Value added Tax (VAT) coming to America!

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This time last year, I wrote an article in which I suggested that a goods and services tax might be implemented in America along with a gasoline tax. (see: Your Welcome America)  It appears I may have been a year premature as the idea is now being kicked around Washington.
A Value added tax (VAT) as is witnessed in Europe at around 20% is a scary thought for average Americans who are used to getting many Government perks without having to pay for them.  The Europeans made the mistake of "exempting" many basics such as food and clothing, etc and that is why their VAT is so high.
A 20% VAT would not even be in the cards for the U.S. so you can breathe a short sigh of relief.  However, as I suggested last year, a 2% Goods and Services tax (GST) being placed on "all" goods and services sold in the country, coupled with a further 10% tax on gasoline, would suffice to pull the U.S. out of debt, and propel a green energy sector forward to new heights.
Let's face it folks. Americans have been getting cheap gas for way too long, while the rest of the world pays 2-3 times what the average American pays for their gasoline. A 10% hike won't kill the economy. On the contrary, it will assist the "sea change" in energy policy that is taking place, and must take place. It is a positive and it must be implemented immediately, before market forces force up the price and that 10% goes to private industry instead of the taxpayer.
A 2% GST would be a huge push to pay down national debt.  It would also lay the ground work for a reduction in capital gains, corporate and income tax. Consider this!  Tax payers would receive 2% of every single transaction, from food to clothing, to cars, boats, jewelry, construction materials, and every hour of labor costs. Canadians griped and growled at first too, however it is exactly that GST introduced in 1991 that has allowed Canada to dodge much of the current economic malaise in the world, and why it is the only G8 country that has been "in the black" for 9 of the past 10 years.This tax is way overdue and will help to reduce many other taxes over time that will allow America to once again take the lead in world business.
There will be vicious and virulent opposition to such a tax, just like there was in Canada at the beginning.  It will come from all sides, especially money interests. However, when all is said and done, this is a good idea and it is overdue. It is time for Americans to join the rest of the world. Stop complaining America and get on with it.  Your economy, your dollar, and your place in the world depend on it.
HP

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Putting a little gold in your mattress might be comfortable, or at least comforting, but Tech will shine brighter this year!

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It was not uncommon for my father, who would have been 83 this year, to walk around on a weekday with $10,000 cash in his pocket. He was not a wealthy man, but ran a small business with approx. 20 employees. However he had the mentality of many others of his, the "greatest" generation, when it came to a healthy skepticism of the dependability of banks. The attitude came honestly as many of that generation had suffered through the great depression, and had lost all their savings when banks went bankrupt.

A good friend told me a story about a favorite aunt who always carried a satchel or briefcase, everywhere she went, all the time. When she died, her family was going to throw out that old satchel as they saw it as an eyesore. Before that was done, someone opened it and discovered it was stuffed with cash! Over $100,000 cash!

The same friend also told me that, when her Grandmother died, (the two elderly ladies were sisters), the family were going to throw out her old mattress when someone laid down for a minute and thought how uncomfortable it was. On further examination, they found it was absolutely stuffed with cash.

Now, we all know that this is not a recommended method of savings because of the dangers of robbery, loss, theft, fire etc. But these veterans of the Great Depression did what they thought was necessary to secure some of their future, rightly or wrongly. As I said, they just did not trust the banks.

Why did they lose their trust in the banks? Well, for the most part, many of those banks were under capitalized and when there was a run on the banks, they collapsed under the weight of so many people trying to retrieve their life savings.

Is that starting to sound somewhat familiar? Here in Canada the 5 major banks are well capitalized and in no danger of such an event. They wisely, for the most part, stayed clear of many of the toxic, derivative assets, that U.S. banks so greedily pursued. This was made clear after the downturn when our top two banks, TD Bank and RBC advanced into the top six banks in the world based on capitalization. They had been (I stand to be correct here) approx. 9th and 20th in the world before the downturn.

If you are reading between the lines, you have no doubt already come to the conclusion that many top banks in the United States were cut down tremendously, some to the brink of life support. The same goes for banks in Britain Germany, Spain (and throughout the Euro zone). Throughout this Spring, we heard bold financial results from many U.S. banks which far exceeded analysts expectations. However, can these numbers be trusted? If you take the numbers from these banks, leave out the Trillions in toxic Derivatives they still hold, add in the billions infused by the U.S. Government, then of course, the numbers will look great.

Once the Government largess is gone, and the Derivatives have to enter into the calculation (and these huge losses will have to be shown at some point) does anyone really think things have gotten better? Many banks in the U.S. and Europe are on life support, and will be for years. Our grandfathers didn't entirely trust the U.S. banking system, (or the stock market for that matter) and for good reason. Now it is our turn to make that determination.

Our problem is, What, exactly, do we stuff into our satchels or mattresses (or home safe). If you use U.S. dollars, you can count on a 20% to 40% drop in your assets over the next 3-4 years, and that's after losing what you have already lost. What holds value in these rocky times? Opinions vary on this, but I cannot help but think that Once the dollar continues it's slide (this weeks renewed strength is only temporary) that the stock market will benefit. It has too! And the part of the market that will benefit most?

1. New Technology companies with a worldwide market and/or valuable intellectual property ( patents ).

2. Generic drug companies (remember the Obama promise of health care reform)

3. Commodities that are valued/traded in U.S. dollars such as

4. Gold and other precious metals (silver is under valued)

5. Oil is traded in U.S. dollars!

6. Natural gas is currently undervalued and will be used extensively for the coming fuel cell revolution in power generation.

No, you cannot put these stores of value in a satchel or in a mattress, but you can spread them throughout your portfolio, either as individual investments or through the purchase of targeted mutual funds. If you're really nervous, a little Gold in the home safe won't hurt, and may give you some piece of mind.

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Taxpayers take one more hit, in a relentless stream of hits...

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As I write this, I am watching Jon Stewart (The Daily Show) point out that, after the U.S. Government gave GM $20 Billion 6 months ago, it has now gone into bankruptcy and U.S. taxpayers are now writing a cheque for $50 Billion to own 60% of a company that is worth negative 90 Billion (-$90,000,000,000)

Canadian taxpayers have invested $12 Billion in the venture, to own 16% of GM. This increases total taxpayer ownership to 76%.(That doesn't include the initial $20 Billion gift from last year from the U.S. Treasury, nor the over $4 Billion from Canada)

Now, I know that my math is not very good, but I do know that 76% of nothing is nothing!

Now If I put that in my Retirefund, I get nothing, right?

But if I invest $62 Billion to ensure I own 76% of a debt of $90 Billion, Then where does that leave me.

Well, if the new entity again goes bankrupt, I lose the initial $62 Billion, and maybe as much as $84.4 Billion (76% of the company).

The Retirefund of Millions of taxpayers just took such a hit, and make no mistake, it has to be paid back, just like the 10.7 Trillion debt that the U.S. will book at the end of this year.

Unless something drastic and unexpected happens, Americans can say goodbye to Social Security as they understand the term today.

If you are under 40, it may not be there for you or your children, or your children's children.

The Drastic Action? - ***Prediction***: (oh, oh, shouldn't make predictions), sometime over the next year, the Obama administration will introduce a bill for a Goods and Services tax (a la Canada's) of 1% on "all goods and services sold or traded in the USA".

Every dollar you spend on anything (except groceries) like clothing, appliances, building materials, candy, bicycles, motor cycles, cars, boats planes, you name it, add 1%.That includes all labour.

Then look for this tax to "increase" to 2% in the following years.

Update Dec 11th 209 - New York Times Talks about VAT coming to America!

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