Commentaries

Now raising intellectual capital

We’re all doomed, part 94

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If you really want to spook yourself, try this. The sweep of history, courtesy of Dylan Grice of SocGen (he starts with 3rd Century Rome) shows that all fiat money eventually collapses under the weight of its internal contradictions, as politicians struggle to meet promises made under more benign circumstances.

There are some really spooky charts here, showing the real level of government liabilities (rather than merely the actual borrowing) and none of the Western countries looks remotely solvent. Oddly enough Spain comes out best – or least worst –  with liabilities totalling a mere 250 percent of GDP. The US is joint worst with 550 percent.

Grice comes up with even scarier figures when he calculates the income/liability ratios, which effectively show that Europe and the US have no hope of returning to long-term fiscal stability.

Alas, he gives us no idea of how to protect ourselves from the consequence of fiscal incontinence. Perhaps that’s in his next piece of research. I’ll let you know.

Why the U.S. needs a Value Added Tax

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Swelling deficits and an aging population leave few palatable options when it comes to taxes.

The best choice by far would be the creation of a new value added tax — a “money machine” that can bring in huge sums with relatively little effort. America is alone among rich nations in not charging a VAT, and its continued unwillingness to do so will make it harder to cope with the fiscal challenges ahead.

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