Capital gains need to be adjusted for inflation.

TAXING IMAGINARY GAINS

UNREAL GAINS CAUSED BY GOVERNMENT IRRESPONSIBILITY

It is amazing that in today's litigious society that no one has challenged the fairness of long term capital gains that are not adjusted for inflation. While we understand that assets that have a gain, especially those held for a short time do indeed likely have a profit, but gains on assets held for 20, 30, or even forty years old may show an increase in dollar value, but in effect, are actually a loss due the depreciated buying power of the dollar caused by inflated prices caused by government action. 

The average inflation, lets say on asset that cost $1000, could be more or less depending on item or asset, in 20 years is 112% or $2125. so a rise in value of $1125 would actually be the break even amount and that would not include any costs associated with owning that item.

For a 30 year period it is estimated at 147% or $2478, an implied gain of $1478 is actually the break even point.  

For a 40 year period the average rate is 201% or $3010, an implied gain of $2010 is actually the break even point.

While those numbers are revealing the rate in the foreseeable future are going to be far worse, with near double digit inflation rates expected for the some time.

Can anyone argue that this is not indeed actually another fraud caused by the government devaluing the purchasing power of out money and then taxing us on the perceived increase caused by their actions.

Short term capital gains, assets held less than year are taxed at your bracket tax rate 10 to 37%.

Long term, held over 1 year tax rates are up to 20%. but there is no provision for assets held a very long times. these assets should be indexed to account for the cumulative inflation over that time. 

In effect we are being taxed on assets that we held for many years, in effect taking most likely any increase in value that has occurred. By holding those assets it seems the government reaps more of a reward for your having done so, than you. 

Is trade decoupling on the horizon?

TRADE WARS NO LONGER ABOUT RECIPROCITY

CAN CHINA SURVVE WITHOUT U.S. TRADE?

It is no longer trade negotiations, based on using tariff's to address trade restrictions and barriers by trading partners. It is now using trade as a weapon to force submission to U.S. will in not only economic, but political and maintaining geopolitical supremacy.  It is no longer about reciprocity, which was a method of insuring fair trade between partners.

It seems our leaders in Washington believe that the U.S. is essential to the economic health of the rest of the world. A country with a population of 330 million vs a population of over 6 billion. While the U.S is a huge trading nation, it is debatable who will be more damaged by a decoupling of trade with the rest of the world. While the goal for Washington is submission and maintaining supremacy, its opponents understand that as sovereign nations they cannot allow themselves to submit to this intimidation. It is very likely this will  end in decoupling, a suspension of trade that will have uncalculated repercussions around the world.

While some believe that this will rebuild American industry and cause a decline in the economic power of China and its affiliated countries, it seems to be a delusional belief that the world can not survive without U.S. trade.

It is similar thinking that believed that Russia could not survive without selling energy to the EU, a policy that has forced Russia to focus on other buyers and has destabilized the economies of EU nations. The reality is that the EU may have lost the access to Russian energy for decades.

I suspect that if this trade war continues the U.S. is in store for increased inflation, a shortage of essential materials and even a shortage of simple domestic goods. While China and India and others will suffer for some time, they will have access to a market of over 6 billion willing to do business, that is proving to be a mutual prosperous endeavor.

It is possibly the end to globalization in trade and will descend into trading blocks made up of nations focused on manufacturing and essential materials and those who are made up of financial services and consumerism. In the end a very lopsided and unlikely competition.

The solution is co-existence as equals and mutual prosperity, not subjugation and submission. The alternative is a recipe for poverty of nonproducers or war as a last resort to maintain supremacy. 

 

Only fools believe that war can save their economies.

 THE WORLD HAS CHANGED SINCE 1939

WAR WILL BE THE END, NOT A NEW BEGINNING

It is not a secret that the economies of many countries are in dire straits, particularly in western Europe. We hear some who still believe that war can rescue them by stimulating economic activity and of course hoping to acquire assets of others. This has been a historical reality in the past, but the world is a far different place for many reasons.

At one time the west had a huge manufacturing capacity and during the depression, brought about by debt and speculation, that was infinitesimal compared to their debt today, war put all those idle factories and underutilized labor to work producing war materials. Money was supplied by increased borrowing and every aspect of the economy quickly accelerated.

Today those manufacturing facilities no longer exist and the debt is already at unsustainable levels. It will take decades to rebuild those manufacturing facilities and the same applies to the skilled workers to provide the labor. The last few decades has eroded the generational supply of specialized workers in manufacturing. There no longer are workers whose family worked in steel mills and mining that considered it part of their heritage. Only decades of new realities of child rearing that instill the virtues of producing things and a solid work ethic can produce a work force that provides national self sustainability.  

As for the finances to rebuild that infrastructure, western countries are now in a position that they will be having a hard time financing the interest on their past debt. 

It is also unlikely that they can muster the enthusiasm for large numbers of draftees to provide the personnel willing to fight to their death. 

The real solution for their internal problems needs to come from stopping the delusional messaging and entertain a frank conversation with their citizens as to how to rebuild their economies for a self reliant strong future. External threats are not their real problem, but decades of financial nonsense that does not produce real goods and wealth have eroded the financial health of these nations. Attempting to go to war with others, who actually have not engaged in those policies, will end in disaster.

Is Trump engaged in cryptic messaging?

 DOES HE HAVE AN END GOAL?

OR IS IT A DAY TO DAY NAVIGATING MINEFIELDS?

One has to have a certain bewilderment as to what Trump is up to in Gaza, Ukraine, and then there is Iran. The reality and narrative is often contradictory. 

In Gaza, which this ceasefire is a result of Israel's attack on Qatar and the implosion of Israel's political support in the U.S. This seemed to give impetus to bringing together enough forces to at least start a process to some semblance of a better place in Gaza. Only time will tell if this is going to be a reality. The amazing part that we have, or will be witnessing, in the coming days is the outrageous attempt to support the image of Netanyahu.

First there was envoy Witcoff,  Gerald Kushner and Ivanka in a speech to the relatives of the hostages, touting the efforts of Netanyahu in getting the hostages released. They were were met with boos and other negative remarks from the crowd. It was obvious that their presence there was to support the policies of Netanyahu to the Israeli population. This may have been planned as an effort for the domestic consumption, but today, everything is streamed around the world in minutes. I suspect that in the rest of the world it will not get a positive reaction, not for Netanyahu or the Trump team. Kushner also praised Israel for its taking to the high ground by not responding to Hamas in kind, but by its humanitarian focus.

Then there was the address to the Knesset by Trump, where he touted Netanyahu as the greatest wartime leader in history.  Acknowledged Miriam Adelson, who was present, as being instrumental in his policies with Israel, with their constant communication, and that she supported Israel over the United States. He also lobbied for a pardon for Netanyahu, one has to wonder if the whole media operation was orchestrated by Netanyahu himself. Trump knows well that this will be played around the world and also knows that this will be counter productive in raising the image of  Israel. Some will say he is just stupid, but it raises doubts about his motives.

Then there is Ukraine, where the huge tariff's demanded by the U.S. senate, on India and China, to discourage purchases of Russian oil, are a disaster and made the situation worse. Now we hear calls for Trump to Ok Tomahawk missiles for Ukraine, after similar calls, for Abrams tanks, Hi-Mars, Atacms missiles and F-16's, all that made no difference in the direction of the war. It seems Trump will go along and promise these, so that he can claim he has done all that he could to save Ukraine.

The suspicion is that Trump attempted a negotiated settlement, rejected by Ukraine and the EU and now is going to give lots of lip service, but is not going to go to war with Russia. If we recall, Trump criticized Russia as a paper tiger and not a real military force, while many believe this, I suspect he was telling Putin to get this over with on an accelerated rate.

While many are pushing for war with Iran, a potential disaster for the worlds fragile economy, I suspect that Trump is going to try to sidestep that in any way that he can, while giving lip service and even appearances of readying for war.

While, of course much of this speculation, there is no definitive plan by Trump, at least not in public, this leads to speculation. What is obvious, don't listen to what he says, but watch what is happening.

Is a currency crisis underway?

 END OF CONFIDENCE IN FIAT CURRENCIES 

NO WILLINGNESS TO RESTORE TRUST

Are we now witnessing the end of Fiat currencies, paper money without backing and created by governments without restraint? Indications are that the world is on the verge of a collapse of confidence in paper currency and the ability or willingness of  governments to make hard decisions on debt, deficits and financial responsibility.

While this is primarily the problem of the western world, it is a problem in every country, as no country has any backing of its currency. Paper currency was at one time a receipt for a unit of silver or gold and exchangeable. That reality began to be diluted in the 1930's and ended for good in 1971. It has been accompanied by deficit spending, inflation and now has exploded to levels that may usher in a period of hyper inflation and a total debasement of the currency.

Today the price of Gold is $4139. an ounce. silver has broken its all time high and is priced at $51.70 an ounce, numbers that indicate a growing doubt about the viability of the present fiat currency system. While these price increases have been huge and intense, it has actually created a freeze up in the market as the dealers and refineries are deluged with sellers and are unable to soundly price in risk and the future. There could be a temporary sell-off and price decline but many are reluctant to sell solid value for depreciating paper currency. It is an indication that many fear that their holdings of paper currency will evaporate in value and any price for solid assets may be better than nothing.

This takes us back to 1980, only 9 years after the end of metal backed currency, when inflation hit 14.6% which prompted the federal reserve to raise rates to near 20%. I remember receiving over 14% on CD's. Gold skyrocketed to $850 and ounce and silver near $50. The high interest rates led to severe recession until 1983 when a recovery began and gold remained under $500 for the decade. In reality that has been the last actual recession. The debt crisis of 2008 was minimized by more debt and helicopter money, same during the Covid era. No one has been willing to suffer the pain of recession and the liquidation of bad debt. 

Today we see the U.S. government shut down because they are not spending enough, even with a near $2 trillion deficit, same applies to the finances in Japan and Europe all are at the limits of their debt expansion but still talking about more spending. Many are unwilling to believe that these governments are nearing a crisis and others fear that their solutions will evaporate their wealth and assets. The U.S. is now expected to lower domestic interest rates, a fact contributing to this crisis.

The reality is the western democratic socialist economies are in severe trouble and there is no way out without tremendous long term pain. The problems indicated in 2008 have been addressed with more deficits and more inflation.

While many want to blame other countries reluctance to take these currencies as payment or hold their debt, it because of their hope of preserving their own economies rather than going down with this ship. 

We are hearing of solutions of Central Bank digital currencies and the elimination of cash. This would lead to restrictions on what is allowed to be bought and sold especially alternatives to this digital currency. Solutions that will in effect rob workers and savers of their assets to preserve a mismanaged and irresponsible currency system. It would most likely result in worldwide poverty for most.

The real solution is sound money representing a store of value for ones labor and savings. Sometimes the simplest solution is the best solution.

Hostages released, Hope, but difficult negotiations ahead.

 PALISTINIAN PRISONERS RELEASED

AID RESTORED

All 20 living hostages have been released and over 2000 Palestinian prisoners have been freed. Israeli troops have partly withdrawn from Gaza and aid trucks are beginning to enter the area. So far, all is according to the terms of phase 1. While it is a hopeful sign, it is going to require patience, cooperation and a regaining of trust to move to the next steps. 

The first sticking point will be Hamas disarming, it is understandable that they will be reluctant to give up their weapons until their is some sense that they will not be immediately attacked. There is also the makeup of a new governing body that needs to be made up of unbiased and objective leaders that can gain the trust of both sides. This will not happen in days or even weeks, but will be a process one day at a time.

The next phase will require patience from Israel and a clear indication that they are willing to let Gaza exist as an independent entity. The past narrative will need to be realigned if any confidence can be restored. Is this ceasefire is just a needed break in a hope of Israel restoring its image, or is it a real effort for a lasting solution? It will take trust and confidence on both sides for this to succeed, it will not happen overnight.

There probably should be some sort of peacekeeping troops in Gaza, not Israeli, not American or European. Some sort of order will need to be implemented. Thankfully the 200 U.S. troops are to stay out of Gaza, It seems their role is to monitor the situation.

Everyone will be on their best behavior while Trump and other leaders are in the region, it will be up to the Palestinians and the Israeli's to deal with their internal extremists, it seems their are plenty on both sides.  

Real peace can only be accomplished with communication and a real effort to deal with problems jointly, not in an eye for an eye policy or demanding submission. Gazans need to accept that Israel is going to exist, publicly, and only coexistence will end the death and destruction. It will take real diplomats from both sides and a close moderating and involvement from the international community. 

Money, Digital ID and Digital currency.

 MONEY SHOULD BE YOUR ASSET

IF YOU NEED PERMISSION, IT IS NOT YOURS

Historically, at least until the late 20th century, money was gold or silver and only represented by a receipt called paper money. For a deeper look at the history of money https://www.blogger.com/blog/post/edit/219171338015504465/828743332419915216. Today we are being bombarded with all kinds of alternative "money" none of which are an asset and increasingly they are not under your control or available for your access or even in your possession. What ever they want to call it is not money. 

The digital revolution has been a miracle of accessibility and innovation. It has made most everyone to have the ability to access the world in information and commerce. While it is a positive development we are now seeing the potential for abuse, particularly from governments and financial players. One example is digital currency, which has no backing of any kind, does not have the ability to ever be in ones possession and could disappear in the push of a computer button. It is touted as an investment and in some instances has increased in value by 100's of multiples, even though it is not accepted for most transactions.

But now governments, who are most likely the creators of digital currency in the first place, are proposing that they can insure it reliability and convenience by making a government controlled form of "MONEY". Again this new currency will not be anchored to any real asset will not be in your possession and can be limited to transactions only approved and permitted by the government. Every transaction can be taxed, cost fees and if you should fall out of favor for any reason can be  frozen or completely destroyed. 

The European community is expected to put digital currency into use by next year. We can expect it will start out as voluntary, but they have already put severe restrictions on cash or even any transaction that is not accompanied by signed statement from both parties as to what is being transacted, even among family members. The United States now have restrictions and limits on gifts or loans and many are subject to tax. Digital currency will be the most aggressive loss of freedom and rights to everyone in the history of government. Presently Europeans are attempting to move assets out of the country and the accompanying restrictions are being increased by the day.

It will all require a digital ID, which seems to be the newest attempt to track, store information and increase the ability of government to control and monitor your life. The so called, "Real Id" is in effect a national Id, something always opposed by rights advocated. This id's feature will be a digital picture that can be scanned and reveal everything about you, from your bank account, family members, medical history, all stored in a government database. This will be sold to increase your convenience and  your security. 

We can expect this ID will evolve into containing QR codes that will be used to conduct financial transactions, permits, registrations and most likely any transactions everywhere. Those who refuse to comply will be cut off from normal everyday living. Systems similar to this are already in use in China, a far larger country than ours.