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IceCap Asset Management On 'Super Taxes' And Why Elvis Has Left The Building

Tyler Durden's picture


It’s no secret by now that governments in Europe, Japan and America have spent and borrowed beyond their means. As IceCap's Keith Dicker notes, including both current debt and future unfunded liabilities, it is estimated America owes over $87 trillion dollars, while the Eurozone countries are on the hook for over $89 trillion. That’s a fistful of dollars. From a tax perspective, the incapacity of these super economic powers, becomes all the more clear. America’s annual tax revenue is only $2.5 trillion, while in Europe, they manage to squeak out roughly $5 trillion. From this view, America is leveraged 34.8x their tax revenues, while the Eurozone is leveraged at 17.8x their tax revenue. As Keith points out in his excellent letter, for the US, Japan, and Europe, Elvis has very much left the building on getting back to 'normal'.

Since we have all become numbed by talks of billions and trillions, let’s put these numbers on the dinner plate of the average American family. According to the OECD, the average American family has income of about $31,000 per year. If this average family borrowed like the American government, it would have over $1.078 million in loans to pay. Good luck finding a bank to lend you that amount of money.


European, American and Japanese governments, on the other hand, continue to spend more than what they collect in taxes. Naturally, this means the money owed by these countries is always increasing. More worrisome is the fact that when interest rates eventually rise, the interest owed on this debt increases exponentially.

Even more worrisome, considering these countries are deeply committed to defying the laws of mathematics and never defaulting on their debt, only one outcome is assured – taxes have to increase, and government services have to decrease. In the end, everyone has to pay. Despite what Brussels may say, there is no magic solution.

The chart above shows the trend in taxes since 2010, for simplicity just note there are an awful lot of green “up” arrows. Don’t expect this to change anytime soon.

If the economy really was clipping along at an ear to ear grinning pace, several things would have happened by now. First up, central banks in the US, Canada, Britain, Europe and Switzerland would have all begun to raise interest rates. Not too mention, the money printing machines would have also begun to grind slower.



In addition, employment should be going gangbusters, while everyone’s favourite measurement of a stronger economy – inflation would be accelerating as well. Yet, none of these events are occurring.

Yet, the real questions behind the upcoming tax hikes are 1) why it will happen and 2) what will be taxed.

And more importantly – what is the Super Tax?

Full IceCap Asset Management letter below:


IceCap Asset Management Limited Global Markets 2013.10.pdf


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Tue, 11/05/2013 - 21:46 | Link to Comment Moe Hamhead
Moe Hamhead's picture

It must be near the Year of Jubilee

Tue, 11/05/2013 - 21:58 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

A Jubilee...  I first encountered that idea (modern version) here at ZH.  Yes, some kind of Jubilee may already be baked into the cake.

Screw the bondholders?

Screw the foreigners?


LOTS of bad things are going to happen.

Tue, 11/05/2013 - 22:17 | Link to Comment LetThemEatRand
LetThemEatRand's picture

Lots of bad things are going to happen to us.  The guys with the real money will feel no pain because they make the rules and the rules never apply to them.

Tue, 11/05/2013 - 22:25 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Ya know, LTER, I would guess that it would only be, say, the top 0.1% who would get off lightly (or prosper even MOAR).  99.9% would have problems or at least worries.

But, guessing, is about all I can do now.

Tue, 11/05/2013 - 22:36 | Link to Comment LetThemEatRand
LetThemEatRand's picture

It may be even a little more than the .1%.  TPTB need their Lords and Ladies.  A powerful ruling class of say 1% or .5% of the population would suit their needs, keep the militarized police fed and housed, maintain an illusion of upward mobility, etc.

Tue, 11/05/2013 - 22:46 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Short version: we're screwed.

Where's my gun?  Or my airline ticket outta here?

Wed, 11/06/2013 - 02:00 | Link to Comment RafterManFMJ
RafterManFMJ's picture

You cannot spell Jubilee without "Jew." LOL, I don't even know what that means! I love the chosen people! Buy Gold! Buy Silver! Buy Rice-a-ronni!

Tue, 11/05/2013 - 21:48 | Link to Comment bigrooster
bigrooster's picture

So we are fucked before Europe but WTF about Japan?  How do they still continue to stay afloat?  Why can't I borrow Yen at 0% and simply not pay back the Yen?

Tue, 11/05/2013 - 21:53 | Link to Comment Darkman17
Darkman17's picture

May I point out the Swiss tax increase on vat was 7.6 to 8.0. And that it's tax personal income tax rate is 10-20 ish percent. And that they are rocking a surplus and reducing their debt.

I just hope I move there before they tighten immigration laws on Americans and Europeans.

Tue, 11/05/2013 - 22:11 | Link to Comment DestituteYetJovial
DestituteYetJovial's picture

Seems a bit silly to compare annual tax-only revenue to total unfunded liabilities. It's like comparing someone's annual salary to their gross debt.

Tue, 11/05/2013 - 21:58 | Link to Comment Pancho Villa
Pancho Villa's picture

For Japan and the USA, I think the supertax will be inflation. The central banks will just keep purchasing government debt until at some point inflation kicks in. Anyone owning long term bonds (either directly or as part of their pension plan) will lose a good chunk of their value due to inflation.

How long can central banks get away with massive QE? That is the big question. I think they can get away with it until the boomers retire in big numbers. The peak year for boomer births was 1957. Those boomers will hit 65 in 2022.

Europe is different because the countries with the largest debt loads don't control the central bank. The Germans control the ECB and they don't want to risk inflation because Germany holds most of the Euro debt. So in Europe, the supertax may be something other than inflation.

Wed, 11/06/2013 - 03:17 | Link to Comment ReactionToClose...
ReactionToClosedMinds's picture

Germany: it will be a long term bail-in based on a one time 'emergency resolution' assessment.  All liquid & tangible wealth will get hit with a special one time 'social harmony assessment' ...payable over 5, 10, 15, 20 , 20+ years per the need.

Go research how this once happened there after WW2 ... compliments of 'allied' nyc financiers as civil affairs officers looking to rebuild Reich

Tue, 11/05/2013 - 21:57 | Link to Comment highly debtful
highly debtful's picture

I don't know about the USA, but "taxes have to increase" never is a problem in Europe, whereas "government services have to decrease" will only happen after the inevitable implosion.  

Tue, 11/05/2013 - 21:59 | Link to Comment Quantum Nucleonics
Quantum Nucleonics's picture

This analysis is flawed.  Europe gets $5 trillion in "revenue", ok.  But only the US federal government gets $2.5 trillion.  To get an apples to apples comparison, you've got to throw in the state and local tax revenue, since many fuctions of European central governments are done at the state level in the US.  That's nearly another $2 trillion, making the numbers more comparable.

Tue, 11/05/2013 - 22:13 | Link to Comment Moe Hamhead
Moe Hamhead's picture

That closes the gap on our burden, but the ratio of the federal liabilities remains.

Tue, 11/05/2013 - 22:29 | Link to Comment Quantum Nucleonics
Quantum Nucleonics's picture

Yea, the burden of federal debt is unmanagable.  Worse than the author realizes.  There is no pot of higher taxes to tap into.  It's already being raised and spent at the state and local level.  Consequently, were past the peak of the Laffer Curve.


Tue, 11/05/2013 - 22:04 | Link to Comment NihilistZero
NihilistZero's picture


It's not 87 trillion dollars.  It's numbers in a fucking CPU, nothing more.  The bond holders won't get paid, but neither will the banks holding leans on assets.  TThe banks aren't going to reposses all collateral at once as the assets would he worthless as no one in the destroyed economy/world could by them. The whole things a giant shell game with unlimited turnd for the house and the gambler. 


If the US defaulted tomorrow the world wouldn't end.  We have dormant factories that would come to life and enough food to feed our populace. Canada and Mexico could keep up going on energy.  The reasoj we WON'T default is that does not serve the interests of TPTB. 




Tue, 11/05/2013 - 22:13 | Link to Comment logicalman
logicalman's picture

Have to agree.

Derivitives?? WTF is the 'value' of a promise on a promise backed by bugger all?


Tue, 11/05/2013 - 22:14 | Link to Comment Oldwood
Oldwood's picture

Will you still go to work tomorrow if you know your employer can't pay and if he did the money would likely be worthless? Think again.

Wed, 11/06/2013 - 00:01 | Link to Comment NihilistZero
NihilistZero's picture


If there is actually work 4U to do then something is being created that can be traded for something else.  Sure it would be rough at first, but given a government absent of debt and without significant imports after a debt default, I think 300 million people residing on a nation of vast resources and infrastructure could find a few economically constructive things to do...

Wed, 11/06/2013 - 01:01 | Link to Comment Oldwood
Oldwood's picture

A collapse/reset may be what it takes, but for many it will be the end of the world. Most are no where near prepared mentally or any other way for what would come. And those in the death throws of this will not go quitely. There will be great calamities at hand and few will be left untouched by them. The world as we know it, WILL end. Studies present here on ZH have shown that any disruption of the system be it financial or a health crisis would only need to last two weeks to create a complete systemic collapse that would not be recoverable in the traditional sense. But sure, there are always coons and rabbits to eat...if you're quick!

Wed, 11/06/2013 - 12:23 | Link to Comment NihilistZero
NihilistZero's picture

Dear hunting out of necessity instead of sport would be my game ;-)   Also we are closer that ever to a breakthrough in Nuclear Fission (or fusion I always get the two crossed) power.  Perpetual energy sources that work like the sun.  I'm not optomistic on a lot of things, but this tech would truly change the world.  Will see if our species can snatch victory from the jaws of defeat.   My single biggest desire in life is to live long enough to see the warp drive invented.  I  read an estimate yesterday that there are 8.8 billion planets in the Milky Way that exist in the earth like sweet spot around a star that can support water and life.  Amazing what we may yet explore...




Tue, 11/05/2013 - 23:04 | Link to Comment malek
malek's picture

Bond holders? Nice euphemism. Think retirees.

Also please point me to a few dormant factories that can be started up quickly again when the need arises.

Wed, 11/06/2013 - 00:09 | Link to Comment NihilistZero
NihilistZero's picture

Quick inrealtive terms?  Yes.  Steel and sewage infrastructure still in place throughout the rust belt.  A  few CATs and engineers driven by need could get us humming along pretty quickly.  Sure some of the finer things may not be avaliable 4 a while, but it'd be far from a Mad Max apocalypse. it's total double think to view the bankers system as evil and unnecessary and then think that a debt default by a self sufficient (at least food wise) nation would lead to a Mad Max style implosion.



Wed, 11/06/2013 - 13:49 | Link to Comment malek
malek's picture

The former steel mills in the rust belt are empty buildings if those are still standing.

The machinery to produce steel has been sold for scrap value.
Even if machinery were still around, unless someone still conserves them and somewhat heats the buildings, they will become unusable and unrestorable rather quickly.

Wed, 11/06/2013 - 16:56 | Link to Comment NihilistZero
NihilistZero's picture

Wasn't talking about the mills but the ore to make the steel.  And Detroit has a sewage infrastructure with buldings waiting to be bulldozed.  What would keep that placed from being a manufacturing power again once the local .gov has withered and died (which has basically already happened).

Thu, 11/07/2013 - 00:32 | Link to Comment malek
malek's picture

You seem to have a pretty dreamy concept of what it needs to have manufacturing humming these days.

Tue, 11/05/2013 - 22:09 | Link to Comment WTFUD
WTFUD's picture

It would appear that there is not enough hardship excerted on the sheeples yet.
For the rest of us ( outside the giant ponzi ) it seems we have to witness the dead bodies on the streets before the penny drops that the quality of life will not be improving any time soon.

I trust the docile masses as much as i trust the scum running this charade.

Probably best just to sit back and have a good laugh watching this shit unfold and for sure refuse to answer the door or phone or emails when the dummies who have ignored sound advice are sending out their SOS.

I'm fucking all right jack, keep your hands off of my stack.

Tue, 11/05/2013 - 22:13 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Just those kinds of hard decisions will be made every day.

Hearts will harden, my own likely included.

Tue, 11/05/2013 - 22:13 | Link to Comment Oldwood
Oldwood's picture

With incomes and home values static, their only choice is a wealth tax. As the IMF outlined in their latest report, while they foresee at asset grab from bank accounts, they recognize that whatever they do, it will require surprise. As they state, the transfer of wealth will need to happen without warning so as to minimize "negative" market actions (everyone taking their money and hiding it) resulting in bank collapses, and then promise they would NEVER do it again. Any kind of institutional wealth tax of an amount to accomplish anything would result in cash disappearing overnight, hidden in mattresses everywhere. They don't have the time to sneak up on us, it will have to be a fast grab. A hit and run, and the economy will likely still end up dead in the ditch. I imagine all accounts, banking and investments alike will be vunerable. There is no place in the financial world that is out of reach and those institutions will throw their momma from the train to stay in their positions.

Tue, 11/05/2013 - 22:16 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Jim Sinclair has been saying "Get Out of The System".  GOTS.  The prudent thing to do.  Buy some gold with the money you take out of the bank.

Ammo too...

Tue, 11/05/2013 - 22:27 | Link to Comment Oldwood
Oldwood's picture

Being a small business owner with employees, I really can't figure out how to GOTS and its really hard to do it with one foot in and one out. My business feels like it is in a slow death spiral as my sales have declined by half over the last five years and shows little signs of improvement. I want out but have few alternatives to income and still have to think of my employees as they are mostly old men like myself with few alternatives. It really sucks to have responsibilities, especially in a world that runs and hides from them. I see the boomer situation from my own perspective, but I feel like the dupe in this because I'm still trying where many in the younger generations have already given up. Right now I feel like I have a big sign pasted to my back that says "fuck me".

Tue, 11/05/2013 - 22:44 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Your situation sounds very difficult.  What are you going to do?  Fire all your guys who probably could not get anything decent to do?  Shut down your business at a huge loss and/or screw your creditors?

Yet, put up with all the crap being laid on small businesses?  And sales down 50%, ugh.  It's too bad that most small businesses are illiquid.


It may have worked out very well for me that my first three shots at business (in the USA) all failed.  Our small business in Peru ("fourth one's the charm") is the only one that has worked out well, quite well.  I feel a lot better about having a business away from here, you know, another basket.

Let's hope that things get better, though it sure doesn't look like that is in the cards.

Tue, 11/05/2013 - 22:57 | Link to Comment Oldwood
Oldwood's picture

The only thing that keeps me going is that I am debt free. Own my building and equipment, vehicles etc. It creates a false sense of security because things are still wearing out and some are terribly expensive to replace/repair. None the less, choices are hard. After 30 years I still have no real feeling of security. I have seen too many fail, especially in the last five years. The key is knowing when to quit. Most wait until all credit is used up and the bank locks the doors. Nothing like being an old fart, no job and a half a million or so in debt. I won't go that far but I have already been eating my savings. We will see.

Tue, 11/05/2013 - 23:09 | Link to Comment malek
malek's picture

If you can have your savings churn rate on a declining trajectory (less savings needed to keep it going quarter over quarter), keep on.
If the rate is increasing, or steady with only a few years til your savings are gone, call it quits.

Best of luck to you.

Wed, 11/06/2013 - 00:20 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

Yes, Oldwood, don't let it go to the bitter end if the decline seems inevitable.  You wrote it: "They key is knowing when to quit."

I second the motion for good luck.

Tue, 11/05/2013 - 23:34 | Link to Comment CuriousPasserby
CuriousPasserby's picture

Find out if any of your employees voted for Obama and get rid of them first!

Tue, 11/05/2013 - 23:54 | Link to Comment Oldwood
Oldwood's picture

Trust me. I have a major left wing nut job that has worked for me for fifteen years. Some days....! But I can't stand the thought of that because I believe in freedom of speech. As much as I despise much of what he thinks I don't ever want anyone to think they can't say what they think without fear of retribution. But of course part of my problem is that I have refused to get rid of old slow white guys and hire hispanics. Its not easy to live by your principles and it sure isn't profitable. Honesty and integrity have become a business liability. What ever happened to "cheaters never win"? Damn, I AM old!

Wed, 11/06/2013 - 07:01 | Link to Comment StandardDeviant
StandardDeviant's picture

My respect to you, sir, for living your belief in free speech.  Voltaire would have approved.

Tue, 11/05/2013 - 22:58 | Link to Comment malek
malek's picture

 the average American family has income of about $31,000 per year. If this average family borrowed like the American government, it would have over $1.078 million in loans to pay.

Hmm, am I missing something here?
If that family has a good credit history -always paid their bills on time etc.- the head of the household should be able to get up to $100,000 through loans and credit card lines.|
As it's a family, the two kids can take out student loans up to the same amount each. Now buy a house in a sought after area, with a 0% down govt sponsored not-yet-jumbo mortgage of $625,000 and voila - here is your family perilously close to those $1.078 million in loans to pay.

Tue, 11/05/2013 - 23:04 | Link to Comment Oldwood
Oldwood's picture

The American family already did borrow that much, plus what the government spends.

Wed, 11/06/2013 - 00:13 | Link to Comment Northern Lights
Northern Lights's picture

That $31,000 that net or gross?

Wed, 11/06/2013 - 07:03 | Link to Comment StandardDeviant
StandardDeviant's picture

The PDF, unencumbered by Scribd web misdesign, is available directly from IceCap here.

Do NOT follow this link or you will be banned from the site!