Mindset

Doug’s proposed measures will also impact a second critical mindset – one belonging to our primary job creators – entrepreneurs, investors, private corporations.

At present, our corporations possess approximately $2 trillion in cash or quick liquid assets; this is near 40 year high as ration to GDP.  Their current mindset is:

Why invest in an extremely business hostile environment?   We have to contend with Dodd Frank, ObamaCare, 40% increase in our debt last 2 ½ years, 12% US dollar decline, US support for Brazil oil drilling while disallowing ours in contempt of court,  EPA implementation of Cap n Trade, and the most blatant – Government attempt, via NLRB,  to mandate how and where our leading exporter (Boeing) can expand.

Two specific proposals – “cut, cap, balance” and the Fair Tax, if implemented will quickly change this mindset.  The former will shift available resources from the wasteful public sector to the private.  The latter’s 0% federal corporate tax will position US immediately as a haven for global venture capitalists, all while being revenue neutral, progressive  via prebates to low income.  Elimination of IRS and projected $430 billion annual savings to the economy, will also add finally again to a business friendly – I want to invest in the US mindset.

Ted Hruzd

Boehner Blew It

To Dick Morris:

Apr 9, 2011:

Dick - I totally agree with you. What a missed opportunity by Boehner!  As a result, foreign creditors may be now concluding than any further investments in US Treasuries are extremely poor decisions.  If I was an investor from China I would invest internally as their middle class is growing.  That sort of investment promises positive returns while prospects in US Treasuries investments promise increasingly negative returns.

The dollar has lost 14% of its value past 10 months.  Watch this accelerate.  I read a report that the Fed has been averaging $4 billion a day financing our debt since November (our debt increases 4-5 billion per day).  No wonder the 10 year T Bill is approx 3.5%.  If the Fed backs off QE2 in July, I expect the US Dollar to collapse.  Who in their right mind would want to invest?  Pimco, the world's largest bond fund sold off all of their T Bills few months ago.

Refer to Damon Vickers book "Day After US Dollar Collapses" for potential severe scenarios.  Or read my review of that on Amazon or my blog - Economics501.wordpress.com.  Yes - it is very possible that come July the IMF and G20 may be calling the shots for the US finances.  This can result in severe cuts in our entitlements.  Yes - Boehner blew it big time.  He would not hold out for a 2% budget haircut.  Expect a 50% haircut come July.  Our total deficit has been growing over 12% a year and our GDP only 2%.  Again - whi in their right mind is going to invest in US besides the Fed?

One more quick pitch here how to grow our economy: The Fair Tax now in Congress as HR25:

Our cumbersome tax code benefits many special interests with little positive effect on economic growth. How can we address this when our economy desperately needs a boost ? One significant answer is the Fair Tax in Congress (HR 25).  It eliminates all special interests, all federal personal and corporate income and payroll taxes and replace that with a revenue-neutral tax of 23 percent (for now) for all "new" products. It is progressive, provides "prebates" to lower-income earners. It eliminates the IRS, which alone will boost our GDP by about $300 billion. That money in the private sector will further generate extra GDP revenue, thus reducing our debt.

The fair tax (fairtax.org) can be set up so Social Security can be funded long-term. Even if the fair tax rate increases (to fund entitlements), the fact that it eliminates federal corporate taxes renders it business-friendly, which likely will significantly increase GDP, thus Treasury revenues.

Dick - keep up your great work.  Let us put pressure on our representatives this week to reject the 38.5 billion deal.  Let us also call for someone else to replace Boehner.  Let's call for someone who can read a balance sheet - Paul Ryan (1st choice); Michele Bachmann (2nd).