Taxing the rich won't solve the problem

Taxing the rich won't solve the problem and this is why.

http://www.huffingtonpost.com/peter-morgan/taxing-the-rich_b_1131020.html

 

Good laugh. Money is always doing something, at the zero bound?? Really?? Govt's that can print their own currency don't rely on debt markets to finance their expenditures!

These types of articles is an example of why free speech is a bad thing. If one wants to justify not taxing the rich, this garbage article was not the way to go.

 

I think you have misunderstood the point made.

 

I think you may have missed the point of the article. Seems to me its saying that because money is always doing something, you should make sure it does something more valuable in Plan B than it was doing in Plan A before switching plans.

The basic message seems to be "think about how you spend *first*".

 

The article was originally a rebuttle of the below artilce stating a tax on the rich would solve the economic problems.

http://www.huffingtonpost.co.uk/peter-g-tatchell/how-to-save-the-economy-_b_1108497.html

As the title of my article said. Taxing the rich won't solve the problem.

 

Good grief.

No "once-off" anything is going to solve a chronic structural problem.

 

True, but doesn't "tax the rich" have an appealing class-warfare kind of ring to it?

 

By taxing the rich there will be an impact on the poor. The money they have is not cash it is in investments, assets. If they were to sell them the value of them would fall. This would be devastating to the stock market and shares. Damaging pension income among other things. I wish it was this simple but it will not work.

 

article has errors and contradiction

1) "Savings in banks provide investment into the economy, when banks lend the funds deposited. This lending enables businesses to borrow money to start up, pay staff and cover overheads. It also enables homebuyers to arrange mortgages and it works as short term credit"

This is not how banking works, one does not need to save for another to borrow. Banks create money when they loan it. Deposits are created by loans, loans are not created by deposits.

2) The next 3 points peter makes are contradictory taking money out of assets and reducing asset prices are bad for the economy, but apparently money held in cash is better left alone to keep asset prices down??? well which is it

The Conclusion claims that private money always leads to productive capital. Ignoring that all stock and housing bubbles are done through private capital creation. The last 30 years the financial sector which doesn't produce any wealth only financial claims on wealth has subverted the productive economy almost entirely, Brittan is even more advanced in it's financial parasitism.A heavy Tax on financial speculation and lowering the tax on production and consumption will force money from derivatives and other non productive finance to production.

"Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary -- essentially a "middleman". Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector's parasitism." Professor William Black

Since the vast majority of wealth was and still is gained in the financial sector it is at the expense of the productive economy and should be taxed into production.


But of course the real problem is compound interest which is not compatible with economic growth.
From antiquity to the Romans when a new ruler would come to power he would start with a debt jubilee. Not for the sake of a gift, but the realization that debt tends to grow faster than the means of payment. Compound interest accumulates at a geometric (as in 2,4,8,16)or exponential rate. Which means that economic growth must also occur at a geometric rate in order to generate enough wealth to avoid mass default (depression).But historically economies have usually grown at arithmetic (1,2,3,4) or a linear rate. The exceptions being advancements that revolutionized the economy, steam, electricity, etc. Trying to extract exponential wealth out of a system that averages linear growth isn't possible. The difference must be made up through inflation to avoid mass default. Inflexibility on part of the roman oligarchy to reset the debts brought about the dark ages.This is why austerity never works revenue goes down and interest keeps accumulating.



“The greatest shortcoming of the human race is our inability to understand the exponential function.”

Albert A. Bartlett, physicist


Interesting that all talk is on GOV debt when private sector debt is far worse. A real economist would address private debt and it's effect

 

The odd question, why is it when top tax rate was at 90% in the 1950s you had a burgeoning middle class, and one income families.