Here you will easily understand why economic collapse is unavoidable .

The balance between offer and demand needs some sort of equilibrium between prices ( raw materials + salaries + paying back corporate debts + energy consumption + profit …) and purchase power ( salaries plus credit capacity ) .

As taxes are not suitable to a specific moment of economy , disruption between offer and demand occur .

Taxes may lean hard on offer or demand if wrongly applied .

As taxes penalize companies , competitiveness and salaries will suffer and unemployment is bound to grow as production and investments are reduced .

As taxes favor companies and penalize citizens ( work force in their role of consumers ) demand will drop , prices will have to fall and unemployment will occur as companies will have to adjust production . Unless of course that companies use the surplus to invest and create more and better quality jobs . But that is not happening but in very limited cases . Companies as we know prefer to pay better dividends .

In other words , no matter how equilibrium between offer and demand is disrupted , unemployment will always occur .

That means that a specific tax policy is needed to maintain a certain moment ( moment is dynamic , state is static ) of an economy .

The current economic model is favoring the accumulation of gains in very few hands which have nothing to do with long term direct investors . Those few hands are what we know as speculators in stock exchange , housing , energy and raw materials …

That is possible because tax models allow that to happen .

The tax plan must stimulate money to go into added value investments that will generate a healthy employment offer that will guarantee a solid middle class with high purchase capacity .

Twenty percent of a the population canot maintain all big car companies and other consumer goods companies running their business for only 20 % of the population .

Till now the problem has been compensated with an exceptional growth of debt both corporative and private ( which sooner or later causes acceleration of sovereign debt ) , but that is something that canot be kept going on for ever and this is where we are now .

People and companies are supporting such a debt level that demand is simply collapsing , because creditors need their credits being paid back and are reluctant to lend any more money .

To pay back the debt , both companies and consumers have to gain much more and that is simply impossible . Consumers income is depressed and tend to be worse and companies with very restricted profits or with losses , canot be expected to increase salaries at this moment neither create new jobs .

So there is no option but to change the tax policy to prevent speculation and stimulate long term direct investments that will generate more quality employment . Housing , stock exchange , raw materials and energy will have to be specially controlled . Being liberal does not mean being idiot .

The situation now is in fact so much out of hand that sovereign debt as well as corporate and private debts will have to be reconsidered . It is impossible to grow without a huge inflation with that level of burden .


Published in: on septiembre 16, 2012 at 7:19 pm  Comments (12)