According to the Tax Foundation, Americans paid their portion of the Federal tax bill, as measured in number of days out of 365, on April 9th. This was one day later than in 2009. The reason for the reduction in the number of days needed to pay our portion of taxes since 2007 is because of all the stimulus and bailouts that have occurred since the onset of the financial "crisis."
If we review the chart on the number of days Americans achieved their "Tax Freedom Day," we find that during years with economic growth we take longer to obtain our freedom. The government sticks it to us when we're making more money. Notice also that our federal budget deficit has gone parabolic for the very same reason that our annual tax bill has gone down.
I've always maintained that this bear market resembles the secular bear period from 1966 to 1982. The chart shows a shocking resemblance between the two periods. In 1968, Tax Freedom Day took place later than the date for the deficit. Likewise, in 1999, freedom occurred after the date for the deficit. After the crossover took place in 1968, our economy hit the high inflation skids thereafter.
For good reason, the 2009 parabolic move in the deficit scares me plenty. If the past is any indication of the future then we're gonna get rampant inflation like never before seen. The irony of this is that after getting slammed in stocks and real estate, most people are seeking safety above all else. The most obvious target for safety is a bank with deposit insurance. Unfortunately, the reformed saver (formerly known as an investor) will get crushed in the coming inflation.
"Markets have risk. So does a savings bank when inflation runs rampant."Richard Russell. Dow Theory Letters. October 7, 1958. page 2.
What is likely to occur is that the same people who got beaten down in real estate and stocks will get nothing less than clobbered when they are locked in a 6-month certificate of deposit at a local bank. Those with the cash will be reluctant to buy real estate or the "right" stocks. Utility stocks will be the favored choice for "safety" but the unsuspecting will wish they never heard of utility companies as a "safe" investment. Even my favorite Dividend Achievers will be taking it on the chin during high inflation.
My solution to the coming inflation is to embrace it. One way to do this is to read Is Inflation Ending? Are You Ready? This book was written in 1982 by Gary Schilling and Kiril Sokoloff (published in 1983) explaining why the days of double digit inflation were over. This is important because everything that happened after 1983 can easily be verified. In the book, we get insight as to what happens in a deflationary environment which precedes breakneck inflation. In order to understand where we're going we need to know where we came from, the book by Schilling and Sokoloff covers 60% of the high/low inflation equation.
Next, read the book Crisis Investing by Douglas Casey. Casey's book covers all ends of the investment spectrum with a bias towards high inflation environments. While you might not need half of the strategies that are mentioned, Crisis Investing will come in handy when you need a quick reference.