An Inflection Point III

BarroMetrics Views: An Inflection Point III

And now we come to the US.  The US was at a tipping point when Bill Clinton took over from Ronald Regan. Indeed, the authors of “Blood in the Streets” had their excellent thesis overturned (that the US was about to follow the decline of the Roman Empire) because of a combination of events and decisions by Clinton.

Clinton provided a temporary relief to the erosion of US economic power. Then we saw George W Bush restart the decline and Obama hasten the fall.

Everywhere we see these signs:

  • In foreign policy Syria, Iran, Ukraine demonstrate US’ declining military clout.
  • In internal policies, we have the IRS and NASA infringing the rights of US citizens. Discovered, despite all the smoke and mirrors, we see little evidence of measures taken to circumvent future infractions.
  • In economic policies, we see today that the International Comparison Program released a report that by year end the US will lose the title of ‘the world’s largest economy’ to China. The US has held this title since 1872.

In the meantime, rather than take the structural reforms needed to reinvigorate the economy, we have a President engaged in ruling by executive decision, and a congress mired in crony capitalism. The result of this is the reduction of living standards for that class that has been responsible for US’ economic success: the middle class (see ‘America’s two-tiered future’)

Finally we have what I see as the black swan event whose effects future historians will see as the final blow to the idea that the FED can forever keep the US stock market up via QE: FACTA which comes into effect on July 1. FACTA is unlikely to hamper the wealthy’s ability to hide assets overseas; but together with FBAR, it’s another set of rules that will hit the middle class (see Unintended Consequences).

China in downturn mode,  the EEC and US are unwilling or unable to take the reforms needed for the next boom.

As Ludwig Von Mises once said: “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”


3 thoughts on “An Inflection Point III”

  1. The “Wealth Effect” column on p B8 of the weekend Wall Street Journal states that, on Friday, the US Treasury Dept. said it would temporarily relax enforcement of Fatca provisions relating to banks that take effect July 1. I hope this mitigates the black swan effect.

  2. Hi Art

    Thanks for the update.

    Perhaps. And FACTA may turn out not to be the Black Swan event I envisage it can become.

    That said, I can tell you that in HK we are already starting to see the effect of FACTA when dealing with US citizens and corporations.

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