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BCG Says "There May Be Only Painful Ways Out Of The Crisis"
Zero Hedge Blog ^ | 9/29/2011 | Tyler Durden

Posted on 09/29/2011 6:54:06 PM PDT by rbg81

Denial. Denial is safe. Comforting. Religiously and relentlessly abused by politicians who don't want nor can face reality. A word synonymous with "muddle through." Ah yes, that "muddle through" which so many C-grade economists and pundits believe is the long-term status quo for the US and the world just because it worked for Japan for the past three decades, or, said otherwise, "just because." Well, too bad. As the following absolutely must read report, which comes not from some trader of dubious credibility interviewed by BBC, nor even from an impassioned executive from a doomed Italian bank, but from consultancy powerhouse Boston Consulting Group confirms, the "muddle through" is dead. And now it is time to face the facts. What facts? The facts which state that between household, corporate and government debt, the developed world has $20 trillion in debt over and above the sustainable threshold by the definition of "stable" debt to GDP of 180%. The facts according to which all attempts to eliminate the excess debt have failed, and for now even the Fed's relentless pursuit of inflating our way out this insurmountable debt load have been for nothing. The facts which state that the only way to resolve the massive debt load is through a global coordinated debt restructuring (which would, among other things, push all global banks into bankruptcy) which, when all is said and done, will have to be funded by the world's financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives and the world is set back on a viable path.

(Excerpt) Read more at zerohedge.com ...


TOPICS: Business/Economy; Government; News/Current Events
KEYWORDS: economiccollapse; economy; financial; tax
I find Zero Hedge to be an interesting blog. But sometimes they post articles that get a WTF reaction from me.

Anyone who seriously thinks the upper middle class is going to stand aside while 30% of its current wealth is confiscated is smoking something.

1 posted on 09/29/2011 6:54:15 PM PDT by rbg81
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To: rbg81

More like “It did NOT work for Japan for the past 20 years”


2 posted on 09/29/2011 6:57:25 PM PDT by GeronL (The Right to Life came before the Right to Happiness)
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To: rbg81
There May Be Are Only Painful Ways Out Of The Crisis

Fixed it.
3 posted on 09/29/2011 7:00:46 PM PDT by DTxAg
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To: rbg81

I’ll have to read the paper. But, this would be so politically toxic that wealth confiscation through inflation would probably be the path taken. In addition, there’s no guarantee that a large wealth tax would be a one-time affair. Would it only be a tax on liquid assets? Or would you have to pay a fraction of the imputed value on your falling real estate?

Any wealth tax large enough (and I actually do expect one to be proposed in the future) to make a dent in the government’s debt would require tyrannic, despotic government control.


4 posted on 09/29/2011 7:03:30 PM PDT by Pearls Before Swine
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To: rbg81
... have to be funded by the world's financial asset holders: the middle-and upper-class, which, if BCS is right, have a ~30% one-time tax on all their assets to look forward to as the great mean reversion finally arrives...

Yep, punishing those who saved and built wealth - while rewarding those who spend every penny before it burns a hole in their pocket has always worked in the past..../s

5 posted on 09/29/2011 7:11:21 PM PDT by GOPJ (Muslims will want to go to the moon when the Jews set-up Israel there. - Dennis Miller)
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To: Pearls Before Swine

A welath tax should also hit the Ford Foundation, Harvard Endowment and George Soros, WIlliam Buffett and Hollyweird


6 posted on 09/29/2011 7:15:00 PM PDT by GeronL (The Right to Life came before the Right to Happiness)
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To: Pearls Before Swine

I think the Fed and Whitehouse have been desperately trying to inflate their way out of this mess, but the harder they try the worse they are making the problem.


7 posted on 09/29/2011 7:19:45 PM PDT by MrShoop
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To: rbg81

“Anyone who seriously thinks the upper middle class is going to stand aside while 30% of its current wealth is confiscated is smoking something. “

The wealth of the middle class is being confiscated through falling real estate values, negative real interest rates, higher taxes, job losses, zero real income growth over a decade, and rapidly rising inflation. Not to mention periodic stock market meltdowns. So far the upper middle class seems to be accepting this erosion of wealth quietly.


8 posted on 09/29/2011 7:29:14 PM PDT by Soul of the South (When times are tough the tough get going.)
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To: MrShoop

I agree that they are trying everything to inflate. The early attempts at inflation, still continued, were to support real estate. That’s why the Fed bought dodgy mortgage backed securities with QE. It’s also why the government tried to make HAMP work, and also why FHA is granting loans with at most 3.5% down.

Later attempts are both fiscal and monetary. The government is running a huge deficit, which would be stimulative if it wasn’t spent so wastefully on supporting unionized government hacks and makework projects, green and non-green. And, the Fed is monetizing it by buying the T-Bonds issued by the Treasury to fund the deficit by printing money.

So far, the effects of collapsing credit and increased saving for balance sheet repair have outweighed the inflationary initiatives. But, those initiatives have left a lot of potentially inflationary tinder laying around, IMHO.


9 posted on 09/29/2011 7:29:49 PM PDT by Pearls Before Swine
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To: Pearls Before Swine

I read most of it. Thy go through the typical analysis which most interested people have seen before. Their conclusion assumes that the Fed is unable to stoke inflation (true enough so far) and hence the only alternative is confiscation.


10 posted on 09/29/2011 8:04:15 PM PDT by MontaniSemperLiberi (Moutaineers are Always Free)
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To: Pearls Before Swine

I think all the big government bureaucrats and economists are trying to inflate away the 14 trillion debt. They and the super wealthy leftists are ensuring that their wealth is protected and will be pulling up the ladder to close off the upper class. The lowest classes will always sell their vote to the ruling classes for more benefits and rights. The middle classes will be hung out to dry.


11 posted on 09/29/2011 8:07:03 PM PDT by RetiredTexasVet (There's a pill for just about everything ... except stupid!)
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To: MontaniSemperLiberi
Their conclusion assumes that the Fed is unable to stoke inflation (true enough so far) and hence the only alternative is confiscation.

It seems to me that confiscation is highly deflationary. The authors also suggest that government create a put under real estate values at 2003 levels. In a deflationary environment exacerbated by wealth confiscation, it would motivate people to forego property maintenance and it would cause the government to borrow--starting the debt merry-go-round all over again.

12 posted on 09/29/2011 8:10:36 PM PDT by Pearls Before Swine
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To: rbg81

I don’t know about you but with taxes and increased costs (food, depressed house value, gas, etc...) I’ve already lost about 25% in the last 3 years.


13 posted on 09/29/2011 8:30:16 PM PDT by fini
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To: rbg81

If it is this bad then the lower class has to pay too by giving up all of their aid.


14 posted on 09/29/2011 8:45:42 PM PDT by chris_bdba
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To: rbg81

DEFUND socialist collectives, foreign and domestic. Debt problem solved.


15 posted on 09/29/2011 9:51:05 PM PDT by PGalt
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To: rbg81

Exert pain on socialists. DEFUND them.

TEA


16 posted on 09/29/2011 9:52:05 PM PDT by PGalt
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To: rbg81

“The law can be an instrument of equalization only as it takes from some persons and gives to other persons. When the law does this, it is an instrument of plunder.”

“It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder.”

Frederic Bastiat 1801-1850


17 posted on 09/29/2011 10:00:31 PM PDT by PGalt
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To: GOPJ

And, I’d like to sell a bridge in Brooklyn to anyone who thinks this would be a “one time” tax.

They would apply the tax and then keep accelerate the spending ‘cause “there’s no deficit!”.


18 posted on 09/30/2011 4:16:39 AM PDT by rbg81
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To: GOPJ

And, I’d like to sell a bridge in Brooklyn to anyone who thinks this would be a “one time” tax.

They would apply the tax and then keep accelerate the spending ‘cause “there’s no deficit!”.


19 posted on 09/30/2011 4:16:55 AM PDT by rbg81
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