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10 April 2008 @ 08:53 pm
tax policy secrets from Pioneer Village  
It became apparent during the early 90s that linking rural banks more directly to the national banking infrastructure via the internet would create inflationary problems because the amount of money speeding through the system would increase in proportion to the rate of exchange.

During the early stages of this internet revolution, the Federal Open Market Committee recognized that sustaining higher interest rates to combat inflation would disserve the opportunity available to the Federal Government to use anti-infaltionary tax policies to skim the till of "rising productivity" so as to pay down the deficit. After taxes were raised, the FOMC quickly reduced rates.

By 1999, however, rapid growth within the economy began to toll a burdensome energy bill (a barrel of oil rose in cost from $20 to $50)with puppeteering inflation strings. Initially, the Federal Open Market Committee responded by tightening monetary policy, but this move was counterproductive since 1) it squeezed revenue flowing into federal coffers 2) Energy costs were now being driven by demand around the world which was stimulated by the same changes to U.S. productivity engines ( in most instances, without rising taxes and increases to central bank determined interest rates) 3) In the global market place, the most attractive investment remained U.S. capital markets but these market powers knew that the rapid increase to the cost of doing business within the U.S. was less worthwhile than continuing the expansion of international investments;so domestically, tightened monetary policy and higher taxes when combined with Energy costs that could not substantially be reduced because demand increased worldwide spiralled the U.S. Economy into a recession.

In response, the FOMC began making small reductions to Interest Rates with little effect. After 9/11 shocked the economy, everyone rushed to provide consumers with More of their own Money by reducing taxes and providing rebates and the FOMC began substantially reducing rates. The move was propitious but was needed before 9/11 since the size of the economy had already begun to shrink (It climaxed at $17 trillion. 9/11 shocked it down to about $10 trillion. As a result, treasury receipts were going to decline.

The bush tax cuts (if you want to call them that---I am thinking about them from the viewpoint of impartial national interest as determined by the Great Economists and Bankers) have sizzled positively and annual deficits have fallen sufficiently for the FOMC to raise interest rates in moves that will stregthen the dollar once federal spending begins to fall again. I am saying that spending beyond our means in areas that are not directly responsible for domestic economic growth is causing the value of the dollar to fall , but the unavoidable policy causes leading to its decline are only medium term pains that were required for the sake of longterm stability for the global community.

SSecurity is to be solved during the next two presidential terms. During this time period, several health care bills are expected to test the waters of congress and begin moving the U.S. towards significant improvements in insurance coverage; The finishing touches are the domain of an earned postscript