In Mike Maloney’s latest podcast he talks about The Dangerous F.O.G. or the Financialization Of Government. Maloney argues this to be the underlying cause of the coming currency and bond crisis.
Maloney Warns About the Financialization Of Government and Declining Tax Revenues
With US stocks hitting all-time highs as recently as last week, Maloney argues that,
“The current US economy is like 100 cars flying down a fog-shrouded highway at 80MPH with two feet of visibility. Everyone is all-in, bullish as can be, and simply hoping against hope that nobody in front of them hits the brakes.”
While everyone focuses on great recent GDP numbers, Maloney is worried declining tax revenues will ultimately sink the US government. He explains as much, stating,
“What’s more, the federal government is now incredibly dependent upon stock market capital gains taxes for overall tax revenue. If the market corrects substantially and most investors lose money, there goes a giant chunk of US federal income that already falls well short of being pay for all of our current-year outlays, let alone coming anywhere close to being able to start paying off the massive debtload we’re already incurred…”
Finally, Maloney looks at the time it takes for tax revenue to recover after the past three recessions. Beginning in 1987 and then 2001 and finally, the Great Recession of 2008. The time it takes for tax revenues to recover is continuing to get longer. As we approach the longest economic expansion in history, investors should take heed to Maloney’s warnings. So, investors should expect the financialization of government to continue as we move closer to the next recession.
