The Department of Homeland Security dealing with more than 48,000 unaccompanied children crossing the border into Texas has created a real controversy.
Aside from the humanitarian issues, we must consider what is causing this issue. That centers on immigration reform and the idea of giving amnesty to children.
Quite frankly, if I was Mexican, I would have to say that this is a viable shot to secure their future.
So what can be done? The entire issue emerges from taxes. The income tax should be abolished and we should simply have a consumption tax period.
Because only American citizens and green-card holders pay income tax. Aliens even pay sales taxes. If we abolished the income tax that whoever is here then pays. The “rich” cannot take a lawyer to negotiate the sales tax on a car where that is done with income taxes.
Additionally, the aliens do jobs Americans do not want. In New Jersey, you are not allowed to pump your own gas.
Yet, gasoline is no more expensive here than in California. We have eliminated jobs at parking garages and gas stations that the youth use to do to earn money during their school days.
They use to be important for they were apprenticeships in a way teaching kids that they had to earn money etc, Now, the youth do not do those jobs and the immigrants do what American youth feel they are too good to do.
History repeats and there is always a massive deflationary implosion because government ends up consuming so much money it sucks the life-blood out of everything. The Founding Fathers were very smart and they forbid DIRECT TAXATION to preserve our liberty.
The difference between a Consumption Tax (indirect) and Income Tax (direct) is rather simple. The first government does not need to track you whereas the latter income tax you have an obligation as an economic slave and they own you and your labor. It is a matter of freedom.
The great liquidity tsunami of the post Crash era is coming to an end. But the inflationary aftereffects are only just beginning.
The Fed is now actively tapering its QE programs. The $85 billion per month QE 3 and QE 4 programs have been reduced to $45 in asset purchases billion per month.
While this still comes to an annualized rate of $540 billion in purchases per year, it marks a significant shift in Fed policy.
Let’s be blunt here. The Fed has engaged in the single largest monetary experiment in history, betting the US economy and banking system on misguided theories that have little to no evidence of success.
The 1970s proved that the Phillips curve (the idea that high inflation cannot coincide with high unemployment) was a bogus idea. And both Japan and the UK have proven that QE does not generate sustainable growth: both countries have engaged in QE efforts equal to over 25% of their GDPs… neither have seen sustained economic growth.
Finally, and this is the single most important item to note… the Fed is fighting the wrong fight. And it has been for well over a decade.
In the early 2000s, Alan Greenspan was worried about deflation. So he hired Ben Bernanke, the self-proclaimed expert on the Great Depression from Princeton. The idea was that with Bernanke as his right hand man, Greenspan could put off deflation from hitting the US. Indeed, one of Bernanke’s first speeches as a Fed President was titled “Deflation: Making Sure It Doesn't Happen Here"
The entire reason Bernanke was hired was to ward off deflation. Now take a look at the following charts.
Here’s what happened to home prices during the Greenspan/Bernanke tenure.
This looks an awful like inflation, not deflation.
Here’s what happened to food prices.
Here’s what happened to oil prices.
And here’s what happened to stocks.
All of the above items indicate intense IN-flation, not DE-flation. The Fed literally hired a deflation expert who helped manufacture one of the greatest periods of inflation in history!
My point with this is that the Fed is typically way behind the curve when it comes to economic forecasts and subsequent monetary policy. By worrying about deflation, the Fed blew bubbles in most asset classes resulting in the 2008 Crisis.
Walter White he isn't: just call him Breaking Bob.
According to AP, Fresno police have arrested a 64-year-old man suspected of cooking methamphetamine in his apartment at a retirement community. KFSN-TV reports Robert Short was pulled over as part of a routine traffic stop late Saturday and officers found meth in his car.
Investigators then went to Short’s apartment in the California League-Fresno Village, where they found a half pound of meth, heroin and materials for a meth lab.
Police say the street value of the drugs Short was carrying is close to $1,700. Officers also found scales and baggies in his car for the sale of meth.
Short’s neighbors at the senior housing facility say despite the tight-knit community there, they didn't know Short, who kept to himself.
Short had been on supervised release for previous drug sales.
But aside from the fact that in a New Normal in which senior citizens are forced to cook meth in order to survive, perhaps a more salient question is how long until local police departments are told to stop busting drug dealers around the nation for fear of what that could do to US GDP growth?
Recall that as insolvent Europe has shown recently, in order to magically and artificially, make its GDP appear stronger, one simply needs to "estimate" the positive impact of such illegal activity as prostitution and drugs, and add them to the national output.
With US GDP once again sliding fast and just one negative quarterly print away from an outright recession , it is only a matter of time before the US Department of Commerce adopts this latest methodology. And then comes the question: at what point will DEA busts of this kind be considered counterproductive to GDP growth?
Because while today's meth lab bust was tiny and its disappearance will hardly nudge "pro forma, Non-GAAP" GDP materially lower, what happens if and when a massive drug facility a la Pollos Hermanos is taken down: will the Deutsche Bank chief "economist" advise that net of drug busts US GDP was really substantially higher? Or rather make that when, not if...
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Livio S. Nespoli has been a broker, registered investment advisor, and financial publisher since 1985.