Thursday, 24 January 2019

Wilbur Ross is Correct

Someone got around to the U.S. Commerce Secretary today....Wilbur Ross....who spoke up to federal workers on furlough or working without pay.....that they don't have money to pay bills, buy groceries, and attempting to use food banks.

His response?   “I know they are, and I don’t really quite understand why.”

Here is the blunt truth.....these individuals....some making $70,000 a year....are living paycheck to paycheck.  Some, in a couple situation....clearly over $200k a year before taxes, and they live paycheck to paycheck.

Sympathy for them?  No......sorry, I have none.

It's one of those rules I had from age thirty-five on....have three months of pay sitting in some kind of account (either savings or CDs) which you can use in some emergency if necessary.

How did these dimwits get to this stage?  Lots of credit, and the belief that nothing would derail their fantastic lifestyle.

Where Venezuela Went Wrong

You could write a 500 page epic story over where Venezuela went wrong, but I'll try to limit this to three central causes:

1.  In 1989 to 1993, there were some woeful economic downfalls, with some folks ending up dead in the chaos.  The two coups in 1992 by Hugo Chavez....connected to the economic period.  Chavez failed in the coups (six to eight months apart).  But the damage was started at this point.  Confidence in democracy was a problem, and corruption was s national issue.

2.  In 1999, Hugo Chavez arrives.  Chavez thinks he's a wise at government, economics, commerce, banking, etc.  He declines any and all advice....taking mostly advice from the inner circle.  Redistribution of wealth and ownership became his central theme.  Literally every single bit of wealth that did siphoned off and redistributed.   In 2013.....Hugo passes away.  Some folks had this idea that the country would have some coup, and somehow find it's path back to stability.  They were wrong.

3.  In 2013, Nicol├ís Maduro arrives, via an election, and the Chavez era continues with more redistribution.  The chief item Maduro's resume that suggested where things were going to go?  For one year of his life....he was a bus driver.

The correction situation today?  Well....there's no more wealth to redistribute.  Anyone who had money left....moved it beyond the border.  Stores are mostly empty.  People were reported in 2018 to have lost a minimum of 10 pounds over the year because there's simply nothing left to eat.  It took thirty years, but it's pretty much wrapped up.....they spent everyone's cash.

The Give and Take Problem

"The government cannot give to anybody anything that the government does not first take from somebody else."
-- Adrian Rogers

I rarely quote ministers, but I sat and reflected upon this recent commentary for a 75-percent tax situation for the ultra rich by Representative Alexandria Ocasio-Cortez (D-N.Y.) (AOC).  I eventually came to this quote which really lays out a frustrating part of the taxation gimmick. 

It used to be that the government simply provided simply freedoms (at least in the 1776 mentality).  Then the government came to provide protection against invasion....requiring a standing Army.  Then the government reached a stage where taxation was necessary because of the various services being provided (roads, bridges, education, etc).  Then the government took on social 'corrections' and got into housing and healthcare for the elderly.  Then the government got into university loan situations where vast sums of money were given for sometimes worthless degrees.  So now the government (by AOC's insight) would go and become the fair distributor of wealth.

Someone from the government (if the AOC proposition continues on and becomes reality) will sit and make a determination about who is reasonably wealthy and overly wealthy.  A guy making $100,000 a year?  He's probably safe.  A guy making $500,000 a year?  He's probably in the threshold of being in the 75-percent taxation racket.  A guy making $1-million a year or more.....he'll be in the 75-percent tax racket for sure.

At some point, if all this redistribution and taxation business fell into place (assuming in the next decade) would see a dramatic drop in business growth, and probably view the unemployment rate climbing to around 10-percent businessmen got smart and just downsized. Why bother taking risks or making money?   It would take around a year for everyone to wake up and realize that instead of resolving/fixing things....this gimmick of 'give and take' delivered some incredible negativity to the economy. 

At that point, the voters would turn to President AOC....asking for an explanation.  And she'd have to admit she really didn't know much about economics or business.