The Tax Man Cometh

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Death and taxes and childbirth! There’s never any convenient time for any of them!

Scarlet O’Hara, Gone With the Wind

I rather wish that Americans paid all their taxes all at once in one lump sum each year:  income taxes, sale taxes, gas taxes, utility taxes, property taxes, community taxes, etc.  I think most of us would be shocked at how much we make ends up in the government fisc.  The last century was an experiment in what happened when governments were able to tap into the wealth of its citizens with abandon, and the result of the experiment inevitably ends in vast unpayable public debt, at least unpayable if inflation does not work its black magic in reducing the value of the debt.  Debt repudiation looms, or a reduction in the value of the currency which amounts to the same things.  And with those happy thoughts, I wish you a happy tax day.

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5 Comments

  1. Public debt as a permanent part of government finance has been with us since 1694, when the newly-incorporated Bank of England bought the National Debt with money raised on undated “Long Annuities” (later known as “Consols,” the interest being a first charge on the Consolidated Fund)

    No country that controls its own currency need ever default. The note issue is a government debt, no different in principle from the bond issue. It simply happens to be issued in smaller denominations and does not bear interest. The one can be converted into the other at pleasure. Every government bond the Bank of England purchases can be held in the Issue Department to back an increase in the note issue. The government’s total indebtedness remains precisely the same.

    In fact, the sale or purchase of Gilts (government bonds) is an important tool that central banks use to control the money supply

  2. “No country that controls its own currency need ever default.”

    Tell that to Zimbabwe. Conjuring money out of thin air only works so long as it is backed up by a strong economy and creditors have a rational expectation of being paid.

  3. Last week, I sent in $206 we owed. They don’t withhold income taxes on social security, so we send quarterly estimated tax payments – 1040ES. This year, I finally estimated it so I owed a few, instead of a late refund.

    The only way to save America from the unsustainable $23 trillion and growing @$1+ trillion per annum debt crisis is by devaluing the dollar/inflation service = pay the interest with cheap “money.”

    Some critics said when the US closed the gold window in August 1971, “it busted the last link with monetary sanity.”

    Fun facts. In 1694, the Bank of England was spawned and invented paper “money.” Gold reserves were supposed to be held in the BoE vaults. They issued way too much paper. Paper “money” is a liability of the issuer, not money. Payment risk was created.

    In 1717, in response to the first banking crisis in modern history, Isaac Newton, likely the smartest man that ever lived, was drafted, Master of the Royal Mint, by the Crown to resolve the crisis. He invented the gold standard.

    See Henry Kaufman’s 2017 book, Tectonic Shifts in Financial Markets: People, Policies, and Institutions. Anybody younger than 35 years-old has experienced only disinflation and falling interest rates.

    The foolishness of policy-makers and market participants led to the 2008 financial crisis and its long-running aftermath. Einstein’s definition of insanity: “the Fed has attained an unprecedented prominence – precisely because of its past policy failures.” Greenspan and Bernanke failed to note deep changes in financial markets – securitization; repeal of Glass-Steagall; increased concentration of markets – handful of megabanks dominate. Dodd-Frank worsened the concentration of financial risks – far more fragile financial system and more dependent on the idiotic Fed. Without the slightest understanding of the real world, just a slavish devotion to their theoretical models.

    The following is provided for your consideration. I don’t agree with al of it.

    Nixon, a big government-loving Republican closed gold window = ended dollar convertibility @$35/ounce; instituted wage/price freeze; import restrictions. Soon enough effective dollar devaluation 21% US $ devaluation to $42.22/ounce gold; oil prices soared 4x, gas lines; inflation was 12% by 1974 and gold prices @ $195/ounce. Then, the ‘genius’ Fed raised rates to unprecedented levels to (13% mid-1974) to fight inflation (from 1971 dollar devaluation and oil shock after the Yom Kippur War 10/1973). That sent GDP crashing down 3.2% (biggest post-Depression drop until the 5.1% drop 2007 – 2009). Unemployment rose to 9% – highest since Depression. S&P 500 went down 51.5% from January 1973 to December 1974.

    Starting in 1971, credit soared out of sight to the benefit of the banks, speculators, the already wealthy, and the politically connected.

    Fiat money is a source of global trading imbalances, soaring debt, escalating median home prices, declining real wages, and the massive rise of the 1% over the bottom 90%.

    It was only that Nixon closed the gold window. They keep giving the almost-always-wrong central planners at the Fed and Treasury more power to do more harm.

    All this and Heaven, too.

  4. AOC’s and Barry Sanders’ proposed, two-line IRS Form 1040.

    1. How much did you make?

    2. Send it in.

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