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Wednesday, 1 January 2014

Our economy is trickle up, not trickle down.

Last year I took the most unexpected decision and blocked international sales to none other than the United States of America. The business case for blocking this jurisdiction was clear an unassailable; increasing fraud, issues to with customs due to government shut-downs and a general downturn in trade with the United States meant that internet trading was simply not worth undertaking. In spite of what the American government will publicly tell you; it is a place in severe economic decline. Yes the stock market is surging, but then the pattern nearly matches that of 1929 immediately prior to the big crash. But a surging stock market does practically nothing for the 'real' economy... especially when the consumer is increasingly tapped out?! The rich own stocks and the poor own debt.

Working on the assumption that a major crash in share prices will occur sometime between 23rd December and the 21st January led also to another decision - don't sell any gold. Not only do I buy and sell gold bullion but I also buy and sell scrap precious metals and my silver and gold scrap has been building up for a few months in expectation of a sharp rise in 2014.

But let's look at that chart...


If the stock market bubble does burst, the wealthy will also have less money to spend into the economy in 2014. For the moment, the stock market has been rallying. This is typical for the month of December. You see, the truth is that investors generally don't want to sell stocks in December because they want to put off paying taxes on the profits.

If stocks are sold before the end of the year, the profits go on the 2013 tax return. If stocks are sold a few days from now, the profits go on the 2014 tax return. It is only human nature to want to delay pain for as long as possible.
It is the poor who are more likely to consume. And logically with their purchasing power being funnelled to the rich in regular debt monetization, they purchase less and less. As the slow but steady contraction in the economy over the past five years has proven beyond a reasonable doubt.

Austerity of the time employed by the UK (i.e. cutting benefits and raising taxes) is never going to help stimulate economic growth. The best form of economic stimulation is not to support zombie banks but to raise income tax thresholds and lower the rates of taxes for the less well off. To repeal laws and cut government expenditure. In other words the exact opposite of how most western governments have reacted.