This article is a fictional interview with Uncle Sam. 

Interviewer

Happy Columbus Day to you Uncle Sam! I bet you'll be glad to see Hurricane Mathew leave.

Uncle Sam

Yes you are right! Those poor folks in the southeast took it very hard. I do see storm clouds brewing over the horizon that continue to worry me.

Interviewer

You mean another hurricane?

Uncle Sam

Oh no young man! I don't literally mean the weather. I mean the markets and the economy. We've been in the middle of this long economic experiment that supposes we can erase our economic problems by simply creating more electronic money. My friend Mr. Land of the Rising Sun (Japan) has been trying to do this for a long time and they are still in a deflationary environment. Mr. Sun is trying to create these weird schemes to use government money to buy capital equipment from businesses and lease them back. He also told me they want to issue something called a compensation bond. They're all over their own market, heck practically buying up the whole darn thing.

Interviewer

Well Uncle Sam but we have been told that our central banks and our governments can rescue us from these problems.

Uncle Sam

Oh yeah, I have heard that one before. The problem is we have economic laws and neither central banks nor governments can repeal them. Here we have government saying something about a debt limit, which ain't no limit at all son, and constantly moving the darn thing. How can you continue to move a limit? They tried to put a team together to solve this debt limit thing and then didn't want to follow their plan.  So then they said if they didn't follow the plan, they would automatically cut the budget (by nowhere near what needs to happen). Well what happened when they got to that point? The government started pointing fingers.

Interviewer

Oh so you are saying the whole thing got political?

Uncle Sam

Oh politics, schmolitics! It's bigger than that now. So they gave us this taxpayer relief something or another. Let me see if I remember this. Oh yeah, they said that we were gonna tax the "rich" more. So if you made $450k or more you'd get hit with the highest tax rate. Funny thing is about half of households pay no tax and maybe 1-2% of households might be affected by this higher threshold. Our President said something about enshrining a principle into law about our budget being balanced in a responsible way.

Interviewer

So what is the big deal about enshrining a principle into law?

Uncle Sam

Oh son, are you serious? What cotton-pickin principle is he talking about here? A principle is some truth from which others are derived. We keep treating economics like it's something made up in a textbook. These damn, so called Wizards at the Fed and in government think they can just pass a law and somehow economic principle supports it.  Last I heard, you gotta pay back a debt and you can't pay it back by simply making more debt. Now we have  government saying something about enshrining a principle into law by somehow convincing us that taxing this small group of households is gonna make a hill of beans. Somehow government and central banks got into the business of thinking they knew what everyone in an economy wanted. My friend Mr. Cyprus can tell you all about that.

Oh and with this election, yeah both major candidates think they can tax the rich or give everyone a tax cut and that will fix everything.

Interviewer

Ok but governments make laws all the time. That is what they do, right? What is the big deal here?

Uncle Sam

I'm gonna have to talk with your mother! Boy you gotta learn to think better than this. We had this President from Missouri who said in 1953 when they passed another one of these laws, that what they just passed rejected the idea that we were the victims of some "inexorable" economic law. Sorry for using that big word sonny, but I'm just quoting the man. Basically, this President thought that these darn economic principles kept getting in our way and by golly we're just gonna pass a law to reject these principles. Problem now is we got so many darn laws and regulations and so many people suggesting more of them that we made things worse. Ever see the tax code? 

Interviewer

Ok. You made your point. So given all this stuff about laws and principles, what do you think might lie ahead of us in the investment markets?

Uncle Sam

Oh man.

Read the remainder of the interview in Interview with Uncle Sam (Part II)