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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • A Just Balance Of Power By Charles Payne 0 comments
    Jan 2, 2013 9:50 AM

    In the name of the most holy and undivided Trinity

    His Majesty the King of the United Kingdom of Great Britain and Ireland, His Imperial and Royal Apostolic Majesty the Emperor of Austria, King of Hungary and Bohemia, His Majesty the Emperor of All the Russia's, and His Majesty the King of Prussia, having transmitted to the French Government proposals for concluding a General Peace, and being desirous, should France refuse the Conditions therein contained, to draw closer the ties which unite them for the vigorous prosecution of a War undertaken for the salutary purpose of putting an end to the miseries of Europe, of securing its future repose, by re-establishing a just balance of Power, and being at the same time desirous, should the Almighty bless their pacific intentions, to fix the means of maintaining against every attempt the order of things which shall have been the happy consequence of their efforts, have agreed to sanction by a solemn Treaty, signed separately by each of the 4 Powers with the 3 others, this twofold engagement.- Treaty of Chaumont (Google)

    Throughout history there have always been conflicts between adversaries in which there was a decided size advantage. When it comes to nations, size has often led to a might-makes-right scenario, yet when it came to foreign policy there used to be an assumption that all nations were equal. This assumption was made without regard to military or economic power.

    But the fact is that small powers are not the same as so-called great powers.

    This fact was illuminated with the signing of the Treaty of Chaumont in 1814. The treaty formally aligned several great European powers in a quest to stop a reeling yet very belligerent France, led by Napoleon, from waging further war.

    The idea saw greater powers of Austria, Prussia, Russia, and Great Britain along with Sweden, Spain, Portugal and small German states attempt to force their will on France and Italy and larger German states.

    Napoleon, perhaps emboldened by recent military victories and his mad delusions of grandeur, rejected the offer. Shortly thereafter his forces met the Sixth Coalition at Leipzig, Saxony where the French suffered a massive defeat. Napoleon retreated back to France where the Sixth Coalition followed with an invasion in the next year.

    I've revisited this moment in history because we currently have a similar situation in America where President Obama can make a claim to be the great power along with the democrat majority in the Senate. By the same token republicans controlling the House of Representatives are certainly the small power. It's obvious any notion that both powers are equal does not exist. As they say, elections have consequences. Yet, the nation itself is about even split along broader ideological lines and presidential voting outcome.

    The problem is how small powers exert any influence or power. Throughout history this has always been a problem. Often cobbled together because of size, small powers as coalitions had little else in common, making collective efforts difficult without a common desired outcome. Sure the notion of respect is critical and drives many organizations of nations or states. For the moment, this is where the Republican Party finds itself. The upstart Tea Party members rattled so many cages in 2010 that establishment members are seeking to diminish their clout and voices.

    With this backdrop I'm surprised President Obama didn't play harder ball although he was smart enough to know media hype over blame would have been short-lived if everyone got a tax hike this year. Of course one irony is all working people will get a tax hike, and one that actually hits the "rich" softer than others.

    Silly Rabbits

    While established republicans went against established party principles including hiking taxes the White House put in tax credits for rich Silicon Valley companies that already enjoy the largest profit margins in business ahead of regular people. Those regular people will pay a $40 in taxes per household earning $50,000 and double that to the limit of the first $110,000 in income. While I was in favor of tax breaks for workers paying federal income tax I was shocked to see the White House not take a stand on this after using the bully pulpit to shame, blame and force them in the first place.

    This certainly goes against the promise of no tax hikes on the so-called middle class. I've written extensively that at some point taxes in some shape or form would have to hit all working people to pay for the furious spending of this administration and its grand ambitions. Ambitions that in many ways is not too different than Napoleon's. In the process a five year extension of stimulus via child tax credits, earned income credits and tuition credits coupled with the threat of higher payroll taxes actually deter households from earning more than $50,000 a year.

    Child Tax Credit is $1,000 up to $110,000
    EITC is $5,891 for families making less than $50,270

    Caught in this web are people striving to earn more than $50,000 but are far from the new $400,000 (individual) notion of rich. So many of these folks voted for President Obama and the idea that somehow the rich would pay their fair share and it would make it easier to climb the ladder of success - Silly rabbits ... they are the losers in all of this. In the meantime, if concession was the only option, this is a better deal than I imagined by a fractured small power.

    I would have preferred a more stubborn fight on tax hikes and, if it had to be done, a higher threshold for rich.

    That being said we are set up now for another battle, with the debt ceiling as the battleground and spending cuts the issue. It should be a donnybrook although as dust settles on the fiscal cliff the outcome didn't match the tug-of-war rhetoric and threats. Republicans fell on their swords and President Obama threw millions of regular workers under a bus all in the name of spending, spending, and spending. In fact, $620.0 billion in spending versus $15.0 billion in spending cuts is as lopsided an outcome as possible.

    Throughout history there have been sharp shifts in small powers and great powers, in fact only a couple years before the Treaty of Chaumont France was the greatest power. There will be similar shifts in America as well and it could be predicated not on initial reactions to all of these deals but their ultimate outcomes. The nation needs pro-growth policies not massive spending hidden behind the facade of fairness and false redistribution.

    The poor stay poor although more comfortably so, the middle class watches as its earnings diminish in real life and adjusted for inflation, upper middle class gets hammered cobbled in with Warren Buffett which means fewer jobs, less investing and shattered dreams as rungs from the ladder of success are removed. The loyal opposition owes it to those folks that voted them into office to stand on principle while also making sure the nation doesn't sink in a cauldron of angst, hate and frustration.

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