Of course, the left is focusing on how much the “rich” pay while ignoring the entire issue of taxes. When I debated Steve Forbes and Governor James Florio at Princeton University, it was the Democrat Florio who I turned. I simply said that the tax code borrowed from the poor and middle class, handed them refund checks at the end of the year, and was borrowing from them without paying any interest. I then added that Social Security was just a tax that denied the average person the RIGHT to prepare for their future by investing that money, yet they argue that the stock market rises and ONLY the rich get richer. The left are brilliant conman because they always point at how the rich don’t pay enough, but they NEVER look closely what government does to them.

Already, all we hear is how Trump is trying to lower taxes for himself and friends. The stupidity of those who even say this is beyond belief. They are so brainwashed that you have to wonder if they are capable of independent thoughts. Trump’s tax plan involves collapsing the current seven-tier bracket system into just three brackets. The lower bracket, those who make less than $75,000, would pay only 12%. The next tier would be those who earn $75,000-$225,000, who would then pay 25%. Those in the third-tier are workers with incomes of more than $225,000 who would pay 33%. This boils down to expanding the net disposable income for taxpayers making between $48,000 and $88,000 annually, as they would save between $1,174 and $7,052, according to the Tax Foundation.

The top rate proposed by the new administration (33%) is substantially lower than the maximum rate under President Obama (43.8%). Furthermore, a standard deduction of $12,000 means, on average, the middle class will get an additional $12k worth of tax-exempt income. Economic growth comes from CONSUMER spending. Increase the net disposable income and that will jump-start the economy. Of course, the Democrats will oppose this because they never saw a dollar they did not want to get their hands on. They tend to forget their history; the FIRST tax cut after World War II was implemented by John F. Kennedy.

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference

“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

For the first time, the head of the European Central Bank, Mario Draghi, has conceded the possibility that the EU may fall apart. Draghi came out and said that any member leaving the Eurozone would need to settle its claims or debts with the bloc’s payments system before severing ties. This statement reveals the heated discussion at Davos and the rift that is beginning to spread. This statement, released on Friday, was made in a letter to two Italian lawmakers in the European Parliament.

Sentiment in Italy is turning very anti-euro and this view is beginning to emerge in other Eurozone states. While they are blaming Britain, the real issue is the insane management of austerity and negative interest rates. This has created a massive depression in Europe and the unending Quantitative Easing has destroyed the European bond market. Whenever the ECB has to give up, interest rates will soar, for private buyers will not be willing to risk it all when the EU is clearly doomed.

Based on data to end-November, Draghi is saying that Italy would have to pay €358.6 billion euro to leave — an exit tax. What Draghi fails to comprehend is that such demands will not keep the Eurozone together, and are more likely to cause it to disintegrate and just default on the ECB. Up until now, the very threat of defaults on cross-border debts has tended to keep the Eurozone together throughout the financial crisis. But pushing this too far will lead to default.

Southern Europe, which are the weaker economies including Italy, Spain, and Greece, have accumulated huge liabilities to keep the euro afloat while Germany stands out as the biggest creditor with net claims of €754.1 billion euros. This alone may set off the massive capital flight to the dollar. We are looking at the complete collapse of the Quantitative Easing carried out by the ECB since 2008 without any success. This will cause Trump problems with trade and currency, which he is not likely to understand.

Sue Peckitt, 65, poured a cup of coffee down the street drain and then threw the cup in a public garbage can. The police then gave her a ticket for 80 pounds. She appealed to have the unbelievable fine overturned and was told to pay up. The police told the press that her act of pouring the coffee down the drain violated laws against introducing “poisonous, noxious or polluting matter” into the drainage system.

After the press got wind of this crazy fine, the city council was embarrassed and investigated the incident. After two months, they and offered Peckitt an apology and a refund. They said, “Our priority is to make sure that the borough is clean and litter free and we apologize for any inconvenience that this may have caused.”

The real question: What if this incident had not become public? Would there have been any refund or apology?

US-Mexico Border in Arizona

COMMENT: Greetings from the other side of the Wall (i.e. Mexico)

Mr Armstrong! First, I would like to thank you for what you do, as a young person committed with helping the world thrive I cannot tell you how empowering it was to discover your work and get to know your story, and how inspiring it is to see upright people like yourself and your team take on the biggest challenges we face today as a planet, being consistent with what you say and actually doing something! That been said I wanted to share something that’s happening here in Mexico City, and because it is related to one of the main topics of your blog, i.e. the hunt for taxes I thought it would be worth sharing. Right now, Mexico City is going through some administrative changes. Beginning in 2018 Mexico D.F. (D.F. stands for Federal District) will no longer be the center of the powers of the federation but the 32nd federal entity of the union. That doesn’t only mean that Mexico D.F. will officially change its name to Ciudad de Mexico (CDMX) but that by the end of this month (January, 2017) CDMX will have its own Constitution. It is here that it gets interesting. In its 21st article, the draft proposed that “the increase in the value of the land derived from the process of urbanization, will be considered part of the public wealth of the city” that effectively meant that all the capital gains of a property will be taxed!! This resulted in a strong opposition specially from groups, associations and businesses concerned with the real estate business. The mayor of the city, surprised and pressured, answered that he would veto any new tax that comes into his desk and proposed an immediate modification of this article, which makes you wonder if he read the draft of the constitution in the first place! After the announcement, the commission in charge of the ruling of that article said it would be revised and modified so that a tax of this nature would not be allowed.

Fiufff!! That was close and everybody went home or headed out to the beach for some sunny winter holidays. Oh wait, except that our “public servants” being the way they are, apparently removed the provision from the draft of the constitution but still added it to the Housing Act which authorizes the administration to “implement mechanisms to capture capital gains, generated form urban development actions”. The Act was passed a nd approved the 26th of December!! The press reported this until the 28th which in Mexico is our April fool’s day, making us wish it was a terrible “December fool’s day” joke. I guess you have to have a sense of humour. I mean this guys are relentless when it comes to making a dishonest buck. I don’t know what Socrates says about Mexico but from my biased point of view it doesn’t look pretty. Higher prices, higher taxes, insecurity, a higher dollar, a debt worth almost 50% of GDP and growing, which at least I think it’s in pesos so I guess it could be worse. I was not alive then but there was a time when the peso fell greatly against the dollar maybe Mexico’s cycle is back down but I’m sure you know that. But there was also a time when the peso was close at par with the dollar, which makes me wonder when does the cycle turn up. Anyway, I guess by that time it’s either a strong peso or a worthless dollar!

Again, thank you and your team for all your work. Have a wonderful and spectacular year!

XA

REPLY: Hello from the other side of the wall. Most people do not realize that the Mexican 8 reales silver coin was commonly known as the “pillar dollar,” and cutting it up into pieces like a pie is what we hear in pirate moves — a piece of eight, meaning a piece of this coin. Here is a piece of eight stamped “St Lucia” for a Caribbean island.

These pillar dollars or Spanish dollars as they were known, were widely used by many countries as an international currency in modern times because of its uniformity. Some countries countersigned the Spanish dollar so it could be used as their local currency, as did even Britain during the shortage of currency under George III. In fact, these pillar/Spanish dollars were the coin upon which they originally constituted the United States “dollar” as they refused to adopt the British system of pounds. In fact, pillar/Spanish dollars were actually considered to be legal tender in the United States up until the Coinage Act of 1857.

Most people have no idea that the Mexican peso (8 reales ceased to be issued in 1897 after it was replaced by the peso) was on par with the dollar, and in fact, the US dollar was based upon the peso. The debasement of the 8 reales (peso) began slightly in 1729 when it was reduced to .7972 of a troy ounce down from .8102. It was debased slightly again in 1772, dropping to .7858 oz followed by another slight debasement to .7797 in 1791.

It was restored back to .7859 oz in 1811 where it remained until the 8 reales was called the peso with .786 oz. It returned to .7859 oz in 1910, which lasted only until 1917. As silver rose in value during the Panic of 1919, and European demand rose for reestablishing a monetary system, the Peso was sharply debased to .4663 oz before it dropped further two years later in 1920 to .3857 oz where it remained until the end of World War II.

In 1947, the peso was debased to .2251 oz and then the financial crisis of 1949, which saw the sharp collapse in the British pound, impacted the peso by dropping it further to .1286 oz in 1950. The crisis hit again in 1957, and the peso was debased to .0514 oz where it remained until 1967. The rising US dollar postwar was critical worldwide and Mexico was not exempt. That was the Recession of 1958, also known as the Eisenhower Recession, which began in 1957 and lasted for eight months. That led to a sharp worldwide economic downturn in 1958, aided by the Fed raising interest rates to try to fight postwar inflation. Then in 1967, silver vanished from the monetary system with the birth of the two-tier gold market in London during 1968.

The answer to the question, “When will Mexico recover from this political mismanagement?” appears to be due in 22 years — 2038. This is most likely reflecting the younger generation really taking charge.

Prices in the US are picking up strongly and support the Fed’s arguments for raising interest rates further. The rate of inflation rose by 2.1% in December, according to the Ministry of Labor. This is the highest increase since two and a half years. Some are suggesting this is due to higher gasoline prices and rents in particular caused the buoyancy. After all, the November rate was still 1.7%. The Fed has been targeting two percent. The Fed raised the key interest rate in December to 0.5 to 0.75%, and took three further steps upward for 2017.

With consumer confidence at record highs, that means consumers will spend confidently. This is the real issue behind the trend, which is polar opposite to Europe and Japan. Nevertheless, the rising trend in U.S. interest rates points to support for the dollar. The higher the dollar, the cheaper the imports. This will play at odds against the Trump policies.

Trump’s promise of bringing jobs home will run into a brick wall. There is nobody in Washington who seems to even understand trade, no less have any coherent police objectives. The stronger the dollar, the cheap the imports and that will lead to raising tariffs all because they do not understand their own statistics.

When the world set up the IMF, World Bank, and Bretton Woods, currencies were FIXED. It then made sense that if you tracked the amount of purchases and sales in dollars, that would translate into buying or selling more goods internationally. There was nobody at the dock counting the number of BMWs or Toyota entering the country. Now that currencies float since 1971, that accounting system does not work. Since the low in the US Dollar Index established during March 2008 at 71.800, this closed 2016 at 102.390. That means the dollar rose 42% since 2008. The Total balance of trade for the US improved only by 29% (US Balance of Trade). We must understand currency because the statistics only measure the amount of money moving NOT actual goods.