Government Could Resort to Drastic Actions to Reduce Debt

With every passing day, we draw closer to that moment when Western governments shock the world and announce that today is the day that part of your wealth goes bye-bye.

I’m talking about a one-off tax to save the Western world.

Governmental leaders, particularly the spin-doctors in D.C., certainly won’t phrase it that way — “to save the Western world.” Government never takes credit for the disasters it creates. Government only positions itself as the emergency-response team forced to altruistically repair the disasters that are always the fault of someone else — the easiest scapegoats always being bankers, Wall Street and the selfish capitalists.

No matter how you spin the news, though, the pain headed our way means the loss of personal wealth all across America.

That painful day is coming. But it doesn’t have to cost me and you a lot of money … we can protect ourselves by acting early.

Let’s hop in the time machine and pop back to September … to Europe and an emergency meeting of the European Central Bank (ECB). Stick with me for a second; the ECB’s emergency meeting speaks to why a big impact is about to hit your wallet here in America.
In a surprise, though ultimately pointless move, the ECB cut interest rates in the euro zone to a barely visible 0.05% — essentially 0%, the lowest rates in Europe’s history. It’s as low as the ECB can go.

ECB President Mario Draghi made the cut because of all the chatter in Europe about the ECB needing to do something to jump-start the economy. So, Draghi did something — but only to make a political point, because for all practical purposes the cut was meaningless since EU rates were already at 0.15%.

His point: Interest rates no longer mean jack to the economic recovery in Europe or America.  Rates have been so low for so long on both sides of the Atlantic that they’ve had plenty of time to revive a normal economy. And yet here we are still struggling with economic anemia on both sides of the Atlantic.

Why?

Because both the U.S. and Europe — the Western world — are warped by extravagant sums of debt that, in turn, aren’t allowing either economy to function normally.

In America, in particular, government over the last decade or so has been operating like a consumer addled by aspirational desire. You know the type: the one who leases a new car he can’t afford, and then a year later wants to buy a different car he can’t afford, and he wraps the cost of the original lease into a new-car loan … and then he buys a house that exceeds his station in life by using an interest-only mortgage that keeps his monthly payment artificially low … and soon enough his debts are so large that bankruptcy is his only option.

That’s America today. Only, American government doesn’t file for bankruptcy. That’s bad for business.

Instead, it steals … from me and you. It does so by raising taxes or by manipulating the currency to create inflation, which reduces the future cost of today’s debts while destroying our purchasing power. It’s the great governmental subterfuge, since it effectively transfers our wealth to the government.

At a certain point, though, the manipulations no longer work. The debts grow too large. We’ve reached that point, which is Draghi’s real message to the world. Try as they have, Western monetary officials — led by our Federal Reserve — have yet to stoke the inflation they want.  And now they face a quandary.

Four Options to Reduce Debt

Politicians in D.C. have four options to reduce the debt that’s dragging America toward her ultimate demise:

1. Grow the U.S. economy. Of course, it’s impossible to grow the world’s largest economy fast enough to eat into our debt principal.
2. Increase taxes. Of course, it’s impossible to raise taxes high enough on us and U.S. business to the degree necessary to reduce the country’s debts; that would be counterproductive because the level of taxation needed would cause a rapid reduction in economic activity, prompting yet more government spending that simply puts us back at square one — too much debt!
3. Cut spending sharply. Of course, who really thinks American politicians have the huevos to do that?

That leaves our politicians with just one viable option:

1. Wealth confiscation … the outright theft of your money and mine.

This is not conspiracy theory or government bashing.

Wealth confiscation is exactly the path the International Monetary Fund is encouraging Washington and other Western governments to pursue. The IMF, as it plainly states in a white-paper on this topic, realizes that the West has no way out of its debt problems at this point. The only solution, the IMF councils, is for government to take money from their citizens — lots of money — and to apply the stolen wealth to a one-time debt-reduction plan that would bring our debt back to what the IMF calls a more sustainable, pre-2007 level.

Specifically, the IMF says government should nab 10% of the net worth of every citizen with any assets.

That means you add up the value of your real estate, your retirement plans, your bank and brokerage accounts — any financial asset you own — and you subtract the debts you owe. And if you have a dollar in positive net worth, the government wants its dime.

In America, that means our government would confiscate something close to $8 trillion of our combined net worth … which, if applied to the country’s existing mound of debt, would magically bring our debt load back to 2007 levels. How convenient!

If this idea of a wealth tax was a rumor, I’d brush it off. But it’s coming straight from the top of the IMF. And what the IMF wants, America and Western Europe — the countries behind the IMF — typically provide.

So beware. The IMF wants your wealth to save the Western world. And American politicians are the henchmen that will deliver.

Until next time, stay Sovereign …

Jeff D. Opdyke
Editor, Profit Seeker

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