hi this is Mike Maloney and I've shown
this graph before but I've added one
more data set here what I've done here
is we have base currency the amount of
paper dollars that exists or deposits at
the Federal Reserve redeemable in paper
dollars and then the green line which is
the value of the wilshire 5000 total
market cap index and then I've added to
that the current tax receipts of the US
government now on the wilshire 5000
that's denominated in points which is
basically an abstract created from a
mathematical formula and there isn't as
much tax receipts as there is base
currency creation so I've taken the
wilshire 5000 total market cap index x
47 to lift it up until it overlays the
blue line it is the green line just to
show you the difference in percentage
the difference in percentage move from
this point here where the the blue line
and the green line are on top of each
other to this point here where they're
still on top of each other the
percentage move for each of them is
exactly the same and what I'm interested
in is the percentage move not the number
of points or the number of dollars the
tax receipts it's the same thing I've
lifted that by 1.5 because it was down
here underneath it and you couldn't see
the correlation as well I'm not
interested in the number of dollars I'm
interested in the percent change and
what we see here is an incredible
correlation again in tax receipts from
this point right here back to about
there the tax receipts rise and fall
with the value of the stock market until
we started qe3 QE 1 and 2 lifted tax
receipts with the stock market qe3 did
not something change there's a
divergence there and I think what's
going on here is yes the there's the
stock market is rising except that's
mostly the bank's trading among
themselves so there's a lot of
high-frequency trading
a lot of the public has actually been
exiting stocks and it's the public that
really gets screwed when it comes to
paying taxes we pay more than the big
entities do on a percentage basis so the
tax revenues that are coming in from
this big stock market boom since the
year 2012 roughly those tax revenues
aren't coming from the increase in the
stock market anymore so what you see is
a divergence of the stock market going
up where the real economy and the tax
revenues that are derived from that
economy from more sales in stores and
stuff like that those tax revenues
aren't increasing at the same rate that
the stock market is going up one of the
things that I've shown before though you
know the the blue line again is base
currency and this whole economic
recovery has been bought and paid for by
the Federal Reserve with the bailouts
and QE 1 and then qe2 and then qe3 and
then we tapered in 2014 and it's been
falling since then the base currency how
many paper dollars exist but the stock
market kept on going now is that because
it took the training wheels off and it's
going along just fine on its own I don't
think so when you examine this a little
bit more closely one of the things that
you see is this tremendous correlation
that I was talking about all the way
back from late 2008 base currency in the
stock market traveled almost exactly
together and then there was this
divergence that started to happen where
the stock market kept on going after
they stopped all of the currency
creation but what you see are these
sudden crashes that take it right back
down to the level of the base currency
creation and it's done that three times
and now the divergence is greater than
ever the divergence was was pretty big
the last time we talked about this but
now it's really big and like I said tax
revenues haven't kept up so the tax
revenues really do represent the real
economy
because this is how much blood the
government is able to suck out of the
real economy and they're always able to
suck a certain amount of economic energy
out of the real economy about twenty to
twenty-five percent roughly is what
they're able to take before they start
collapsing the real economy so that
hasn't changed the percentage that they
take out in other words this growth and
if you look how this growth has gone
flat now for the past several years it's
just been absolutely flat the tax
revenues and then you know getting back
to the first graph this current economic
expansion the white area here is now
about to overtake the white area here
there was one back in the 60s that was a
little bit longer than this one so right
now when we overtake this one this
becomes the third longest economic
expansion in history and then it has to
overtake the one that's back here it'll
become the second but this goes back to
the beginning of the United States we're
in the third longest economic expansion
and the last you know 200 and some years
that means that the chances of this
going on much longer are extremely low
and now they're talking about a Fed rate
hike and so it'll be at exactly the
wrong time if they do a rate hike that
will probably be the trigger that causes
the next recession the next one of these
gray bars I think we're probably already
in a recession as you already know a
whole bunch of factors indicate that and
when they declare a recession they're
declaring that it started more than six
months ago because it's a lagging
indicator so that's my take on that but
what I find scary and I wrote about this
in the update to my book guide to
investing in gold and silver than 2015
update that tax revenues now rise and
fall with the stock market and before
that the tax revenues weren't really
dependent on the stock market they there
was no huge correlation but since the
year 2000 there's a very high degree of
correlation so as we go into the next
crash tax revenues will fall deficit
spending will explode the government
will answer with more and more spending
programs and so on to try and stimulate
the economy and it's a recipe for
disaster but it's an opportunity for
some folks you just have to find that
opportunity so I hope you got something
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