows a 97 percent rise in Covid throughout California, which has gone in the opposite direction from its West Coast counterparts, Oregon and Washington. -Politico

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