“I am a capitalist.  A good one through and through.”  Every politician says that because, except for Bernie Sanders, all believe that socialism is the “political kiss of death” because all Americans detest socialism.  That simply is not true and that is why Bernie is doing so well in the polls. In fact, I am convinced that none of these politicians understand the difference between socialism and capitalism, and they are all petrified of the voters, but you don’t know either.  Today we teach you and then you judge where you stand.

First, understand that pure capitalism would never work.  Under such a scenario all would set out to make as much money as they could and it would all be theirs to keep.  What government there was would be paid for by an annual tax that would be divided equally by the number of citizens.  If you made a billion dollars, you would pay the same to the government as the person making one hundred dollars. Life would be entirely dictated by the forces of supply and demand.  It would not be long before the wealth would be in the hands of the very few and most would have nothing. That is not good for either the rich or the poor because in the end the poor would revolt and take by force what the rich had.  Marx called it those without the “proletariat”.

Socialism is just the opposite.  There is no private business and each person is given the same amount of land.  Whatever he earns goes to the government and divided equally. No matter how hard you work or how smart you are, you get the same from the government as everyone else.  That is pure socialism, not to be confused with Communism, which is more of a political philosophy, as opposed to a system of free elections. Socialism does not work either.  Let’s look at Vietnam, which struggled so long in wars to attain independence. They were ruled by individuals who believed in socialism, and once they became independent they turned to that philosophy.  They nearly starved! It was the worst of times for Vietnam. After about ten years of starvation, the rulers turned to free enterprise or capitalism. It worked and today Vietnam prospers, although it is still a communist nation.  Look at a nighttime picture of North and South Korea. The South is booming as a capitalist nation and the North is dark and produces nothing for its people. This one is very scary because it has the bomb and a possible method of delivery of it to the US.  Remember, when people get too poor, they can do desperate things—and that does worry me. The Soviet Union broke up because socialism did not work, and now it has all kinds of capitalist businesses.

How about us-what do we have?  Well, all our politicians are capitalists, and they lie well.  Ask them if they favor a cut in social security and watch their reaction.  They will run for the hills and protest the safety of that program. Now that program is a form of socialism.  It forces you to pay into a system that is there to take care of all and what you pay into the system and is not precisely related to your income.  An example is an athlete that is making 12 million dollars per year. He will pay into the social security system on the first 150,000 dollars of his income (roughly) and $11,850,000 dollars is his and he pays no further social security tax on those dollars.  Put another way if you earn $150,000 per year and I earn $11 million dollars, we pay the same into the social security system. That is pure socialism, but we Americans love it and no politician will take it away. We have a graduated income tax. You pay more as a percentage as you make more.  Hardly everyone getting a chunk of land that is the same and paying a single tax under my example of pure capitalism. So that is a socialistic change in capitalism. Medicare is the same, and soon if we have any brain at all, we will have a single payer system for health care. Bernie want to go farther and supports government coverage for nursing home care (and I agree) and public education for college (I may not go that far).  Here is why I agree on nursing home help and waffle on public education. The chances of going into a nursing home is beyond the individual’s practical control and wipes him out financially. My parents scrimped and saved as best they could. My father never went in a nursing home, but my mother did. In two years she was out of money and she never changed beds. The government paid and the rate was 90% lower. It is our greatest sin of omission in America.

Even if you proclaim to be a pure capitalist, you are in for a rough time.  Young people want large doses of social programs and soon they will have their say, and there is no changing their minds and I welcome their thinking.  The recent tax reduction for the very wealthy is absurd. I remember a 70% bracket, which is too high, but now it is too low. Think of Mike Trout who is being paid $24 million per year.  Shaving 3% off his bracket is a $650,000 saving in taxes, and now the Government needs to cut entitlements to make up for the lost revenue that it squandered.

When too much goes to the top and too little to the bottom, there is a problem and we are getting closer to that situation!

THE MARKET FEARS A RECESSION IS COMING

This would not be the fault of the President.   We are in a long period of growth and the economy is in for a setback.  The Fed as much as predicted it by announcing that no further interest rate hikes are coming for the rest of the year!  I was shocked at that and the only reason is that they see signs of recession too. Announcing no further rate hikes should be music to the market’s ears, but the market didn’t like it because they know why.