A few months back I put the idea out there that the economy would look good for most of 2010 due to companies and individuals showing as much
profit and capital gains in 2010 as possible. The airline industry as a whole for the first time in many years is going to report a profit
of over 2 billion in 2010. Stocks have been on a roller coaster ride all year allowing investors of all size to pull profits out of the markets.
When the bill ball drops in times square on December, 31 2010 the tax rates on capital gains and corporate profits all go up considerably.
Why would companies and individuals choose to pay higher taxes in 2011 if they can have that income taxed at the lower 2010 rates? The
economic up tick we are being told is signaling a recovery in America is really just people showing as much profit and capital gains
as their accounting practices will allow this year so that next year they can show practically nothing.
Don't take my word for it, from a Jun 14, 2010 CNBC article entitled Take Some Profits, Before the Tax Man Takes ?Em. Quote:"As my old friend Art Laffer continually reminds us, the Tax Man is coming to town on January 1, 2011. Taxes are going up across-the-board. So investors should seriously consider selling into any stock market strength ahead of the tax deadline. Doing this will enable investors to lock in a lower capital-gains tax this year and beat next years higher rates. "
Even with all the extra tax revenue that will be generated this year the deficit for 2010 is projected to be 1.4 trillion dollars. What do you
suppose the deficit will look like next year when the top corporations and individuals all show dramatically lower profits, income and capital
Through a combination of massive deficit spending and the announcement of future tax hikes what they have done is create the illusion of an
economic recovery that is going to hit a brick wall in 2011. As the 787 billion stimulus begins to wind down we are seeing that the states
are issuing warnings of massive layoffs and suspension of services if additional federal bail outs are not provided. We have delayed dealing with
the 2.8 trillion dollars worth of municipal debt and the oversized state and local budgets via the stimulus bill. The economy has not recovered.
The states cannot afford their budgets and more cities each day are warning of going into default.
There is one disturbing bit of information that you have to get your head around.
The United States in 2010 will issue nearly as much new debt as the rest of the world combined.
Does anyone in their right mind believe that we can continue to do that for very much longer. How can 300 million people create as much new debt
as the other 5.7 billion people on the planet COMBINED! There are economists still seriously arguing that what America needs to do is borrow and
spend at even higher rates than we already have in order to fix our economy. Have we completely lost our minds or are we on a deliberate path
to collapse the system in order to replace it with something else entirely?