October-November 2021 Newsletter
400th ANNIVERSARY OF THANKSGIVING DAY
November 25, 2021 is the Celebration of the survival of the voyager Pilgrims at Plymouth, Mass. They arrived in 1620 during the Winter and lived on their little ship until Spring 2022 when it departed for Holland. Only half of the hundred devoted passengers had survived the bitter Winter. Game was plentiful and the native Indians assisted them with planting food in the rocky sandy soil. The first year of settlement after they harvested the crops, a three-day feast was prepared and shared by their Indian friends who helped them survive the terrible winter and successful encampment. This was the true beginning of America, a time of friendship and abundance shared by all. Many countries celebrate the end of the annual harvest and onset of Winter, but this Celebration was from a group of Puritan Christians who had escaped England and Europe to begin their own country with freedom of religion and personal goals. It would take another 155 years before the bloody Revolution wrested the future 13 Colonies from England and the journey was finalized.
We all have a lot to be thankful for and hopefully not lose our freedom and prosperity with excess greed and politics. We were the most powerful and generous country in the world and have now lost our position. The entire world is affected by our downfall.
This newsletter covers both October and November. My wife and I took a week away on vacation to New England. It was very peaceful especially since the resort in the Berkshires was closing for Winter.
MONETARY THEORY: Unlimited debt supports this Democratic Party theory that the money supply is supported by debt which never needs to be repaid. Endless spending bills have been steamrolled through the House and Senate this year. The panic of the Covid virus is behind us but endless spending is now the norm. The current monetary policy of cheap money is fueling the economy as well as the endless supply of it. We now have inflation approaching ten percent and nobody is addressing it by raising interest rates and cutting spending. All the recessions of the past have been successfully ignored but the price will be paid.
TESLA: The premier electric auto manufacturer has announced a new battery for their automobiles. Beginning next year with their battery partner Panasonic, the new battery, about double the size of a D cell, which will replace a smaller 18650 rechargeable battery. It is a more practical size so should be more economic and much more powerful. It is truly remarkable that Tesla was assembling hundreds of small batteries to power each of their cars.
SOCIAL SECURITY: This affects most of us. It is a mandatory payroll investment equal to about 15% of total payroll and is divided between Medicare and pension benefits. For most people 85% of the pension benefits are Federally taxed as ordinary income if the total income including SS is more than the poverty threshold of income [$35,000 joint]. The surplus funds paid in over past years earns 2% interest from special Federal security [or note] issued to the fund in return. At this time benefits are first paid from general SS taxes received, and the deficit payout is covered by redeeming the debt. The payouts are now considerably more than the taxes collected.
There is about $3 trillion in Federal funds belonging to the Social Security and Medicare currently to cover the lifelong difference between beneficiaries. The Social Security-Medicare reserves represent a $95 trillion deficit based on future benefits promised versus actual reserves to cover demands and obligations. Unlike private pension plans, there is no plan to account for future benefits. This is three times the publicized National Debt. The future of Social Security, without the new House proposals to expand the benefits for all, is insolvency in 2033 or sooner. The insolvency points for Medicare without further expanding benefits as proposed, is sooner, by 2026.
Social Security benefit payments are scheduled to increase by 5.9% beginning next year. This is the biggest bump since 1982. That was 50 years ago and if I remember correctly, it was corrected when President Nixon instituted a complete wage freeze throughout the country to force inflation, which was over 10%] back down.
CHINESE FORCED ORGAN HARVESTING: This came into view when the principal director of the Qingdao University Medical School Hospital, Dr Zang, a liver transplant specialist, who had won awards as The Nation’s Distinguished Doctor, committed suicide. One of the hospitals he worked at was the Tianjin First Central Armed Police General Hospital. He was one of five doctors who committed suicide from organ transplant surgeries.
This hospital went from donor shortage limited production from only 1,570 annual transplants a year to 20,000. The changing element was the CCP persecuting the Falun Gong religious sect. International investigations have revealed that their forced organ harvesting from live humans were crimes against humanity. Currently, it is hard to believe of an assembly line of political prisoners strapped down on gurneys, given a shot of anesthesia to stop screaming, and ripping his/her kidney out for the patient in the next room. The Aztecs did it for your heart but never bothered to transplant it. That would come later. Thanks to Epoch Times for the article.
BITCOIN: This has been recognized by El Salvador as legal tender. Their new law says that the government guarantees “Automatic and Instant Convertibility” to dollars. This Wall Street Journal article further states that the government will be able to move money outside normal international protected SWIFT banking dollar systems, more like Argentina, especially since the non-currency moves up and down more than a roller coaster.
MARKET NEWS: Andy Kessler wrote a WSJ article recently about market fundamentals. A fundamental is simply value of a business measured by sales, profits, and equity. Today, we are in a stock market which is valued simply by the value of shares issued times market price. That makes some fantastic comparisons and a bit of speculation. Some examples were GameStop which peaked at $135 and now delisted at $.30 per share. Beyond Meat, made with pea protein is worth more than the global market for peas eaten. An Italian artist auctioned an invisible statue for $18,000. It was an empty box the artist claimed was a space full of energy. Today’s negative real yields do not reflect reality. The Fed has warned it plans on tapering bond and mortgage purchases later this year. The compass may stop spinning soon. Until then and always stick to the fundamentals.
TALIBAN GIFT of $64,000,000 was made by the administration to the Taliban at the time of our exodus at the airport. The gift was for humanitarian aid. It was debated that it was really for a ransom to get the remaining Americans out of the country. It appears that if that was the real goal the Taliban have defaulted because the money is gone but the remaining American family hostages are not gone.
Zero taxes by Biden are promised to offset all his spending proposals. Without going through all the stuff [see December newsletter when the big one is passed or failed], the efforts of 85,000 new IRS agents auditing every American citizen, your bank statements in hand, for back unreported taxes, will certainly be an event to remember. Checks to aliens without Social Security numbers are another historic event and a final one is jobs for only Union members. What is suddenly evident now with the collection process of emptying your pockets for indirect benefits, is two letters received by clients recently: One was for non-filing of a LLC business tax return. The penalty letter of $2,500 was dated the month after the extension deadline, both this year. This is a new penalty sent as soon as they could mail it, for new penalties on the books but never enforced. Beware. The other penalty was for $600 for a client sending off 1099 forms late at $50 each. This is the first time I have seen this one, ever. A third was evident last year when they reinstituted the 20% negligence penalty for underreporting taxes owed when the computer found some income missing from a 1099 comparison. This penalty used to be in force [on the books] for many years and disappeared about ten years ago because it was so hated and assumed negligence on a common matter. We are entering the era where everybody must fear the IRS with their automatic power of penalties and such awful recourse with tax liens and interest on penalty amounts [and nobody on the phones when you make the call]. We also have a client in US Tax Court where all collections are supposed to be put on stay until settled. Meanwhile the client is still receiving notices indicating tax liens on his bank accounts if he does not pay immediately.
FROM SUNNY CALIFORNIA: Governor Newsome, after surviving a recall attempt, has inked more legislation to prove his loyalty to those 2/3 of the voters who still love him. A new law effective January 1, 2024 will phase out gasoline powered small engines including those used in landscaping, power generation, and recreation. That gives all of us two years to wear out the lawnmowers and edgers and to redesign the backup power generators that run of gas. Since the generators will not run-on electricity either, these expensive units will have to be reconditioned to run on propane. Most [all the ones I have had] of the electric mowers suck. They eat the extension cords or have terrible batteries and cost more at the store. Performance on my last battery mower was that it was good for only half of the lawn and the little battery cost as much to replace as the mower originally cost. The lithium battery units will not still cost twice as much as gas and have bigger batteries by then. But do not count on it. Back to shopping in nearby states.
FINALLY, FROM THE PRESIDENT: During my vacation this Fall, regular gasoline prices were $3.40 per gallon, and everybody was complaining because it was only $2.40 a year before. Restless California at this time was only $4.40 and the White House said they were temporary. They were right because California, with the help of sales tax on the fuel, is over $5.00 for regular. I would not be surprised if all the grades of fuel will be retailing at $6 by year-end. Recently White House Press Secretary Jen Psaki claimed there was an upside to high gas prices. “The need to accelerate the development of renewable “clean” energy sources. Essentially soaring prices are good.” This has led to a new language abnormality to explain economic abnormalities, CLIMATE JUSTICE. Sounds like Animal Farm where meanings are opposite of statements. What costs too much is good for you “because it costs too much.”
BIDEN AND NOTHINGNESS: From the WSJ comes a great article on doublespeak from Washington. Jen Psaki said the evacuation of Kabul could not be called anything but a success. She is becoming expert at reordering reality and transforming from believing what is real to believing what we are told is real. In Chicago reality resets when the Cook County State’s Attorney declined to prosecute the gang members who staged a shootout in a residential neighborhood. The reasons for not bringing charges were that the gangs were engaged in consensual “mutual combat” like in the movie “Fight Club.” President Biden has stated that we have a Closed Border. If we have a closed border how are armies of immigrants able to cross them? Project 1619 purports to reframe history which is displacing a proven reality with mere assertions.
THE TRILLION DOLLAR COIN minted by the Treasury was proposed to avoid a debt ceiling and a shutdown of the government. What a fantastic simple solution. This WSJ article suggested a Chewbacca neutral face on the coin to keep politicians out of trouble. It should be portable, and not the size of another coin like the Susan B. Anthony dollars vs quarters. How could you get change for it? What if the motel canned soda machine eats it without spitting out an orange soda? The commotion of extracting justice from the machine would be awful. A government shutdown is also a nightmare, but so is not getting an orange soda, per Jason Gay.
INTEREST RATE INCREASES are predicted for an increased Fed benchmark interest rate and a maneuver to pull back on the massive support it has been providing by buying back $120 billion monthly in bond purchases. Their threshold of 2% inflation has been exceeded and the elasticity of the difference between the threshold amount and the real world will adversely show very soon. Lastly, when the record low of 0% to .25% goes up, like all boats on the ocean at high tide, it will affect ALL interest rates that are not fixed. Like bank loans, credit cards, and future mortgages.
FUTURE ANNOUNCEMENTS will be made a month from now when we have the two huge phony tax increase bills cleared and will detail the changes applicable to our business and clients.
At this time, we reiterate that we are still here to help you with your taxes as required. Our only problem with the returns completed this year was with the stimulus payments received vs IRS records.
Enough for now. Two months of economic news is deadly to the soul. December news will be strictly tax info.
See you after year-end.
Phillip & Nenita
FYI: We have completed a new Instagram site. Please visit us at our Instagram @phillipbchuteauthor.com.
Also, we need a boost from Yelp. I am requesting a few clients to give us a positive Yelp review if you are satisfied with our service. Thank you.