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SPEAKING OF TAXES AND INFLATION

Tax

Tax (Photo credit: 401(K) 2013)

I few months ago I asked myself the question “What happens if gas prices start spiking at the same time taxes are spiking?” Well as it turns out, gas is climbing and so are taxes. Debbie Bruister, a mother of four, received a $1,160 raise this school year- about $97 a month, before taxes and other deductions – but the elimination of the payroll tax break shrunk her and her husband’s paychecks by more than $270 a month. They’re paying $3.51 a gallon whereas they were paying less than $3 per gallon in 2012. –http://finance.yahoo.com/news/middle-class-expenses-grow-faster-111900178.html In Virginia, the governor has managed to raise taxes and gasoline prices in one fell swoop by enacting a new wholesale tax on gas paid by distributors, which you know is going to affect the price at the pump. Glad I bought that 4 cylinder Civic.

So below I listed a few inevitable outcomes to gas and taxes spiking at the same time just off the top of my head:

– Increased food costs

– Break down in various supply chains

– Less disposable income – decrease in non-essential spending

Corporate profits begin getting squeezed

Less profits means smaller (or no) raises for employees

Leading to even less disposable income, and the cycle starts feeding on itself

– Becomes more expensive to drive to work

– People (teens mostly I’d imagine) begin stealing gas

– People begin to struggle paying bills

– Loans become harder to get

All of the above can lead to civil disorder, or at the very least people becoming far more uptight and stressed out.

As people have less and less buying power, they will begin losing confidence in the dollar, and as this happens people and countries will stop investing in US Bonds. If that happens then the government will have as much trouble servicing its debt as the individual is having, but that is another topic entirely.

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THE REAL THREAT TO BE PREPPING FOR

I have finally had my “Aha” moment in regards to the most likely disaster we need to be prepping for,: taxes and inflation.  These are the greatest

Image courtesy of renjith krishnan

Image courtesy of renjith krishnan

danger we are facing, and even though they aren’t going to lead to anarchy and complete societal breakdown, they will lead to increases in crime and violence, and shortages of many of the things we take for granted.  While the systems people have become helpless without will still be in place and functioning, we the people will not get as much utility from them as we once did.

Taxes are about to become the biggest crisis we face.  Our taxes are on the rise because local, state, and federal governments are going broke through their refusal to do what we the people are required to do (budget, live within our means).

This is going to pull more and more money out of our pockets and out of the monetary system, leaving fewer dollars for us to spend.  The top tax rate in France is now 75%.  75%!!!  Ouch!  Not only are we going to have fewer and fewer dollars to spend, the dollars we do have are buying less than they used to.

“the question of how the increase in Social Security taxes would affect the poorest workers did not seem to garner much debate on either side of the aisle.

“I don’t see any reason to consider supporting its extension,” said Timothy F. Geithner, the Treasury secretary, in testimony last year. Even Nancy Pelosi, a reliable liberal who leads the Democratic minority in the House of Representatives, was for letting it expire.

If you wanted to design a policy to squeeze the spending of lower- and middle-income households, raising the payroll tax is the way to do it,” said Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors. “It’s very regressive.”

Retailing analysts and economists say high-end earners will largely be spared.

“I wouldn’t expect it to have much of an effect on BMW consumption,” said Richard H. Thaler, a professor of behavioral science and economics at the University of Chicago’s Booth School of Business. “The people who will notice it the most are the ones making the least.”

When asked how their financial situation had changed in January, 32 percent of people with incomes below $75,000 said their pay had dropped, compared with 13 percent who said it had increased. By contrast, 38 percent of people earning more than $75,000 said their wages had gone up last month, and 23 percent said they had gone down. “ – http://finance.yahoo.com/news/higher-payroll-tax-pinches-those-174834511.html

As people spend less, prices will continue to increase as businesses struggle to maintain profit margins.  This will lead to people buying fewer items and a vicious cycle begins.  Also, less buying power means a diminished ability to repay loans. So if a bank or lender doesn’t have faith in your ability to repay a loan, they aren’t going to make the loan.  That means you are going to have a really difficult time replacing a car that breaks down, which could lead to losing your job.

Couple tax increases with the continual rise in inflation and the erosion of the dollar’s buying power and you are looking at a situation in which the working class is basically becoming indentured servants.

One of the steps to take in order to be resilient when this happens, I MUST HAVE DEPENDABLE TRANSPORTATION NOW!  The time is coming when we are not going to be able to afford a replacement.  Back in early December I took my cash savings and bought a used Honda Civic 5 speed for $2600.  With proper maintenance I should be able to get at least another 100,000 miles out of it, and it has a 4 cylinder engine so it gets good gas mileage.  I saw it as having more value than the cash I was sitting on.  I am now attempting to replenish my cash.  Saving $50 per week should replace it in about a year.  I think it is vital to be sitting on cash as we approach the coming crisis.  I also think it is wise to have a portion of that cash in silver because silver is going to start to appreciate in value at some point.  You don’t want it all in silver though because you don’t want to be in a situation where you can’t get it converted back into dollars in time to take advantage of a great deal.

An important note about taxes: the very rich don’t really care at what rate they are taxed at in this country because the tax laws were written by them.  As long as they know what rate they will be charged, the can have their accountants, planners and advisors plan for it and adjust accordingly.  These sophisticated tax planners have nearly 4 million words of tax code to help them in their tax avoidance.  74,000 pages seems to be excessive and wreaks of special interest.  Wasn’t Romney’s tax return over 375 pages long?  He paid a rate of between 13.5% and 14.1%.  Sounds low to me, but my tax return has less than 10 pages.  For the sake of disclosure, I am not an Obama fanboy, I did not vote for him.  I voted for Gary Johnson.

We The People

we-the-people.jpg

The Constitution of the United States of America does not grant us our rights as individuals, it protects them!!

 

The term “inalienable” means unable to be taken away from, or given away by, the possessor.

 

 

 

OPT OUT

02/01/13

Secede as an individual. Quit supporting the corporate mindset that you so despise and which is stealing your wealth, free time, family time, and quality of life. Disempower the systems that are oppressing you. Empower yourself. Be resilient, not dependant. Without even realizing it we support and enforce our own slavery/oppression. We actively participate in keeping the systems that make us miserable going. We are miserable and we facilitate it. Lead your own life! Don’t get me wrong, I think you should absolutely support those advancing the causes you believe in, but don’t stop there. Use some of that support to make a difference yourself. Think about the kind of person it took to shape and tame this country. You are born of that stock, those were your ancestors. You have that same blood in you.

We need to support things that matter. We need to support things that add value to our lives on the individual (personal) level. We need to support things that will support us.

02/01/13 ACTION

– Bought 5 ounces of silver from the TSPMint which just came online. I didn’t really need more silver at this point, but they are working in conjunction with AOCS and I wanted to show my support for both TSP and AOCS. I want to enable them to keep getting the message out.

09/27/12

It looks like I have gone on a bit of a spending spree, but I feel it is necessary. I have not been as focused as I have needed to be recently so I feel like I have some catching up to do. I haven’t been getting the OT I need, but since my wife is anything but “gazelle intense” (for instance, she is willing to keep paying ATT $100 per month so she can dvr “The Voice” and “Xfactor”), and I haven’t been taking any money from her paycheck to pay bills, I am going to use any extra to become more resilient so I can break free from my dependence on the system. I have started listing the things I am intent upon buying with the hours of OT required to do so. As long as I stick to the schedule things should be ok. Jack at TSP has said (and of course it makes sense) that QE3 (ha) will probably put off the inevitable economic hardship for 18-24 months, so that is the time frame I am giving myself to become as resilient as possible. Sustainable living is the goal. I believe that what is going to happen in the economic meltdown is that the govt will began taxing the crap out of us, making it harder and harder to survive on what we make. They may make credit easier to obtain, at least for a while, so that people are even more enslaved by their debt. I have to be prepared for the heavy taxation and resist the urge to continue the status quo by using credit. That means being able to provide some things that we normally spend money on – like food – so we will have money for the things we can’t provide for ourselves, like medicine.

I am reading the series 299 days and it has really made me more committed to getting in better health. I had my blood work done on Tuesday, and my numbers are great. My total cholesterol is 177 (could be better but), my LDL is 85 and my HDL is 85, triglycerides are at 37, and my A1C was <6 (5.6?). I splurged on raw milk because I figure it has a lot of nutrients that are missing in our diet so if my youngest and I get them once in a while it is better than nothing. Plus, while we are getting them from the raw milk we are getting a break the skim milk at the same time.

09/27/12 ACTION

– Bought 4 bags raised bed garden mix $64.00 (ouch)

– Bought 300 rounds 9mm bulk for $71.18 (again ouch, but needed for target practice). Need to break in my Steyr and get comfortable using it.

– Bought some raw milk $10. (the price has gone up $2/gallon because the local gov’t is making it harder for them to be in business)