Friday, July 29, 2022

Tax & Spend

Tax & Spend

If you really want to destroy a society, debase its money. With the M2 money supply currently at some $21T (that's correct, trillion) from a previous level of $14T, the country is flush with cash. This is causing lots of problems and weird things to happen. 

In terms of problems, too many people have too much money chasing too few goods. Hence, inflation is rampant. Of the two ways to combat this, either increasing supply of goods or killing demand, the Fed has chosen the latter. But even that action will be of little consequence if spending increases at a similar clip to the supply of money.

Money needs to come from somewhere, and the Treasury has been happy to keep the printing presses going night and day. This has led to an environment of stagflation and the government choosing winners and losers; the winners are the pork barrel recipients such as healthcare, (the) climate Solyndras, and "infrastructure." You can count on your taxes going on up, way up, especially if you're a small business owner. The pitch is always "pay your fair share" or "just a nibble" and when you take a look in the kitchen are your cookies are gone.

What is an investor to do? You need some good strategery. Assuming the omnipartisan "Inflation Reduction Act" agreed upon by Democrat members of the Senate gets approval in the House we can expect the "Tax & Spend" moniker to ring truer than ever. Investors need to adjust their portfolios accordingly.

Consider where and how the wealth redistribution is occurring, determine who the net losers and winners are, and allocate accordingly. Fighting the Fed is hard enough, fighting both the Fed and Congress is nearly impossible, especially when the IRS is being weaponized. Like the Indians of old, look for the gravy train and attack. Mark Twain put it best when he said "No man's liberty or property is safe while Congress is in session."
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