QUESTION:
Thank you for your fascinating blog. I thoroughly enjoy reading your analysis
on social, political, financial and historical topics. i would like to make a
couple points with questions and get your analysis or feedback on these.
First point: You
describe that post 2015.75 (Big Bang), you expect a peak in bonds (safe haven)
that will coincide with a low in stocks due to global fear. The eventual
collapse in bonds will drive everyone into “private assets” causing a major
rise in stocks and commodities due to lack of confidence in government. At the
same time, you say that government won’t give up the fight on taxation and
asset seizure. So, my question is, what good is it to invest in stocks in this
private phase if the government will most likely tax all profits to the point
of making the investment pointless? Why would people continue to buy stocks
then? Typically when fair rule of law degrades, people hoard and don’t invest,
correct?
…
Thanks for your
analysis!
ANSWER: Historically,
this has been the difference between movable and immovable assets, such as real
estate. Collectibles, stocks, and precious metals are in the moveable category.
Of course this is what governments are now attempting to seize.
The best hedge would
be to have assets in terms of stocks in the USA, and certainly not in Europe.
It may be harder to engage in a taxation of shares as an asset, whereas in
Europe they are much closer to communism and see nothing wrong with
taxing assets, not just income.
If we look at the fall of
Rome, the first asset class to decline was real estate, as you cannot take it
with you when you leave town. Thus, the population of Rome collapsed from 1
million to 15,000 by the Middle Ages. People had no choice and just walked
away, unable to pay the taxes demanded.
Taxes are the great
destroyer. You are an economic slave if you simply cannot retire without having
to pay taxes. Taxes reduce economic growth and lower productivity for they are
no different, economically speaking, from some gangster demanding “protection”
money to operate a business.
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