The End of the Statist Quo

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Here at Casey
Research, we have been rather negative about the economy for many
moons. To be otherwise in the face of the decades-long trend toward
ever more government – along with its increasingly destructive
and expensive meddling in the free markets – would have been
foolish. And, so far, we have been right.

However, I
for one am beginning to see some light at the end of the tunnel.

It won’t
happen overnight, and maybe not in the next five to ten years, but
it increasingly appears to me that the government’s disastrous
“problem solving” that has brought us to this place is
approaching a limit. Case in point, governments the world over are
now engaged in an insane race to the bottom for their currencies
– which will only gain speed if the Fed goes ahead with a new
round of quantitative easing. Should the Fed persist with this latest
madness, countries all over the globe are likely to step up their
own interventions – but that may very well lead to the fiat
system breaking down completely, to be replaced by something more
tangible.

Likewise, given
the increasingly dire need to spur economic growth, we could soon
see an end to the growth in bureaucracy and the fire hose of taxes
and regulations that those bureaucrats have been spraying over the
global economy for decades.

Put another
way, having squandered so much of human progress through counterproductive
policies, any leader that wants to retain power – and they
all want to retain power – is soon going to be forced to return
to policies that have been proven to allow businesses to blossom.

This sea change
won’t happen all at once – and probably not without the
global economy first going through a dark and troublesome period.
But I have to believe that we’ll soon see a widespread recognition
that there are problems to be solved, and opportunities to be captured,
by breaking from the herd. Thus, while one state tries to raise
taxes to “solve” its budget problems, another will see
the opportunity for growth to be had by lowering taxes. While one
government passes more regulation to pander to a favored group,
another will repeal legislation to lighten the dead hand of government
in order to favor all.

In reasonably
quick order, the governments that reduce, rather than increase,
their burden on their business communities will see their economies
begin to prosper while others stagnate – just as they always
have. The United States in its youth provides the paradigm of this
principle, but Hong Kong, Singapore, Dubai, and a handful of other,
less pure examples prove the point as well.

In support
of this general theme, subscriber D.W. recently sent along an interesting
piece on boom times in a Swiss canton that is picking off the hedge
fund managers being chased out of the UK by the 50% tax now being
levied on earnings of over £150,000 a year.

And I quote…

Switzerland’s
tempting tax regimes attract UK firms

Thirty minutes
from Zurich and dotted with traditional dairy farms, it might seem
an unlikely location for some of Britain’s biggest hedge funds.
But it is one of a number of Swiss regions competing to offer ever
lower tax rates in a bid to tempt British businesses to relocate.

The hills are
alive with the sound of cowbells – and construction workers.

The village,
in the area of Höfe in Schwyz is clustered around a shimmering
lake which reflects the lush green, rural backdrop.

However the
scenery is also now increasingly dominated by building sites as
it reinvented itself as a hedge fund centre by offering low personal
tax rates to attract cash-rich fund managers.

Spa hotels
and up-market furniture retailers are springing up on the outskirts
to cater for the new clientele.

Full
article here.

Why am I so
confident that following another round or two of desperate, last-gasp
efforts to maintain the statist quo, we’ll see a shift to a
global competition based on free-market policies and hard money?

Simply because
when there is only one path left, the choice of where to go next
becomes obvious.

Or as one anonymous
pundit so well put it…

"The world
will soon wake up to the reality that everyone is broke and can
collect nothing from the bankrupt, who are owed unlimited amounts
by the insolvent, who are attempting to make late payments on a
bank holiday in the wrong country, with an unacceptable currency,
against defaulted collateral, of which nobody is sure who holds
title."

The very real
problems now confronting the world – most of which were created
by politically motivated politicos trying to solve real and manufactured
problems for favored constituents – have now reached the point
where they can only be solved by lowering the burden of government
on entrepreneurs and letting the free market do what it does best.

The countries
that are first to jump on this bandwagon, or that are most vigorous
in shedding their layers of obstructionist regulations and taxation,
are going to be those that win the day. Conversely, any country
that stubbornly tries to hold on to the statist quo is headed for
even more serious troubles as its productive elements ship off to
more favorable turf.

Investment
angle? Watch the news for signals indicating that a particular government
is turning toward freer markets, smaller governments, and lower
taxes – then pile in. Getting in early on such a turnaround
could be hugely profitable, just as leaving money tied up in the
markets overburdened by stubborn statists is a sure ticket to a
big loss.

Politics have
never played a bigger role in assessing where your asset value might
go. That’s why every month, David and the other editors of
The Casey Report analyze the economic, financial, and political
big-picture trends and recommend the best opportunities to profit.
Knowledge is power when it comes to protecting your personal wealth.
Details
here.

David Galland
is the managing editor of Casey
Research
.

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