[Editor’s Note: The following post is by TDV Editor-in-Chief, Jeff Berwick]
What do you call an economic system that takes most or all of the money you earn? You might have asked blacks in 18th century America, or you could ask taxpayers in France under French President Francois Hollande.
Thanks to the tax surcharge imposed by President Hollande's Socialist government last year, more than 8,000 French households had a tax bill that topped 100 percent of their income. Roughly 12,000 households paid more than 75 percent of their 2011 revenues toward taxes because of the Socialist government's levy. Here at TDV, we know that government is a gang of thieving thugs who take as much as they can, but even our heads swim when we read the numbers. I don't think any government has gone this fully commie since Laos in 1975.
We get the notion of "going full commie" from a line by Robert Downey, Jr's character Lazarus in the great movie, "Tropic Thunder":
Lazarus: “Everybody knows you never go full retard.”
Speedman: “What do you mean?”
Lazarus: “Check it out. Dustin Hoffman, ‘Rain Man,’ look retarded, act retarded, not retarded. Count toothpicks to your cards. Autistic, sure. Not retarded. You know Tom Hanks, ‘Forrest Gump.’ Slow, yes. Retarded, maybe. Braces on his legs. But he charmed the pants off Nixon and won a ping-pong competition. That ain’t retarded. You went full retard, man. Never go full retard.”
We might — with apologies to Rober Downey, Jr — offer a slight twist on the same advice to Hollande and his government. "You're going full commie, man. Never go full commie!"
According to business newspaper Les Echos the almost comically commie level of taxation was the result of last year's one-off levy of 2011 incomes for households with assets of more than 1.3 million euros or about $1.67 million. The expropriated French can thank President Hollande and his commitment to punish productivity, savings and private property as much as possible. Hollande's predecessor's rebate scheme capped individual overall taxation at 50 percent of income. But that kind of limited theft offends the nostrils of those who would go full commie like Hollande.
Even France's Constitutional Council thought this was excessive. A top administrative court figures a single household should have no more than a mere 66.66% or two-thirds of its highest marginal income stolen by the government. So Hollande's government will have to rework the code so that businesses take the biggest hit. After all, every socialist/communist knows that it's productive activity that you want to punish the most and discourage.
You'd think the entire world — even places with overtly socialist populations and governments — would have learned from the former Soviet Union, North Korea, and Cuba: Never go full commie!
But like Ayn Rand said, one can choose to ignore reality, but one cannot ignore the consequences of ignoring reality! Going full commie economically before imposing full border and capital controls means that some of your victims are going to try to get away and they will rather easily succeed.
Take for example Gerard Depardieu. In one of history's great ironic twists, the millionaire actor and French national symbol fled the country ahead of the communist theft of his income, into the arms of the former center of the communist empire! I cannot for the life of me understand why a single French man or woman who has had a taste of the full commie would just sit around and wait for another run. Run, French people, run! Your government isn't even remotely playing around anymore. They have made it clear that they hate private property and wealth to a degree that would embarrass even the Occupy Wall Street crowd.
We wouldn't recommend fully following Depardieu's example, however. Get out of France, yes, but not to gangster, socially intolerant, oligarchical Russia. Not when there are so many better options—like the ones offered by TDV Passports!
French Bonds More Attractive Than Gold?
In another twist, however, the French government itself, which would strip away every cent from "the rich", is not getting what it deserves—at least not yet. According to Businessweek, credit downgrades, recession and President Francois Hollande’s gaping budget shortfall have done little to prevent French bonds from outshining gold.
Investors who bought French bonds when Standard & Poor’s stripped the country of its top credit rating on January 13th, 2012, have chalked up a 12 percent return, about triple the gains of German debt. Gold, touted by some investors as the world’s safest asset and a potential beneficiary when AAA rated governments are downgraded, lost 17 percent in the same period.
A 12% return in less than six months for the debt of a government in full, desperate, commie confiscation mode, and with a debt to GDP ratio that has been progressing like this:
And it's not just the tax slaves that French government is robbing more than usual lately. Those dumb enough to actually buy those bonds and lend the French government money get as little as 1.659% return for their trouble. This is amidst "unprecedented" stimulus from central banks that both drives interest rates down and degrades the value of whatever money is returned to the lenders in the future. Yet somehow this leads investors to seek the "safe haven" of government debt.
Businessweek quotes Soeren Moerch who heads fixed-income trading at Danske Bank A/S:
“French bonds are fundamentally weak, but they are attracting strong demand. France may be at risk of further downgrades, but that doesn’t matter much as long as there’s massive amount of money out there seeking returns. France is part of a global story of liquidity boosts and search for yield pick-up.”
Simply amazing. The monetary system as we have known it is coming apart and most of the world is still throwing good money after bad. They figure that the precious metals have had their run and it's safe to wade back into things like government debt.
Good thing you know better, which is why you are reading today's issue. For even more in-depth economic analysis and for actionable plays in the sector that will be the only winner during The End Of The Monetary System As We Know It (TEOTMSAWKI), be sure to subscribe to the TDV Newsletter here.
Get away from the collapsing Western nation-states (especially increasingly commie France) and don't lend any governments money. In addition to being financially idiotic, it's just plain immoral.
[Editor's Note: Today's article is excerpted from the aforementioned TDV Newsletter. To find out more and sign up for even more analysis and actionable advice, just click here.]
