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Scarcely a night goes by, when I don’t tune in to Lou Dobbs on CNN to catch his daily market/news roundup. He has always come across as one of the most trustworthy and honest TV journalists I’ve ever seen or heard, and more than that – a patriot. Anyone who watches Lou knows how diligently he reports on Outsourcing America [the export of American jobs] and Broken Borders – highlighting the flood of illegal aliens into the U. S. of A. – largely from Mexico. While the bright lights of CNN are rightly and rigorously reporting on the incoming illegal alien issue, what often gets overlooked or grossly under reported is Native Capital Flight, in admittedly smaller numbers, the affluent and their assets going the other way. Big Things Come In Small Packages At first blush, the thought of a few folks leaving the U. S. of A. might seem to some as a non issue. In fact, nationalist sentiment might even persuade many to encourage those so inclined to leave. So who's leaving anyway? “According to the US Census Bureau, as reported in the "2000 Statistical Yearbook of the Immigration and Naturalization Service" (6.2 MB download), by the Bureau of Citizenship and Immigration Services (BCIS), formerly the Immigration and Naturalization Service (INS), the wealthy are leaving the United States in record numbers. According to that report, in 2002, roughly 363,000 US citizens and permanent residents quietly left the United States permanently. Now granted, not all of those 363,000 expatriates were rich. But, think about it. How many do you think were poor?... How many do you think were even middle class?” So what is the demographic composition of the 363,000 cited above? First, consider that the poor who come to the U.S.A. typically do so for the benefits offered to them by the government. That begs the question, why would the poor leave? INS data is highly suggestive that the wealthiest Americans are leaving for wealth friendly climates. Data like this is backed up by the reality that the rich are increasingly being called upon to pay more: “The top-earning 1% of taxpayers (income over $285,424 in 2002) now carry 22.5% more of the tax burden than they did 10 years ago, when their share of the tax burden was only 27.45%. Do the math (33.7% / 27.5%).” The numbers cited above amount to 268 billion of a total 797 billion in individual income taxes collected in 2002. So the reality of it all, folks, is that the top 1% of income earners [1.28 million taxpayers] make roughly 16 % of all income generated and pay almost 34% of all individual income taxes collected by the IRS. Why Are The Rich Leaving? The exact causes for Native Capital Flight vary from case to case but logic would dictate that increased rules and regulations – along with the desire for privacy would categorically factor into the decision making process - everything from the Patriot Act to Sarbanes – Oxley to the National I.D. Card, to name a few. While these programs are perhaps necessary – they have undoubtedly contributed to Native Capital Flight. Still Don’t Believe It? Then Show Me The Money!
We can see through simple empirical observation of the Fed’s data that U.S. money supply [M3] has expanded since the year 2000 by roughly 3 Trillion Dollars. Yet, according to Forbes, on their annual list of the 400 richest Americans – there were 278 billionaires in 2004 vs. 307 in 1999 – a significant decrease? For those who would attempt to explain these phenomena by citing the burst of the tech bubble in 2000, I say on that basis Money Supply should have logically shrunk – but instead it’s grown by a factor of 30%. So, where is the money? Why Should We Care?
If the top 1% of income earners in the U.S. of A. should depart permanently, the remaining taxpayers would face 50% tax increases – just to allow the Treasury to remain even. While most members of the main stream financial press are fixated on the incoming, it never hurts to remember outflows, “Those who argue that Americans with the most money should be taxed at a higher rate will find themselves being taxed at a much higher rate, instead. If you are paying $5,000 in income tax today, then imagine paying an additional $2500 in taxes. If you are paying $25,000, then imagine paying an additional $12,500. If you are paying $100,000 - well if you are paying $100,000 in income tax, there's a good chance that you already have your bags packed and your second passport in hand, so you don't need to imagine anything.” Food for thought, if nothing else. It always makes financial sense to keep an eye on the big picture. Today’s Market Overseas, markets finished the day lower with Japan’s Nikkei Index closing 102 points lower at 10,947. Meanwhile, the DOW closed up 112.17 at 10,252.25, while the NASDAQ finished up 17.65 to 1,994.43 and the S & P closed up 11.64 finishing the day at 1,165.69. Precious Metals finished the day mixed, with COMEX gold futures off 1.10 to 419.10 while silver closed up .02 at 6.95. The XAU gold bug index closed at 78.73, off .29 with the HUI finishing the day down 1.45 at 166.60. Foreign currencies finished the day mixed, with the USD closing little changed at 86.12. The Yen closed at 106.87, the EURO at .7915, the GBP at .5440, the CAD at 1.2700 and the Ruble closing at 28.01. NYMEX crude oil closed at 48.61/barrel, down .06. Fixed income markets were largely unchanged with the 10 yr. bond at a virtual standstill at 4.13% while the 5 yr. bond closed at 3.83%. TIC data was released by the Fed and Treasury this morning and it revealed an anemic uptake of US debt by traditional sovereign foreign buyers with both Japan and China marginally trimming their official reserve holdings of US paper. It was reported that Caribbean Banking Centers bolstered their US debt holdings by a stiff 32 billion in March. On the docket for tomorrow, we expect the Census Bureau to report building permits for April at 8:30 am. [expected 2050k vs. 2025k] as well as April housing starts [expected 2030k vs. 1837k] At 8:30 am. we also expect the Bureau of Labor Statistics [BLS] to release April Producer Price Inflation [PPI] data. Core PPI is expected to be +.2 vs. a prior +.1 with a headline April PPI number expected to be +.5 vs. a prior +.7. At 9:15 am. the Fed is expected to release April Capacity Utilization [expected 79.6% vs. prior 79.4%] and April Industrial Production, expected +.3 % vs. prior +.3%. That’s the day that was. Good night to all and have a pleasant tomorrow. Rob Kirby © 2005
Rob Kirby |
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When
the rich depart and take their wealth and assets with them, those of us
that remain are required to ‘pick up the slack’ so to speak –
which means more punitive taxes for the rest of us now and in the
future. 