The Capitalist Investor - Episode 138

Headlines are reading all over the map lately and this week’s episode of “The Capitalist Investor,” sifts through them. In Episode #138 Derek, Tony, and Luke touch on the usual topics: taxes, inflation, recessions, and employment. But after Nancy Pelosi’s visit to Taiwan, new issues have arised and the threat of economic warfare is looming. What’s happening today domestically and internationally is something people will reflect on years from now, but the guys aim to address it all now. 

Outline of This Episode:

  • [1:45] Reactionary Acts and Bills
  • [7:35] Pelosi’s visit to Taiwan
  • [12:40] Global trade warnings

Inside Biden’s Inflation Act and between its lines

It seems like every day there’s a new big bill politicians are voting on, raising controversy and flooding the news. It’s easy to get confused and lost in all the shuffle but luckily, we’re doing our best to keep up. 

The Senate recently announced a deal on a $700 billion Inflation Reduction legislation. This newest legislation is the second part of Biden’s infrastructure and social spending measures and is awaiting to pass in Congress. 

The act seems great since there’s just so much inflation hurting our economy right now, but inside this act, taxes will be increasing all across the board. The name may sound hopeful, but we’re not entirely confident it will reduce inflation and lessen the pain at all. 

With this legislation, Biden will be raising taxes, and of course no one wants to pay more in taxes. Inside it there is a 15 percent minimum corporate tax – that worries us a bit. While technically being in a recession – no matter which definition you follow – when you raise taxes on corporations, margins will compress, prices go up, people will stop spending money, and businesses will begin to lay off workers. 

Despite its name, this bill may deepen the recession. It could raise unemployment which would just dig a deeper hole and make it harder to climb out of. It will calm the inflation down a bit, but just because people are going to start seeing their wallets shrink. 

Politicians are just too reactionary in every single sense. Instead of trying to prevent bad things from happening, they wait and react after they already happen. And this bill is an example of that.

China, Taiwan, semiconductors, and economic warfare

We’re living in a period in which people years from now will reflect on as a historical moment – just like how today, historians reflect on the Cold War and the Cuban Missile Crisis. 

While we’re not gearing up for all-out war, the world may be gearing up for economic warfare. 

After Nancy Pelosi’s trip to Taiwan, the U.S. may have laid down a path for an economic crisis that can trigger national security, technology, and trade concerns. 

China currently perceives Taiwan as its territory, although it’s been independent for quite some time. It produces roughly 50 percent of the world’s semiconductors – the little electric components that make the world go round. But the U.S. wants to start producing our own and with that comes some tension.  

Whether Pelosi’s trip was for economic recon on semiconductor production, or for international affairs in support of Taiwan’s independence, it raised a lot of controversy and sparked the possibility of economic warfare, sanctions, and trade problems. 

It’s kind of like a Cold War situation, if the U.S. has infringed already and China invades Taiwan, what would happen if China stopped trading semiconductors to the rest of the world? The impact would be disastrous economically and socially – we can’t overlook it. 

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