Is This The First Domino?

May 26, 2010

by Al Doyle

The possibility of a number of deficit-plagued states delaying or even reneging on state income tax refunds has been raised by those who understand the nature of the current economic decline. That scenario has now become a reality, as Rhode Island has held back 53,000 individual refund checks for four to six weeks, and payment isn't expected for another month. The $36.3 million owed works out to an average of $685 per taxpayer.

From the May 25 edition of USA Today: "Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year. . .at the same time, government-provided benefits from Social Security, unemployment insurance, food stamps and other programs rose to a record high during the first three months of 2010.

"The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more expensive programs. Government-generated income is taxed at lower rates, or not at all, he says."

Total public and private U.S. indebtedness- not including tens of trillions in unfunded liabilities -is 800 percent of annual gross domestic product (GDP), which is more than twice the rate in 1929.

"If debt and money printing equaled prosperity, then Zimbabwe would be the richest country. Mugabe (dictator of Zimbabwe) is the economic mentor of Ben Bernanke." - Dr. Marc Faber.

Even venerable stock market analyst Richard Russell -a rational and level-headed manwho would never be labeled as an alarmist or extremist - has issued the alarm to his subscribers.

"By the end of the year, they won't recognize the country," Russell warned.