Mod Note (Andy): This post is a reprint from the January 15th edition of Jared's Daily Dirtnap Newsletter. If you'd like to read more, WSO readers qualify for a $100 discount to his Daily Dirtnap daily market newsletter...just email [email protected] and mention "WSO Monkey Discount". You can follow Jared on twitter at @dailydirtnap..
So here it is, January 15th, and we’re reasonably close to electing a president who is pretty much a communist. There are still a lot of things that have to happen...he has to get through Hillary, through Trump and/or Bloomberg, but nobody thought this could happen six months ago and it is happening. I told you it could happen. 90% tax rates, here we come.
Of course, that would not be good for capital formation, and hence this newsletter, so it would probably be the end of the line for me (and all you readers).
So as much as this tends to be an apolitical newsletter, I don’t have a problem going anti-Bernie. As much as some people may not like Trump or Hillary, we would still have a Wall Street. We would still have capitalism. With Bernie, no.
But here’s the sad part: even though Bernie probably won’t see the Oval Office this year, this is only the beginning. He might not be back in 2020, but someone else will, someone probably worse. Or 2024. I figure we are 2-3 elections from totalitarianism in this country.
I used to make these sorts of statements all the time in early TDD. There’s a story in here that I’m getting to.
I was onto something in 2008, although I didn’t really know how or why. Quantitative easing--the printing of money to buy government bonds--can destroy a country. I thought it would destroy us through hyperinflation. But that’s not what happened. We had asset price hyperinflation--stocks, bonds, real estate, art, etc, which made inequality unimaginably bad, which would not have happened on its own, probably, or would not have happened as quickly. I don’t consider inequality to be a bad thing, but it is a pretty good predictor of political instability. So beating up on the rich will always be a feature of Western democracies.
But what is striking here is how closely the U.S. has mirrored the Weimar experience. In fact, you can go around the world and see how printing money leads to political instability which leads to authoritarianism (I am also referring to Trump here). There are tens of millions of people who want 90% tax rates to imitate Sweden or Denmark whose tax rates are in the 50s-60s. Maybe Sweden in the 1970s is what Bernie meant.
I’m not optimistic here. We might cheat death in 2016, but it will catch up with us eventually.
As you can imagine, the academic community is all-in for Bernie. Bernie is actually not popular here in South Carolina--most Democrats prefer Hillary. Funny thing about the Bernie demographic is that you’re looking at household incomes of $100K-$200K. Don’t think you’re going to be able to escape higher taxes. $18 trillion was the number they put on Bernie’s proposals. Since we can only raise about another $200-$400 billion in taxes on the rich, that all goes to debt. Or you tax everyone else. Great! 200% debt/GDP. You can do something about debt when it’s 100% debt/GDP, but when it gets out to 200%, it’s checkmate. ODDLY FREAKING ENOUGH, the best trade to come out of this will be the one I was pushing in 2008, which is gold. It’s only a matter of when, not if.
more Bernie conversation going on here: http://www.wallstreetoasis.com/forums/bernie-sanders-overtakenovertakin…
Good to see someone else here living in South Carolina.
That said, I don't buy in to the Bernie hysteria. To accomplish any of his agenda, he would have to go through Congress. I seriously doubt a rise in the marginal tax rate is going to pass through a Republican House or a Republican Senate.
Agree.
On a different note, I'm not a political historian but it seems like these attitudes move somewhat in generational cycles. We had 90% taxes on the richest people back in the 60s and 70s, and I think maybe even back early towards 1900. (I'm not sure what income taxes looked like before the 50s). We had a stable system in place that was started by FDR and boosted (or maybe saved) by the post-WWII boom. That system lasted all the way until Carter when inflation eventually caught up with us. Since Reagan we've had a pretty favorable tax environment for citizens across the board. Who knows. Maybe that's going to change with the aging baby boomers, and others, who demand their benefits regardless of the cost to the country and we won't see another Reagan inspired boom until the generation after the Millennials. Or maybe things will stay status quo. In either case, Millenials are f***ed.
If the political climate keeps moving toward institutionalized stupidity, I'm leaving the country. Life is too short to pay for other people's shitty existences with my work.
Not that I don't admire your initiative but, where would you plan on going? The US is still pretty darn good (for now) compared to most other developed nations. At least for now, I don't think the grass is greener on the other side.
Hello Canada. If not that, maybe Texas and plan for secession.
"Who is John Galt?"
Weimar Republic Monthly Inflation Rate: 29,500% U.S. Annual Inflation Rate: 1.5%
Fail to see how we're even remotely like the Weimar Republic at all.
"what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may FSM have mercy on your soul." billy madison.
Right.
Holy shit the level of fear mongering and straight up misrepresentation and misunderstanding is horrible.
The current system as it stands is not sustainable and cannot possibly continue indefinitely, not unless the country wants to continue moving towards an oligarchy.
I'm Aussie and support Bernie, many of his policies already exist in other countries, the USA is surprisingly backward on certain subjects.
Throw all the shit you want turd burglars. Adapt or die, soon enough the baby boomers will die and those trying to emulate their business model will find themselves in a strange new world.
Classic. Got to love foreigners who pick favorites in elections that they can't vote in and then criticize and entire country for not being up to their standard.
If the USA is surprisingly backward in some respects, the rest of the world is unsurprisingly backward in every other respect.
And what the actual fuck is this trend of random Australians talking about American politics on WSO about?
Investment and finance professionals seem to short circuit when it comes to political analysis and economic implications.
It's pervasive.
But its a real disservice to the industry's track record and domain credibility. I get doom & gloomers will always have a thesis, but when regular market commentary has a 'leave Brittany alone' melt down, it doesn't wear well.
Would love to read some 09 writings from this guy about burying gold in your back yard, shorting treasuries/USD/S&P, becuz Obama is a Kenyan socialist.
Australian politics has a habit of swinging from the left to the right. We also vote for the party moreso than the leader, which has led to some interesting cat fights in recent years.
We vote in one party who raises the economic side of the country, brings up business confidence, trade surpluses, R&D incentives, etc. This is good, the country prospers, but the country also tightens it's collective belt.
Then we vote in the other party who spends the money raised and the population benefits, we get larger tax returns, bonus money to spend on education or retail. The country is happy but we get fat. And then we swing back.
Most recently we have voted in the penny pincher business party. It was high time to. Unfortunately the head of the party was a Grade A Jackass. Australia was embarassed time and time again watching this buffoon humiliate the nation as we collectively facepalmed. He was also very backward thinking, looking to the policies of the past that were no longer sustainable (mining heavy, fuck the environment kind of stuff).
So in comes our knight in shining armour - Mr Turnbull - dun dun da dahhh.
Turnbull here is an example of a man from finance turned politician done right. A journalist, lawyer, investment banker and venture capitalist. This man understands the world we are moving towards and is attempting to lead a nation towards it in the best manner he can. He acknowledges and respects the past but recognizes that we do not live in that world any more.
Trump & Hillary (not to mention the flurry of idiotic republican candidates) I believe represent the old world, the kind of wankers you would want to kick out of office but it isn't so easy to do as it is in Australia. So, generally you'd be stuck with them.
Trump makes money, he is a shrewd businessman who I would probably piss my pants if I sat on the other side of the meeting table from. No doubt. But he is also childish, disrespectful and a joke. The rest of the world understands that.
Hillary is a fucknut riding on the laurels of family dynasty, she is a two faced hack who believes she DESERVES the presidency and will do anything to get it. She is in the pockets of so many industries, I wouldn't trust her for a second. She does not look out for the best interest of the American people.
But Bernie cares. He has a history of fighting for good causes and he has the knowledge and experience. He may be a little too socialist, but America has had presidents like him before, GREAT ones. The nation forgets that. I may not believe he is the strongest or most confident man, but he is the most honest and passionate contender. And he will fight for the people's interests as he has done so for decades.
Even if we accept your premise that "Bernie cares", who cares? This just means he believes his own bullshit. Intentions are meaningless, only results matter when it comes to implementing policies. The overwhelming majority of people have good intentions. The ideas he has are nothing new. They have been tried in various forms in different countries at different times and always end up with the same poor results.
Not to mention you say that he will fight for people's interests....whose interests are he backing? That's part of his problem. He divides the world between those he wants to give money to and those he wants to take from. Not bad if you don't pay taxes and are sucking on the government tit. Not so good if you are already paying ludicrously high taxes (50%+ in places like NYC for high earners) and your tax rate moves to usurious levels where the incentive to work virtually vanishes. But, yeah, I guess he "cares".
Your homework assignment is to re-read your post and try to come back here with a semi-coherent argument or better.
Hold up, I didn't talk about american politics save for the candidates.
Fair points, and if you were the real dick i'd be keen.
True that his policies require further honing to ensure the correct demographics are aided in the way they need it most, and that a balance is struck between aiding the middle class and poor and not overly taxing the rich.
https://www.washingtonpost.com/news/wonk/wp/2016/01/17/bernie-sanders-n… Better run down than I could ever provide.
Worst case - Income above $10m is taxed at a rate of 52 percent. Boo fucking hoo.
Look up the Nordic Model to get an example of how this shit works (well) https://en.wikipedia.org/wiki/Nordic_model
This guy @welshmin is fundamentally incorrect.
Continuing on what @DickFuld said about good intentions and how "bernie cares" does not matter.
Are you at all well educated? Have you taken economics 101? Well just in case you haven't I will educate you. Page 14 of my fundamentals of microeconomics book, this idea is considered one of the guideposts of economic thinking, written by a Harvard economics professor.
GOOD INTENTIONS DO NOT GUARANTEE DESIRABLE OUTCOMES. "There is a tendency to believe that if the proponents of a policy have good intentions, their proposals must be sound. This is not the case because proponents are often not aware of the secondary effects of their proposals."
If you'd like me to go on I can. But pretty much, lets just thank god Australians can't vote in America. Lol.
If you needed any more ammunition for why we should close the borders. This is it^^^
It's cute to come talk American politics after you've seen your first Michael Moore documentary.
taxfoundation org /blog/how-scandinavian-countries-pay-their-government-spending
Stop checking Reddit and go read a book you dope.
Some jimmies were rustled in the making of this thread.
Not a Hillary fan or a Democrat, but that's who we're getting, and I'd be lying if I said it kept me up at night. I stopped following politics exactly because I now see Hillary as the least-worst choice. Good Lord.
Yup.
I'm a Libertarian. Gary Johnson or even Rand Paul aren't getting elected. Not this time.
The Clintons are political animals; geniuses really. Things won't be great under her but no one is going to go full bear on our treasuries while she's president.
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