The problem with wealth taxes

[Horatio Parker]

So, to you, if the private sector is losing wealth due to sectoral balances, it's irrevelant.

Begs the question: what is relevant?

Your blindness is amazing.

The problem is that you continue to equate "wealth" with "currency".

Maybe this will help. The same idea stated in the context of horizontal/vertical transactions:

Despite the indirect influence of non-government activity, including private credit creation, on the budget outcome, there is an important sense in which vertical transactions are key to the determination of the level of net financial assets. The key point is this: only the government can enable a change in net financial assets alongside stable income. If the non-government attempts to alter its net financial assets through its own actions, it can only do so in ways that cause income adjustments.

Suppose there is unemployment. This is evidence of a non-government desire for a higher level of net financial assets than is consistent with full employment given the government’s current fiscal policy settings. The non-government is powerless to realize this level of net saving alongside full employment through its own actions.

If the non-government attempts to increase its saving ratio, for instance, this will weaken demand and cause falling income unless the government counters the effect with greater deficit spending. Similarly, if capitalists cut back private investment, this will once again only increase non-government net saving in a way that causes negative income adjustments unless the effect is offset by deficit spending. So the consequence of non-government attempts to increase net saving are negative income adjustments.

 

[Loren Pechtel]

Your blindness is amazing.

The problem is that you continue to equate "wealth" with "currency".

Maybe this will help. The same idea stated in the context of horizontal/vertical transactions:

Despite the indirect influence of non-government activity, including private credit creation, on the budget outcome, there is an important sense in which vertical transactions are key to the determination of the level of net financial assets. The key point is this: only the government can enable a change in net financial assets alongside stable income. If the non-government attempts to alter its net financial assets through its own actions, it can only do so in ways that cause income adjustments.

Suppose there is unemployment. This is evidence of a non-government desire for a higher level of net financial assets than is consistent with full employment given the government’s current fiscal policy settings. The non-government is powerless to realize this level of net saving alongside full employment through its own actions.

If the non-government attempts to increase its saving ratio, for instance, this will weaken demand and cause falling income unless the government counters the effect with greater deficit spending. Similarly, if capitalists cut back private investment, this will once again only increase non-government net saving in a way that causes negative income adjustments unless the effect is offset by deficit spending. So the consequence of non-government attempts to increase net saving are negative income adjustments.

1) That's pretty obviously a quote--and quotes need citations.

2) You're still not getting it about wealth vs money. Everything you argue about private assets applies to money but for most people the majority of their assets aren't money.

 

[Horatio Parker]

http://heteconomist.com/verticalhorizontal-vs-exogenousendogenous/

Re 2) and yet - there is money! Somehow you think that because the larger portion of private wealth isn't monetized, the portion of monetized wealth cannot be subjected to the relationship of govt to private sectors. It's insane.

The formula again is S-I. S is gross savings, and I is gross investment. Again, this number is drawn down when govt is in surplus and foreign in deficit.

 

[Loren Pechtel]

http://heteconomist.com/verticalhorizontal-vs-exogenousendogenous/

Re 2) and yet - there is money! Somehow you think that because the larger portion of private wealth isn't monetized, the portion of monetized wealth cannot be subjected to the relationship of govt to private sectors. It's insane.

The formula again is S-I. S is gross savings, and I is gross investment. Again, this number is drawn down when govt is in surplus and foreign in deficit.

I'm not saying that the portion that is monetized isn't subject to the factors you discuss. What I'm saying is that since most of it isn't monetized that's irrelevant.

 

[Horatio Parker]

http://heteconomist.com/verticalhorizontal-vs-exogenousendogenous/

Re 2) and yet - there is money! Somehow you think that because the larger portion of private wealth isn't monetized, the portion of monetized wealth cannot be subjected to the relationship of govt to private sectors. It's insane.

The formula again is S-I. S is gross savings, and I is gross investment. Again, this number is drawn down when govt is in surplus and foreign in deficit.

I'm not saying that the portion that is monetized isn't subject to the factors you discuss. What I'm saying is that since most of it isn't monetized that's irrelevant.

You need to explain that, cuz it makes no sense to me.

The private sector has less money, but it doesn't matter due to private non-monetized asset appreciation?

Regardless of whether assets have appreciated to make up for the drain, which again seems to be what you're suggesting, overall the private sector has less.

Usually, people think of prosperity as acquiring more wealth(including financial assets), not less.

You are standing logic on it's head to maintain your rigid anti-deficit stance.

The essence: govt deficits add to private savings.

 

[SimpleDon]

Greece apparently went that route and they're fucking themselves up even more:

(If the paywall gives you trouble go anonymous, it will avoid the 10 articles/month limit.)
http://mobile.nytimes.com/2016/11/02/opinion/in-greece-property-is-debt.html

People are walking away from houses because the tax burden is too high. The tax burden has driven the value of those houses way down, also.

The problem in Greece isn't with the kind of taxes that the government is imposing, it is with the amount of taxes that the austerity program is imposing.

It is impossible to pay off the national debt of any country any time by running a budget surplus. It has never been done successfully and everywhere and every time that it has been tried it has lead to exactly what we are seeing in Greece, the economy spiraling into depression.

Running a budget surplus destroys money. It destroys private savings. It increases private debt. These are very bad things to do.

Every country that tried austerity to recover from the Great Recession slowed or stalled their recovery and had to abandon their austerity programs. And none of them tried to run a surplus, they just tried to reduce their deficits.

Greece was a bad actor in the EC before 2008. Thanks to Goldman Sachs and the miracle that keeps on giving financial instability and crises, deregulation, Greece was able to hide a huge part of their national debt. But the people of Greece don't deserve the punishment that they are now subject to. Especially considering that it is so self-defeating because as we now see clearly, austerity doesn't decrease the national debt, it increases it.

We have had this discussion many times before. Now that you have seen more of the disaster that austerity has caused in Greece are you starting to understand?

 

[Horatio Parker]

Misunderstanding of these issues is very common:

In 2012, Mezvinski, the husband of Chelsea Clinton, created a $325 million basket of offshore funds under the Eaglevale Partners banner through a special arrangement with investment bank Goldman Sachs. The funds have lost tens of millions of dollars predicting that bailouts of the Greek banking system would pump up the value of the country’s distressed bonds. One fund, exclusively dedicated to Greek debt, suffered near-total losses.

Larry Summers doesn't get it. Warren Mosler sez:

I opened with a question: "Larry, what's wrong with the budget deficit?" He replied: "It takes away savings that could be used for investment." I then objected: "No it doesn't, all Treasury securities do is offset operating factors at the Fed. It has nothing to do with savings and investment." To which he retorted: "Well, I really don't understand reserve accounting, so I can't discuss it at that level." Senator Daschle was looking on at all this in disbelief. This Harvard professor of economics, Assistant Treasury secretary Lawrence Summers didn't understand reserve accounting? Sad but true.

 

[Loren Pechtel]

I'm not saying that the portion that is monetized isn't subject to the factors you discuss. What I'm saying is that since most of it isn't monetized that's irrelevant.

You need to explain that, cuz it makes no sense to me.

The private sector has less money, but it doesn't matter due to private non-monetized asset appreciation?

Regardless of whether assets have appreciated to make up for the drain, which again seems to be what you're suggesting, overall the private sector has less.

Usually, people think of prosperity as acquiring more wealth(including financial assets), not less.

You are standing logic on it's head to maintain your rigid anti-deficit stance.

The essence: govt deficits add to private savings.

You're still not getting it.

It doesn't have to be only appreciation, if I earn some money and use it to buy a house I now don't have money but I certainly have value.

Lets try an analogy to your argument: You're insisting that the level of wealth someone has is based upon how much money they have in their wallet, ignore what's in the bank.

 

[Loren Pechtel]

Greece apparently went that route and they're fucking themselves up even more:

(If the paywall gives you trouble go anonymous, it will avoid the 10 articles/month limit.)
http://mobile.nytimes.com/2016/11/02/opinion/in-greece-property-is-debt.html

People are walking away from houses because the tax burden is too high. The tax burden has driven the value of those houses way down, also.

The problem in Greece isn't with the kind of taxes that the government is imposing, it is with the amount of taxes that the austerity program is imposing.

It is impossible to pay off the national debt of any country any time by running a budget surplus. It has never been done successfully and everywhere and every time that it has been tried it has lead to exactly what we are seeing in Greece, the economy spiraling into depression.

Running a budget surplus destroys money. It destroys private savings. It increases private debt. These are very bad things to do.

Every country that tried austerity to recover from the Great Recession slowed or stalled their recovery and had to abandon their austerity programs. And none of them tried to run a surplus, they just tried to reduce their deficits.

Greece was a bad actor in the EC before 2008. Thanks to Goldman Sachs and the miracle that keeps on giving financial instability and crises, deregulation, Greece was able to hide a huge part of their national debt. But the people of Greece don't deserve the punishment that they are now subject to. Especially considering that it is so self-defeating because as we now see clearly, austerity doesn't decrease the national debt, it increases it.

We have had this discussion many times before. Now that you have seen more of the disaster that austerity has caused in Greece are you starting to understand?

1) What we are seeing in Greece isn't due to austerity. Rather, it's due to a horribly misdesigned tax policy. Tax evasion is still rampant over there, thus the government is resorting to taxing things that are hard to hide rather than taxing what it should be taxing.

2) What you are also missing is that Greece didn't have a choice. You can only run a deficit if someone will loan you money--and Greece had reached the point that they couldn't borrow anymore. Fixing their act was a condition of additional loans. Had they not complied they wouldn't have gotten more loans and the result would be far worse than what we are seeing now.

 

[Horatio Parker]

No. What happens when govt spending is insufficient, is the drawing down of net financial assets. Which doesn't directly affect the value of a an asset such as a house, tho it may slow the market down, which of course could. Especially if surpluses were to continue year after year.

You're flailing around trying to find a counter balance.


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[Loren Pechtel]

No. What happens when govt spending is insufficient, is the drawing down of net financial assets. Which doesn't directly affect the value of a an asset such as a house, tho it may slow the market down, which of course could. Especially if surpluses were to continue year after year.

You're flailing around trying to find a counter balance.


Sent from my iPhone using Tapatalk

 

[Horatio Parker]

No. What happens when govt spending is insufficient, is the drawing down of net financial assets. Which doesn't directly affect the value of a an asset such as a house, tho it may slow the market down, which of course could. Especially if surpluses were to continue year after year.

You're flailing around trying to find a counter balance.


Sent from my iPhone using Tapatalk

Indeed.