The US Economy, Taxes, & the United Nations – Bold Innovations Needed – Tax Reform and Benefits Reform – by George Mentz, JD, MBA, CWMMonday, June 4th, 2012
The Economic Issues and Some Defensive Strategies and Ideas
According to the WESP World Economic Situation and Prospects Report from the United Nations, the US and global economy is in a rut and having extreme difficulty moving forward. The report recommends that governments must be innovative and think of new strategies to cooperate with business and the workers to stimulate the economy.
As per the United Nations Report, the US economy still remains weak and without direction. The report states that, “In the United States, despite recent improvements, the unemployment rate remains well above pre-crisis levels, at over 8 per cent. In the euro area, it increased to a historic high of 10.9 per cent in March 2012. It reached alarming heights in the debt-ridden euro area countries: in Spain it had jumped to 24.1 per cent in March 2012 (up 8.6 in 2007), 21.7 per cent in Greece (up from 8), 13.5 in Portugal (up from 8.5), and 14.5 per cent in Ireland (up from 5). In developing countries, in contrast, employment rebounded more strongly.”
USA Economic Woes – The Highlights
1. In a May 9th ABC news report, the number of highly educated professionals or PhDs on public aid or welfare has tripled in recent months.
2. In total, 44 million people were on food stamps in the US on a monthly basis in 2011, compared with 17 million in 2000, according to the U.S. Department of Agriculture. – Source ABC News
3. Moreover, Business Week reported on May 31st that The number of Americans on Social Security disability has jumped 23 percent since 2007.
4. Presently, The level of employment is about five million jobs lower than where it was in 2008, when the economy slipped into recession.
5. A record 5.4 million workers with their dependents have signed up to collect federal disability checks since President Obama took office.
6. CNN now reports this May that 12.7 million are unemployed in the United States not including the 4 million who have may have given up looking for work.
7. Economists forecasts and estimates reveal that about another 4 million workers have simply stopped looking for work, and so do not show up in the Dept. of Labor tally used for the unemployment rate
8. Japan’s stock markets fell again with the broader Topix index hitting a 28-year low.
9. To make things worse in 2012, Wall Street Stocks ended down a whopping 2 percent, extending May’s rout. The DJI Dow Jones industrial average also dipped into negative territory for the year which is the biggest insult to injury to a potential recovery and to workers’ 401K Plans.
The United Nations States that there are Four major weaknesses continue to conspire against economic recovery:
1. Deleveraging by banks, firms and households, which continues to restrain normal credit flows and consumer and investment demand;
2. Unemployment remains high, a condition that is both cause and effect in preventing economic recovery;
3. Fiscal austerity responses to rising public debts deter economic growth and make a return to debt sustainability all the more difficult; and
4. Bank exposures to sovereign debt perpetuate fragility in the financial sector, which in turn spurs continued deleveraging.
The UNs Ban Ki-Moon said, “Worldwide, more than 400 million new jobs will be needed over the next decade. That means that policy-makers must get serious, now, about generating decent employment,” said Secretary-General Ban Ki-moon at the high-level thematic debate on The State of the World Economy and Finance and its Impact on Development, held on 17 May. “It is time to recognize that human capital and natural capital are every bit as important as financial capital,”
In conclusion, there needs to be new, bold, and efficient ways to stimulate hiring, employment and consumer spending. Governments should begin to look at ways to treat the working professional and the employers as the customer and determine what types of simple benefits and tax reform could be imparted upon the hardest working and the most steadfast contributors.
There needs to be greater incentives to: compete, to create, to invest, and to participate. If the cash, food, and health benefits of “not working” outweigh the rewards of: hard work, risk and job stress, then the entire system is totally broken. In sum, because the markets and investment yields are not advancing in recent years, the pensions and government obligations grow larger while the available money gets smaller. In the end, the state, federal and city governments are not using sustainable business practices or budgeting, and if costs are not constrained, then debts will become unmanageable and insurmountable.
Defensive Market Tips: Some Stock Sectors that were resilient this week were: Verizon VZ, WalMart WMT, AT&T Symbol T, Sara Lee SLE, AmerisourceBergen ABC, Johnson and Johnson JNJ, Pfizer PFE, ristol-Myers Squibb, Wellpoint WLP, or you can find ETFs that are defensive in nature that own gold, silver, or other commodities Gold/DGP or Silver/SLV
Other Typical Defensive Stocks may include: Microsoft MFST, Mastercard MA, Monsanto MON, Walgreens WAG, Merck MRK, VISA symbol V, Chevron CVX, Exxon XOM, Lowes LOW
George Mentz is a world recognized wealth management commentator who has authored several revolutionary books. Dr. Mentz, an international attorney, has been a keynote speaker globally in Asia, Arabia, USA, Mexico, Switzerland, and in the West Indies. Mentz can be contacted at www.gmentz.com
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*No tax or investment advice is implied herein. Before making any important investment, tax, or legal decision, please speak to a licensed professional in your jurisdiction.