The Motley Fool Discussion Boards

Previous Page

Retirement Discussions / Retired Fools


Subject:  Re: More Shutdown Fallout Date:  10/19/2013  9:39 PM
Author:  Howie52 Number:  18684 of 20604

"What ypou say may have merit. Maybe we should raise taxes, back to (say) the tax rates during the Reagan terms.

Count No'Count "


I suspect you will be looking at higher taxes than the past. And I
suspect the economic growth will slow dramatically. And I
suspect the unemployment problems we have now across the board
and across the western world will become more severe.
Unless something extraordinary happens.

The driver for the world-wide economic boom - and the reduction in
world-wide poverty has been the demand for goods and services
extending from the overall population growth coming out of the
second world war - driven largely by the western and eastern
economies and by the increased communication - i.e. trade throughout
the world triggered to no small degree by the war. The restriction
of economic growth imposed by the failed communist experiments and the
cold war disappeared - and for a while growth was explosive.

Now growth has stalled - and the current power blocks have no
clue about re-starting economic growth. I am not certain they desire
economic growth - either within the US or in the world.
The Reagan policies all require a vibrant economy - and they also
encouraged a vibrant economy. The logic being that if economic
growth is kept high, the overall wealth of the population would rise.
If the wealth rises, poverty would decline. This has turned out to
be largely true - as worldwide poverty has been reduced remarkably.

The underlying problem is that large economies tend to have
cyclical growth. Attempting to force continual "growth" requires
either periods of "irrational exuberance" or encouraging
growth in sectors - i.e. creating bubbles in the economy.
These approaches tend to fail. The world had a short period where
there was a positive cycle in many sectors simultaneously in the mid
2000s. And cycles do not last forever. When cycles coincide - the top
is lovely. The bottom is hell. The bottom was 2009 - 2010.
And to minimize life in hell - the money tap was opened.
Now if money is put to uses that generate more wealth, a positive
cycle is started again ---- in theory. However, if money is directed
poorly - well things do not improve so much.
When money is artificially created and is not used to create
a higher taxable base, the wealth cycle is stopped. So, you have a
choice - increase taxes and restrict growth - or put money created into
areas that generate economic growth which then generates tax dollars.
If you fail to generate the higher tax revenues from growth in the economy - you will either have to increase taxes - and suffer.
Or you will delay increasing taxes and eventually drive interest rates
sky high. Generally, a politician can outlive this problem - but the
next poor sap ----- will be saddled with a whole lot of poorer saps.

We are very likely to become those poorer saps.

This is my theory of economic turmoil - which may be full of the proverbial building blocks of horsepuckies.
However, since the hockey season has started up and I will be heading
to a local arena to see minor league hockey again in a week or so, I
trust and hope that the world does not end as we know it this week.
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us