Unintended (but predictable) Consequences
January 08, 2010
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RELATED TICKERS: TE
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Public anger and outrage have a negative impact on the economy that goes BEYOND the reduction in disposable income of consumers. Here are a few reasons to be bearish that some of the bulls may not have thought of:
1) An increase in theft and crime. Stores experience higher "shrinkage", which comes from both customer theft and insider graft and theft. Hardship changes people's values. Theft can quickly be rationalized as moral when families are worried about whether they will eat.
2) John Galtism (If you don't know who John Galt is, read Atlas Shrugged). If people have been getting raped while jogging in the neighborhood park, are you going to choose to go running there? By analogy, if the future business climate is uncertain and the government is lurching toward over-regulated socialism, is it rational to start or expand a business? Is it rational to rely on obviously manipulated and bogus government statistics in order to manage a business?
3) Barter, tax avoidance and outright tax fraud. With taxes increasing and that money going to pay Government Sachs record bonuses so that they can do "God's work," do ya think folks might do whatever they can to avoid paying taxes? Buy from Craig's List, barter, under-report small business profits? When people feel that politicians are not respresenting them, they can lose a sense of moral responsibility to pay taxes. "No taxation without respresentation" applies -- let's have a tea party! If the Secretary of the Treasury is a tax cheat, it must be ok for me!
From the comments I'm reading in news stories all over the Internet, including populist sites like Yahoo Finance, public anger is increasing rapidly. Read the comments here, for instance: People are Mad And when people get angry, they can change in scary ways. Just sayin'
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