ELAM: Will the US go the way of Chile?

“Between 1975 and 2015, per capita income in Chile quadrupled to $23,000, the highest rate in Latin America. As a result, from the early 1980s to 2014, poverty fell from 45 percent to 8 percent.” Chile became one of the wealthiest nations in South America.

Stephen Moore

The left in Chile, of course, could not stand the good fortune. They began a chant of income inequality. They assumed influential positions in schools and the Catholic religion as well as unions.

As Moore puts it, does this sound familiar? The left took back the Presidency in 2013. Market reforms were out the window. In 2020 the Constitution was re-written.

Chile is now headed down the same road as Argentina and Venezuela. Those who can are leaving. Moore states the Chilean economy is in free-fall.

Team Biden is touting the same program. A “one time all encompassing tax” is being touted. This would even tax appreciated property, which has not been sold. Other plans include a permanent upgrade of the IRS to root out “tax cheats.”

It is doubtful this would be a one-time tax or that any of these schemes would raise enough money for trillions of federal spending. The middle class will be targeted next.

At the G7 meeting French President Macron remarked it was good to see the U.S. “back in the Club.” By that he meant the welfare club. Federal expenditures in the USA take 18-24% of GD. In France the government take is a whopping 40% of the economy. The rest of the EU is much the same. This is why there is not a French laptop computer. The tax burden stifles innovation and takes most of the profit for the government.

The stock market is now correcting as we predicted in this time period. Is it any wonder investors are exiting positions with a Federal Tax Grab on the front burner?

Money is flowing into long dated bonds with the ETF TLT advancing over ten dollars the last few weeks. Last week we discussed speculation regarding $100 crude oil. Today WTIC is up again to $71.91. The emphasis away from anything carbon based and the demand for fuel as travel begins again is supporting the price.

The Goldman Sachs Commodity Trust GSG has returned 25% this year. Again, it is unusual to see bond prices advancing amid commodity price increases. That should not last much longer. If price continue inflating, look for long dated interest rates to do the same.