The litmus test of economic health

This is the one metric that cuts through all the bullshit. Revenue! In this case, state revenue.

For as long as government revenue, better known as tax revenue, is declining, it means the economy is in decline. What declining tax revenue also means, it means that your income is declining too. How else can tax revenue decline if not when the revenue of society is declining?

Here is the feedback loop –

1 . Declining tax revenue, means necessarily that social expenditure must be curtailed and, in some cases, discontinued.

2 . Declining revenue at personal level, means less disposable income thus less consumption.

3 . Less consumption means increasing unemployment.

4 . Increasing unemployment requires more social expenditure.

5 . Go back to point one. There is not enough money for social expenditure.

A world war is abrewing.

http://online.wsj.com/article/SB126212283240009387.html?mod=WSJ_hps_sections_news

Excerpts:

“Sales taxes declined 9% to $70 billion in the third quarter compared with the year-ago period, the Census Bureau said. Income taxes plunged 12% to about $58 billion. Together, sales and income taxes make up roughly half of state and local tax revenue. […] The third quarter was the fourth consecutive quarter in which tax collections were below year-ago levels. Through the first three quarters of 2009 state and local tax revenues totaled $875 billion, nearly 8% below the $951 billion collected in the first three quarters of 2008. In the same period, federal receipts were down nearly 19%.”

If local and state taxes are declining, then Federal tax revenue is declining too.

Declining Federal revenue means that in order to maintain the same level of expenditure on the military, on public works or on health care for example, the Federal state must borrow more than the year before.

But since it is now established fact that international creditors are unable to lend much more to the USA because, like the USA, they have to face-up to their own problems in the form of decreasing tax revenue, then the USA will have to carry on buying its own bonds from itself.

That is what currency debasement is all about.

You can let the main stream press, the pundits and government tell you that things are improving and that it looks like we’re coming out of this depression. The one and only metric that tells you whether we are or we aren’t is revenue. For as long as revenue is declining, we’re only going down.

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One Response to “The litmus test of economic health”

  1. Unemployment… (deflation at work) « Guido's temple of the absurd Says:

    […] But, here is the kicker. Emergency Unemployment Compensation is a great concept. But extending it over and over again is putting strain on what effectively is already a horrible fiscal situation as brought about by declining tax revenue. […]

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