This chart proves my point. Our purchasing power is sagging.

Large deficits reduce our purchasing power. Why? Taxes will have to go up to pay the interest on the bonds the government sold to pay for the social programs we like but we cannot afford.

This is a below average expansion. It is not a big surprise. Income is growing slowly because business is afraid of hiring due to higher costs/taxes.

The healthcare program will reduce the deficit because taxes will rise. Our purchasing power, however, will sag. It is no coincidence real income is growing well below the average of previous expansions (see chart -- click on the chart to enlarge it).

This scenario has major implications on our investment strategy.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 by Timer Digest

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