Beware: State Debt and Capital Controls

Everyone now is nervously talking of the so-called double-dipped recession, an economically stupid concept – the world has been in a bear market downturn since 2000 when inflationary adjusted by gold or copper. I surmised a year ago that the state and federal governments were carrying far too much debt. Debt that is, which couldn’t be paid back easily if, a) China’s economy were too slow down and far fewer ghost cities were to be built. b) the Australian property bubble were to pop (happening right now), sending our four major banks into insolvency, hence nationalization by the already overly indebted federal government.

The government at some point will enact some sort of stealthy nefarious taxation. I’m not talking about the highly publicized Carbon Tax. But the more sneaky re-categorization of property taxes in Queensland to include both the previous land value and the new valuation of fixtures on the land. That would be residential houses, factories, and other caveat capital. Or more insidiously by regulating the population away from other investment assets or vehicles and into superannuation accounts of treasury bonds, in a  deliberately inflationary environment.

The government may be incompetent but they aren’t stupid. The government knows where the majority of peoples wealth is stored; In their homes. Relative to any other form of investment, property is far greater share of the populations wealth than stock-equity or managed funds. Taxation of course leads to capital flight, the governments counter-response will be capital and price controls. Quite possibly what we saw in America under FDR.

A few days ago while attending a party, I happened upon an old school friend of mine. He has been a bureaucrat for the ATO (Australian Taxation Office, for non-Australian readers similar to the American IRS) for some time now, but has recently become apart of the fraud department. I half seriously asked him if they were developing any capital control regulation recently. Paraphrasing him some what, he said “let me put it this way; its not about should we do it. It has now moved onto how do we do it. It’s about functionality”

I was surprised by the speed of the government. What shall follow within the next few years will be a New-New Deal, but with less public money and more coercion. Prepare accordingly.

About Avadoro Worden

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2 Responses to Beware: State Debt and Capital Controls

  1. Milan Skarka says:

    Here in the US we have a similar situation with the property taxes. The property values (mostly real estate) are reassessed annually to adjust the tax rate. This does lent it to exaggerated value assessments in order to increase the taxes. The only consolation is that this is done on the local (County) level and voters have a better chance to control the elected Supervisors.

  2. rosencrantz says:

    I more or less agree, but somehow I think that saving the economy is not on Bob Brown’s agenda. Gillard will do as told.

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