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Great Depression Online Archive Issue:

Something to Smirk About

Great Depression Online
Long Beach, CA
June 11, 2010

Inside This Issue You Will Discover…

*** The Next Ticking Time Bomb
*** The Legend of the Laffer Curve
*** Something to Smirk About
*** And More

“The economy will collapse in 2011.” – Art Laffer

The Next Ticking Time Bomb

Last Sunday’s Wall Street Journal published an ominous piece by Art Laffer, warning of the next ticking time bomb set to explode across the U.S. economy…

“On or about Jan. 1, 2011, federal, state and local tax rates are scheduled to rise quite sharply.  President George W. Bush’s tax cuts expire on that date, meaning that the highest federal personal income tax rate will go 39.6% from 35%, the highest federal dividend tax rate pops up to 39.6% from 15%, the capital gains tax rate to 20% from 15%, and the estate tax rate to 55% from zero.  Lots and lots of other changes will also occur as a result of the sunset provision in the Bush tax cuts.”

~~~~~~Private Insider’s Report~~~~~~

Chaos and panic are always created when new financial rules replace old, established ones.  Those who understand this have the combination to the New Vault and can easily open it, reach in, and get their generous share of the new wealth.  Unfortunately, those who don’t understand this will desperately cling to the Old Rules and stoically go down with the sinking ship like a brave old sea captain.

New Rules here

~~~~~~~~~~~~~~~~~~~~~~~~~

The effect, according to Laffer…

“When we pass the tax boundary of Jan. 1, 2011 …the train goes off the tracks and we get our worst nightmare of a severe ‘double dip’ recession.”

Unfortunately, he’s probably right.  Laffer, if you didn’t know, has thought about taxes, and how they impact an economy more than just about anyone.  If you don’t know who Art Laffer is, he’s the originator of the Laffer Curve…

The Legend of the Laffer Curve

Legend has it, Laffer first sketched the Laffer Curve out on the back of a napkin in 1974 while dining with Donald Rumsfeld, then Chief of Staff to President Ford, and Dick Cheney, Rumsfeld’s deputy at the time.  Later the Laffer Curve would become the intellectual backbone of supply side economics.

The premise of the Laffer Curve is that reducing marginal tax rates increases the flow of gross revenues to the government.  The idea seems simple enough…high taxes stifle productivity, low taxes encourage it.  In short, a small piece of a big pie is much more than a big piece of nothing. 

But like most economic theories, once put into practice things never quite added up like they did when penciled out on the back of a cocktail napkin.  The government taxed less, and even thought tax receipts increased, they spent more…much more.

Yet now the government is set to do something even worse.  With tax rates going up, and projected deficits still above $1 trillion a year…they’ll, in effect, be taxing more and spending more.  This will strangle the economy.  After that, according to Laffer, tax receipts will crash.

“If you thought deficits and unemployment have been bad lately, you ain’t seen nothing yet.”

Something to Smirk About

There’s a lot of serious stuff going on.  In fact, things have been so serious out there we forgot to point and laugh at them.  What gives?  With the dismal unemployment report, tarballs floating up on Pensacola beaches, Joran van der Sloot, Barney Frank, and the European debt crackup, there’s hardly been a thing to smirk about.

We’ve even heard reports of young Chinese assembly line workers leaping to their death while on the job to escape the dismal work conditions.  If only country music had made its way to the Middle Kingdom…the Chinese youth would’ve known there’s a less permanent solution to a temporary problem. 

“Take this job and shove it; I ain’t working here no more,” goes the David Allan Coe tune.  Some jobs are just awful…we know, we’ve had our share.  But, good grief, no job’s worth killing yourself over.

Fortunately, just when we thought humor had been rubbed out from the face of the earth forever, wouldn’t you know it, the outgoing California Governator, Arnold Schwarzenegger, botched his election ballot.  He voted for two Senate Candidates, instead of one.

So here, for comedic relief, we’ll pause from the gravities of the world, point a finger, and howl with laughter… “You idiot!  You imbecile!  You moron!  You buffoon!”

He strutted into office like a peacock on the walk, beating his chest, parroting his old action hero movie script, and boasting how he’d reign in spending in Sacramento.  He’ll shuffle out a disgraced clown.  For rather than controlling spending in the golden state, he puffed cigars and pretended to be the Governor.  After that he got countless pedicures.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  The Great Depression and history have shown us clearly enough that when economic rules shift, they are merciless. Those who know, prosper… those who don’t, get crushed. That’s just the way life is.  Don’t get crushed.

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