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If having money in the system constitutes wealth creation, why not just print more money, and create wealth?
because when you just print more money without something behind it, you lower the value of the money you just printed, and you increase inflation. read up on the weimar republic and zimbabwe. both countries tried to monetized their debt by printing money, and both countries ended up with an inflation rate of 500% per day. it got to a point where the minute you got paid you went out and bought the items you needed as soon as possible, because if you waited the price would go up. even an hour wait was costly.
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Originally Posted by le roi
you made the claim. the burden is on you to prove it, not on me to disprove it.
for the record i think that there is a "magic number" that represents the optimal taxation rate, the ideal balance between government and private sector spending. This rate would always be changing based on economic conditions and government policy, and there is no economic model that could ever accurately predict it. the number only exists in theory, it is essentially 'unknowable'.
the only two things i'm sure of is that it is not 100%, and it is not 0%. 0% would mean we had no government, which would not be conducive to economic growth. 100% would mean we had no private sector, which is also not conducive to economic growth.
But to say that "always lower" is "always good" is to me, a big mistake, especially when you ignore the redistributive nature of our monetary policy.
alright, in 1920 we were in the worst recession this country has ever seen, including the great depression, and today, in 1921 harding cut taxes to the bone and cut spending to the bone, and the economy boomed. the 20s were called the roaring 20s for a reason, and it was because the economy was booming big time. in 1930(?) hoover signed the smoot-hawley tariff act which put a tariff on goods coming into the US. the idea was to encourage US production, but the reality was that other countries raised tariffs in US goods, and that killed demand for US exports. in 1933 FDR raised taxes, and the economy slowed further, even with massive amounts of government spending. it wasnt until after WWll when truman lowered taxes and cut the tariffs that our economy turned around. in 1961 kennedy lowered taxes, and the economy moved forward. in 1981 reagan lowered taxes and the economy moved forward. in 1989 bush41 raised taxes and the economy slowed. clinton was an exception at first, even though taxes went up the economy moved forward because of the dotcom bubble, but when that bubble burst, the economy slowed, and it wasnt until 2003, after bush 43 lowered taxes twice that the economy moved forward.
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Originally Posted by le roi
I don't need 401k's, I need retirement.
I don't need HSA's, I need healthcare.
I don't need stocks, I need investment opportunities.
I don't need Wall Street, I just need a working, ethical, accountable financial system that does not steal from me.
The bankers need people like me FAR more than people like me need them.
How easy is it for Americans to sell their homes? We've had record high absorbtion rates.
How have prices been falling on the things we buy? Skyrocketing oil, cotton, iron, et cetera due to bankers raping the dollar.
How have 401k's worked out as a stable and secure retirement vehicle? They rely on unrealistic growth projections immediately before retirement.
if youlook at the past few years, you might be correct, however if you look further back you will find that investing in the stock and bond markets gets you greater returns on your money than just putting it into a savings account earning as little as 1.2% or as much as 6% interest(back in the mid 70s when interest rates were high). stock market returns on investments average about 20% gains over the long term, higher if you invest wisely.
alright, in 1920 we were in the worst recession this country has ever seen, including the great depression, and today, in 1921 harding cut taxes to the bone and cut spending to the bone, and the economy boomed.
the 1920's were fueled by expansion of private debt, just like Reagan's 1980's, and Bush's 2000's. Borrowing creates inflation -- it gives the illusion of growth in the form of nominal price increases, until you have to pay it back (1930's, 2010's), which creates deflationary pressure. Taxes have nothing to do with it.
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stock market returns on investments average about 20% gains over the long term, higher if you invest wisely.
again, nominal price increases.
it is like the people who think that their house is increasing in "value" when the dollar weakens. The question is not how fast these things (stocks, houses) go up, but how fast they go up relative to the goods, services, and commodities that people want to buy.
the 1920's were fueled by expansion of private debt, just like Reagan's 1980's, and Bush's 2000's. Taxes have nothing to do with it.
try reading a history book sometime. lower taxes allow for greater investment, which turns into more economic activity since people have money in their pockets to spend and invest. if the tax rates in the years you indicated were higher, the economic activity would not have been as good as they were. this is a cause and effect deal. lower taxes puts more money into the economy and that raises economic activity. raise taxes takes money out of the economy and lowers economic activity.
as for the private debt, that built up as time went along, it wasnt that suddenly household debt jumped one day. because taxes were lower, and the economy improved, the people had more confidence in the economy, and thus started spending more money.
It's a fine ideology to have, it just does not apply in all cases.
In particular, during periods of deflation when all entities are trying to keep their powder dry, then higher taxes will give you more investment.
Low-tax strategy yields most economic growth when you have a period of sustained inflation, where investors are not scared of deflation. Unfortunately we cannot sustain a monetary system with perpetually low infation; we make political decisions that keep screwing that up, which the volatility of the 1920-30's, and 2000's-2010's are indicative of. To "solve" this, our policymakers just try to redefine how inflation is measured, so people like you can pretend that the economic growth of the 20's and 2000's were "real" instead of nominal.
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if the tax rates in the years you indicated were higher, the economic activity would not have been as good as they were.
only in Laffer-land, the make believe fairy tale place where all growth is real growth, where people have equal political access to new dollars entering the economy, and where income inequality is not a problem.
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this is a cause and effect deal. lower taxes puts more money into the economy and that raises economic activity. raise taxes takes money out of the economy and lowers economic activity.
Just keep saying it, over and over again.
Don't bother reading anything I'm saying, or actually doing some research on the relationship between private debt levels of 1920's and 2000's, and the nominal growth of those time periods.
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as for the private debt, that built up as time went along, it wasnt that suddenly household debt jumped one day.
No, actually it did suddenly jump one "day" - drastically over a year or two or 3. It should grow slowly over time, the question is how MUCH it should grow over time, and what we do when it grows too fast.
As you would say, "You need to pick up a history book."
No culture gave more to the wealthy than in the late nineteenth century America. The robber barons such as the Getty's Morgans and the like held all the power and influence. Now corporations want to have tax breaks at the same time outsourcing jobs to China and other nations for cheap labor. I guess if we would work for 1 dollar an hour and live in hovels we could bring back jobs here. What corporations have done is to outsources jobs to make cheap crap with cheap labor, they are relying on other industries to keep enough jobs here so there will be some who will buy that cheap crap. So many jobs have been outsourced that now the boat is listing and is in danger of sinking. Any many of you right wing supporters are saying to let in more water because it will actually make the boat turn upright again.
Do you not recall the bailouts? How do you think we paid for that.... taxes?
And don't tell me they've been paid back... only TARP has been paid back.
We incurred trillions in new debt, we gave it to bankers, and now the prices of commodities are sky high. Like I said, go look at the price of cotton, oil, or iron ore.
And how exactly was that stealing?
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Do you even realize that they are using Fannie Mae and Freddie Mac --- taxpayer backed institutions -- to dump their risk??
Yet, the private banks get the profit, if everything works out. The whole thing is currently a scheme to "recapitalize" banks. "Recapitalize" sounds a lot better than "make rich again regardless of the fundamentals of capitalism, or the moral hazard involved."
You are telling me that I need to "learn how it works", when you clearly don't understand home financing, or any of the other topics here.
haha, obviously 90% of home loans right now are involved in fannie mae and freddie mac. And obviously I feel those institutions should be eliminated. Regardless of the existence of those agencies, you could not get a mortgage without modern privatized financial markets. To claim otherwise is nothing short of ignorance.
You just seem bitter that some people worked hard enough to be wealthy. If you want more out of your life, stop whining about the wealthy and work to earn your own way.
You mean besides the obvious: lying, strongarming, and taking money from the people?
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Regardless of the existence of those agencies, you could not get a mortgage without modern privatized financial markets. To claim otherwise is nothing short of ignorance.
The only reason you "can't" is because the system is designed that way.
Design the system differently, and *poof* -- you can.
The government is capable of issuing mortgages direct to the consumer, if liquidity in RRE was truly the "problem." That's part of the bigger lie -- that in order to save the markets, we had to save the institutions that killed these markets.
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You just seem bitter that some people worked hard enough to be wealthy. If you want more out of your life, stop whining about the wealthy and work to earn your own way.
Yeah, maybe I should go get a gun and start robbing people, like bankers do with the treasury. I'm sure it is hard work.
They are stealing from the American people, and that is worth speaking out against.
The problem with the economy is the velocity of money or in our case the lack of velocity.
Velocity is speaking of the average frequency with which a unit of money is spent. To give you a very rough understanding, let’s assume a very small economy of just you and me, which has a money supply of $100. I have the $100 and spend it to buy $100 of flowers from you. You in turn spend $100 to buy books from me. We have created $200 of our "gross domestic product" from a money supply of just $100. If we do that transaction every month, we will have $2400 of annual "GDP" from our $100 monetary base
P=MV, where P is the nominal gross domestic product (not inflation-adjusted here), M is the money supply, and V is the velocity of money. You can solve for V by dividing P by M. By the way, this is known as an identity equation. It is true at all times and all places.
The Fed is trying a grand experiment that is not working. The tarp stimulus was supposed to put a lot of money into the economy thereby creating velocity. Two problems. The banks are holding on to the money. Corporations are holding on to the money and the very wealthy are holding on to the money. The tarp and stimulus money has not been put into circulation. It has not "trickled down". The second problem is that if it is put into circulation all at once it could lead to massive inflation.
Simple solution. Tax the rich use the money to pay for infrastructure repairs which will increase transactions thereby increaseing velocity. Reducing social programs actually decreases velocity as that money is usually spent very quickly thereby increasing velocity.
Thanks for the high-school level lecture on money supply.
Sadly you are mistaken in the belief that if you were to tax the rich, poverty would go away. There are so many factors that its not only about taxation but spending, etc.
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