Ping!
Just reading the VIX suggests the Dow has at least one more violent leg down. Certainly there are enough potential catalysts in the air.
Of course anyone paying attention expects the free market to be substantially hampered by abuses coming from the new administration, but those will pass eventually.
Because by definition income taxes discourage savings and investment, that results in the rise of too much debt financing for economic advancement, so if there is any form of economic disruption the results can be disastrous, as the sub-prime mortgage meltdown so clearly demonstrates.
This is why we should kibosh the Federal income tax system (a system so complex and unwieldy even the IRS admits it has difficulty figuring it out and costing the US economy probably around US$600 BILLION PER YEAR in compliance costs and pre-compliance economic decision costs in 2008! ) and start over with a government revenue stream based on taxing consumption, which means we generate revenue here in the USA not from 158 million taxpayers but over 300 million people living in the USA and 50 million foreign visitors per year, a lot more stable base for revenue generation.
That's why I'm a big supporter of the FairTax system as the starting point of this change. Because FairTax no longer taxes earning money, we get the following benefits:
1) Income earners will get paychecks as much as 22% larger, thanks to no more tax withholding per paycheck.
2) Americans will actually start to save and invest their income at a much higher rate because of no tax consequences of putting money into savings and investment accounts.
3) Because of the higher savings rate, that means Americans can actually build up a retirement nest egg and/or save up to buy a big-ticket item like a home, automobile or large appliance either in a cash payment and/or with a far smaller loan, since the consumer can afford far bigger down payments. That benefits finance companies, since it means a far higher chance they can get their loans paid back.
4) Americans don't have to go to Byzantine methods to "hide" their assets from the clutches of the IRS. This would end the practice of offshoring assets in places like Bermuda and the Cayman Islands and possibly end a majority of the underground economy.
5) American companies are far less likely to offshore corporate headquarter and manufacturing operations just to reduce their income tax burden. That means higher employment and we could even see cities in the Rust Belt revive as manufacturing operations return to the USA.
6) Foreign investors would pour trillions of dollars into the US financial system, since investing in the USA will no longer have any tax consequences.
Estimating US GDP decreases, unemployment rates & equity price drops based on what we experienced in the 1930s and what was experienced by Malasia, Indonesia & Philipines is a little of a stretch - our economic, social & political worlds are much different. Prob better to estimate based on what the industrialised & technological world (mostly western world + Japan) has experienced since the early 1970s, plus weighting more strongly for US experience in the 1970s & early 80s, and for Japan’s experience in the 90s (b/c that’s the closest parallel as far as how the crisis started).
I don’t have the numbers, but that seems to suggest that GDP contraction & unemployment not be as extreme as suggested here, but that instead tha duration of the economic and stock market slump msy be much longer and the public debt growth much higher than expected based on this analysis.