The stock market had a bad week. Internal liquidity as reflected in the daily tax revenue correlates with the movement of the market. A drop off of daily tax collections compared to a year earlier serves as an early warning for market drop offs. You have to follow closely. The data posts a day late. The market change especially down follows closely there after, just a day or two. The average daily revenue this week to date trails last year by 48%. This appears to be the greatest drop in the last year. The 15th, tax time, comes a day later in the week this year, but it is hard to imagine it making that much difference.
We have written about this phenomena of liquidity before. It is frustrating because we missed the signal and it was a strong one. There are policy implications too however. Tax revenue does not drop off because of the balance of payments, the interest rate, or the tax rate. It drops off because of lower corporate contributions, lower payrolls and thus lower parole withholding and because of lower velocity in the economy; that is lower turnover of funds, spending that is in a productive way. Alternatively, it may be just a fluke. The market has many flukes but usually not this big. The next ten days should tell. (An economist’s hedge, just what we criticize)
The loss of jobs overseas may be the contributing cause of the drop off, a loss of high paying jobs that would have fueled further productive choices and growth. --- There may be a broader and more sinister problem, however. The problem may grow from monopolies engineering scarcity in support of their tight margins. A restraint of trade stems from: the oil companies clinging to fossil fuels, the recording and motion picture industries clinging to copyright, the phone companies clinging to bandwidth with paranoia over VOIP, and the insurance healthcare pharmaceutical complex clinging to engineered scarcity of another sort. All of this chokes out the competition, growth and innovation. These bureaucratic megalopolies contribute poorly to the velocity and growth of the economy. (Much like giving the money to the government) Where is the FTC
We have written about this phenomena of liquidity before. It is frustrating because we missed the signal and it was a strong one. There are policy implications too however. Tax revenue does not drop off because of the balance of payments, the interest rate, or the tax rate. It drops off because of lower corporate contributions, lower payrolls and thus lower parole withholding and because of lower velocity in the economy; that is lower turnover of funds, spending that is in a productive way. Alternatively, it may be just a fluke. The market has many flukes but usually not this big. The next ten days should tell. (An economist’s hedge, just what we criticize)
The loss of jobs overseas may be the contributing cause of the drop off, a loss of high paying jobs that would have fueled further productive choices and growth. --- There may be a broader and more sinister problem, however. The problem may grow from monopolies engineering scarcity in support of their tight margins. A restraint of trade stems from: the oil companies clinging to fossil fuels, the recording and motion picture industries clinging to copyright, the phone companies clinging to bandwidth with paranoia over VOIP, and the insurance healthcare pharmaceutical complex clinging to engineered scarcity of another sort. All of this chokes out the competition, growth and innovation. These bureaucratic megalopolies contribute poorly to the velocity and growth of the economy. (Much like giving the money to the government) Where is the FTC
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