An economics, investment, trading and policy blog with a focus on Modern Monetary Theory (MMT). We seek the truth, avoid the mainstream and are virulently anti-neoliberalism.
You know "trickle down economics" contains a tautology whereby there is "excess savings" by definition....
the metaphor (tip-off) implies that there is this big pot full of water that fills up and then starts to overflow a bit and some of the contents "trickle down" over the sides of the pot.
The big pot full of water represents excess savings imo....
I'm previous anon (both), Matt is right, morons are the ones using trickle down economics. The guy in the video nails it down.
I also think that the wealthy saving desires are impossible to met (infinite) and high taxes serve to reduce excessive savings. They have excessive savings because as you can see they can buy assets with real negative returns (t-notes) and gamble on asset prices like housing (or commodities becoming an "investment" class instead of being run on supply and demand in the last years).
High progressive taxes are good and taxing rent seeking activities more (from land and financial activities).
also Anon look at all of the retained earnings that the corporate sector are sitting on.
This gets back to better corporate governance.
The corps hoard the retained earnings and then insiders (think Aubrey McClendon at CHK) use it as their own personal slush funds.
They should be made to pay them out in dividends. The entire mutual fund industry is worthless as they are the custodians of the shares and never press the corps to pay out the retained earnings.
Exactly Matt, is ridiculous we are seeing corporations sitting on trillions of cash and giving dividends like <1% per share. They are also not reinvesting because... why? There is no demand. Excess capacity and we can produce way more than we can consume, "job creators" won't consume thousands of cars per capita, well, the luxury industry in this plutocracy has gone well, but that's irrelevant in the grand scheme of economic activity. We can't make an economy out of building toys and ghettos for the wealthy (also this starts to sound much like the later Roman empire, or the later European monarchies, sounds familiar? Guess how the aristocracy will end.)
All the gains come from asset price inflation, not from income. So basically you don't invest expecting a return, you just trade on price action trying to fool the next buyer, and gambling on market tops. See how the stock market has done for the past 12 years despite record earnings etc. that's the consequence, there is no buy&hold any longer, it's just trading the price and ignoring any fundamentals because you don't expect real returns. This is typical of an economy which is inflating the stock of money but has no real growth for the average citizen, a lot of nominal growth, but people is getting poorer and income inequality is increasing.
Very fitting for a market where the median holding time of a stock has been dropping consistently in the last years up to milliseconds. And everything can be tracked to a couple of reasons...
Honestly I don't care about consumption (I like it going down), but I care about welfare, they better share productivity, lower prices and higher purchasing power for your income at least would be welcome, but as the video points, this also has gone downwards.
EVen Marx admitted that capitalism was a step forward historically and it vastly improved the lives of many over what they had been subjected to before. And the Industrial capitalism of Marx's time was much harsher than now.
There has been progress since then, too. Read the Communist Manifesto. Many of the demands articulated there have been met, although of course, the transition to socialism has not yet occurred. But we no longer have purely feudal or pure capitalistic economies but mostly mixed economies, that is, capitalism with socialistic characteristics. If socialism is to be, it will come to be when the conditions are ripe, which means a significant maturing of collective consciousness.
Generally change comes from forward-thinkers who the masses get behind. America was established by the elite of the time, which is what the founding fathers were, even through it was the masses that fought and died in the revolution that made the US possible. But it was the founders that drafted the documents and its has largely been the elite that have run the country since.
Like it or not, "trickle down" has been the reality, not just wrt money but also power. Washington could have been king had he not refused.
So let's not be too hard on the people who actually organize and run things, and innovate. Let's just isolate the sociopaths and morons among them. The selection process is skewed in the favor of sociopathy at present and that needs to be changed. It can be. But it will take leadership and that means an "elite."
I am all for consensus decision-making in community that gives everyone a voice, but having quite a bit of experience with this, I know that "natural leaders" arise and they are the people that others are willing to get behind and back because they have the goods.
We need a better selection process. The present one is not working in either business, finance, or government. Too many sociopaths getting trough the overly porous filters.
I agree with your sentiments and I also part company with MMT over that tax issue. I also agree with your further sentiments on ultra large corporations involved in public utiliies type work.
"I also think that the wealthy saving desires are impossible to met (infinite) and high taxes serve to reduce excessive savings. They have excessive savings because as you can see they can buy assets with real negative returns (t-notes) and gamble on asset prices like housing (or commodities becoming an "investment" class instead of being run on supply and demand in the last years).
High progressive taxes are good and taxing rent seeking activities more (from land and financial activities)."
I think many of us, if not most of here, either have wealthy friends or at least know some wealthy people. Those that do will likely testify that they are not 'bad people" but rather people caught up in a culture and institutions that bias their views and activities. I have even had some acquaintances that had to go prison who I do not consider "bad people." They got caught up in a frenzy and did stupid things that they admitted were stupid on reflection.
We not only have a crazy culture that glamorizes fame, fortune, power and pleasure, but also institutions that encourage sociopathic behavior. An economics built around pursuit of self-interest is deeply implicated in this.
The fundamental problem is a "spiritual" one having to do with consciousness, which then gets manifested as a material one through culture and institutions. We are creating the wrong kinds of cognition, volition and affect owing to a wrong notion of the nature of human being. When the response to problems is that people are just greedy, that is an indication that the society is producing greedy people and has a selection and promotion process that favors this behavior.
Of course, this is not to excuse bad behavior. Everyone has a moral compass hardwired in through instrumentation like mirror neurons. There is increasing evidence that morality is an evolutionary trait because it favors survival and progress, individually and at group and species levels. It is even found in a proto-stage in bacteria.
It comes back to what Roger Erickson has been pounding on. We need to organize ourselves in such as way as to coordinate to increase adaptive rate. Otherwise we are shooting ourselves in the head individually (our offspring will not have as good a chance of surviving and progressing), group-wise, e.g., nationally, or at the species level (globally).
As Neil Wilson often reminds us, we need better systems design and that means overhauling major institutions, education being one of the foremost. But it also requires a shift in values and that means moving away from an economics whose philosophical foundation is pursuit of self-interest as the "natural" driving force.
Leverage, I think that the corps are sitting on all that cash for a good reason — to them. They don't want the economy to recover before the election in the hope of electing a GOP government that will "end the socialism" that Democrats have been promoting since FDR.
Is this a vast intentional conspiracy? I don't think that it is organized, except in some pockets. But I think that a lot of people at the top see this as the best chance they have had since FDR to finally drive a stake through the New Deal.
I think that if a GOP government is elected, the coffers will open and confidence will be rediscovered.
I don't think this is just being cynical, either. I have been around along enough to know how minds work. Again, I stress, there are not "bad people." It's the way the institutions are structured. Human beings are social and their thinking and behavior are shaped by prevailing culture and institutions to a great degree.
They really do believe in market capitalism, the invisible hand and meritocracy. They think that they are at the top because they are the best of the best and should be left alone to pursue self-interest to enable the invisible hand to do its thing without government getting in the way. And they have convinced a significant % of the masses to think this way, too, making political victory possible.
This would allow for institutional change that would solidify this postion for generations at least. That's the thinking. The Rehnquist and Roberts courts are good examples of how institutional change can be fixed law through conservative judicial interpretation. This is really the goal.
"Is there a third party apart from Democrats or Republicans in the U.S?"
Not really. The Green Party takes some votes from the left that would go to Democrats and the Libertarian Party takes a corresponding amount from the GOP, but it is minuscule. Sometimes there are "spoiler" candidates that can influence an election through. Ross Perot adversely impacted the GOP under Bush I, who lost his bid for a second term, and Ralph Nader may have cost All Gore the presidency in 2000, too.
Romney will almost certainly be the GOP nominee, and there could be a reaction from the Ron Paul people, perhaps even involving Ron Paul himself. But that is uncertain at the moment and it's not likely to become much clearer before the GOP nominating convention.
I don't think that there is an articulated MMT fiscal policy other than at the macro (aggregate) level, i.er., size of the fiscal balance based on offsetting demand leakage to saving.
Warren personally prefers lower taxes. Bill Mitchell usually emphasizes more expenditure. But I have never seen any MMT budget proposals for the US or other countries specifying the mix of taxation and expenditure and how these would be allocated.
So I think is incorrect to say that MMT has a policy position on this, or that the specific distribution is indicated by the general macro analysis using sectoral balances and functional finance.
MMT holds that economic policy is a matter of political decisions regarding alternative policy options. MMT suggests policy options, showing consequences that may be expected given varying conditions, and also shows which putative alternatives are ruled out by the identities.
Cutting taxes for a small percentage of the population which is not going to spend significantly more neither trickle down the money through investment and job creation is useless policy.
I wonder why people needs to have thousands of millions in 'financial markets' doing nothing... what serves this purpose?
Thinking in aggregates leads you many times to wrong conclusions. 'Cutting taxes' is not a solution, what matters is how you do it. Also think about what is the original purpose of taxation.
I can tell you wealthy people creating inflation by gambling on assets in a redistribution of wealth bottom-up. Taxation can work the other way around diminishing this problem. However I've never heard Warren make this point.
Why accommodating infinite saving desires by wealthy people that lead to excess in financial systems and risk-free income? What's the social purpose of this? I don't buy this aristocratic policy.
Warren often makes the point of taxing transactions that are desirable to limit. These generally involve negative externality, which implies personalizing gain and socializing loss. So we tax unhealthy products like alcohol and tobacco because to limit preferences due to personal gratification that have social cost, like increased level of poor health and medical treatment the cost of which could be avoided.
The basic argument is not to tax behavior that is socially and and economically advantageous and to tax behaviors that are socially and economically disadvantageous.
It may be argued that excessive saving is socially and economically disadvantageous, in that it concentrates political and economic power at the top, which undermines democratic institutions, and it also constitutes demand leakage that requires increased deficits to offset, resulting in income wealth distribution to the top in a self-augmenting cycle.
"…I think many of us, if not most of here, either have wealthy friends or at least know some wealthy people…"
The wealth of people I know (multi-millionaires) is chump change compared to the rich I'm talking about that have many billions or more in wealth.
The $100 Billion or so in cash or cash equivalents Apple is sitting on had to be monetized by previous deficit spending and it is more or less useless to the economy.
"…Why accommodating infinite saving desires by wealthy people that lead to excess in financial systems and risk-free income? What's the social purpose of this? I don't buy this aristocratic policy…"
The myth that anyone, if they work hard enough, can become a millionaire. Or an NFL star.
In reality 1 out of 100 or less can and that tends to happen at the expense of the 99 that can't.
We may as well play the lottery for our retirement funds too.
The one rich person I know well is a down-to-earth guy (you would never know he's rich) that believes he is special. He has several siblings and none of them are successful. He also thinks that rich people spend more than poor people and it doesn't occur to him that if he spent all the money he's made he wouldn't be rich.
On the other side of the coin is my late employer, an Architect that made about $5 Million dollars over a 10-year period but died penniless with no health insurance because he was a compulsive spend-thrift.
also, i think that's the problem "they" have with the public learning about MMT--"they" are afraid that a well-informed public will force Congress to "vote" everyone a raise.
"EVen Marx admitted that capitalism was a step forward historically and it vastly improved the lives of many over what they had been subjected to before. And the Industrial capitalism of Marx's time was much harsher than now.
There has been progress since then, too. Read the Communist Manifesto. Many of the demands articulated there have been met, although of course, the transition to socialism has not yet occurred. But we no longer have purely feudal or pure capitalistic economies but mostly mixed economies, that is, capitalism with socialistic characteristics. If socialism is to be, it will come to be when the conditions are ripe, which means a significant maturing of collective consciousness. "
a coupla years ago i had an eye-opening experience. i happened to be reading a list of very insightful quotes by the late, great GEORGE ORWELL and it occurred to me that i should go find a collection of his essays to see the quotes in context.
anyhow, i found one such collection and came upon one of his book reviews (he was a literary critic for many english newspapers after WW2) for a book by american author JAMES BURNHAM. i can't remember what book the review was for, but orwell referred to an earlier book by burnham, entitled THE MANAGERIAL REVOLUTION.
he didn't like the book he was reviewing, nor did he like " the managerial...", but he was quick to point out that he felt that burnham's basic thesis was sound.
what was his thesis? that most people believe that, if you don't have capitalism, you have socialism. or, if you don't have socialism, you have capitalism. well, burnham said you can have NEITHER. and he called it "managerialism." you basically have an economy run by managers for THEIR own self-interests.
so, i have come to the belief that we have neither capitalism nor socialism--in fact, we CAN'T have either one or the other. there can only be managerialism (i confess that i'm not an economist, so forgive me if that term is currently used in another way).
and what people assume is socialism or capitalism is just simply the amount of "trickle-down" the "managers" allow at any given time or the degree to which the "managers" allow a consideration of "public purpose" to factor in to their decision-making.
I have an insightful thought also. We aren't living in Socialism or Capitalism, we are living in the MATRIX. Where we work all day long to keep our masters happy without even knowing it.
I agree with both, too. Managerialism is an other way of saying that elites rule.
Always been like that but how 'accommodated' elites were made a system more like absolute monarchies or feudalism or more like plutocracies.
Plutocracies tend to get more and more aristocratic, when the plutocrats self-perpetuate the status quo. We the peasants are here to serve the machine, to keep it moving.
Fortunately we have progressed a lot (I think that's the point Tom was making) so life is more 'bearable' for us the peasants. But let's not fool ourself, we are still peasants, the majority of us, and working class. We are not aristocrats or capitalists.
Even small entrepreneurs are not capitalists because they owe their welfare to big capital (financial in this case).
Also the aristocrats are not an homogeneous class, though they are more homogeneous that the peasants.
"so, i have come to the belief that we have neither capitalism nor socialism--in fact, we CAN'T have either one or the other. there can only be managerialism (i confess that i'm not an economist, so forgive me if that term is currently used in another way)."
Randy Wray has written quite a bit on this. He got it from Minsky. Since then it has morphed into money managerialism with the expansion of financialization.
While it is true that elites always rule, the composition of the elite changes over time. There is a new global elite emerging based on financialization as well as emergent technologies. But it is true that old wealth based on extensive land including RE and resources holdings constitutes a feudal aristocracy that persists.
Mike, my original post did not have the video. It was an update that I did not announce in the comments so it would not have come across the RSS feed. That's why you missed my posting it.
33 comments:
This coming from a venture capitalist would have some value, but trickle down economics are not about truth, but about greed and power.
You got it Anon....
You know "trickle down economics" contains a tautology whereby there is "excess savings" by definition....
the metaphor (tip-off) implies that there is this big pot full of water that fills up and then starts to overflow a bit and some of the contents "trickle down" over the sides of the pot.
The big pot full of water represents excess savings imo....
Resp,
Reading the comments on youtube and elsewhere, I suspect that some posters on the Internet are paid shills.
As for moron, this guy makes much more than the person that posted that comment.
FJ,
I think Anon was referring to "trickle down" as the 'moron' approach.. not this fellow.
Resp,
ps Henry Ford knew this a century ago... he also knew that a dollar bond was the same as a dollar bill.
Ford had Mathematical Maturity:
http://en.wikipedia.org/wiki/Mathematical_maturity
gets back to a mathematically mature understanding of what Paul here often describes as a "closed system".
Those of the semantic persuasion, and morons who can never get out of "metaphor mode" need not apply.
Resp,
I'm previous anon (both), Matt is right, morons are the ones using trickle down economics. The guy in the video nails it down.
I also think that the wealthy saving desires are impossible to met (infinite) and high taxes serve to reduce excessive savings. They have excessive savings because as you can see they can buy assets with real negative returns (t-notes) and gamble on asset prices like housing (or commodities becoming an "investment" class instead of being run on supply and demand in the last years).
High progressive taxes are good and taxing rent seeking activities more (from land and financial activities).
OK, Understood.
Moron, was referring to the ones using trickle down economics.
Also some economic mathematical models point to a trickle up effect.
http://www.austms.org.au/Jobs/Library4.html
Still suspect some paid posters on the internet though.
also Anon look at all of the retained earnings that the corporate sector are sitting on.
This gets back to better corporate governance.
The corps hoard the retained earnings and then insiders (think Aubrey McClendon at CHK) use it as their own personal slush funds.
They should be made to pay them out in dividends. The entire mutual fund industry is worthless as they are the custodians of the shares and never press the corps to pay out the retained earnings.
Resp,
Exactly Matt, is ridiculous we are seeing corporations sitting on trillions of cash and giving dividends like <1% per share. They are also not reinvesting because... why? There is no demand. Excess capacity and we can produce way more than we can consume, "job creators" won't consume thousands of cars per capita, well, the luxury industry in this plutocracy has gone well, but that's irrelevant in the grand scheme of economic activity. We can't make an economy out of building toys and ghettos for the wealthy (also this starts to sound much like the later Roman empire, or the later European monarchies, sounds familiar? Guess how the aristocracy will end.)
All the gains come from asset price inflation, not from income. So basically you don't invest expecting a return, you just trade on price action trying to fool the next buyer, and gambling on market tops. See how the stock market has done for the past 12 years despite record earnings etc. that's the consequence, there is no buy&hold any longer, it's just trading the price and ignoring any fundamentals because you don't expect real returns. This is typical of an economy which is inflating the stock of money but has no real growth for the average citizen, a lot of nominal growth, but people is getting poorer and income inequality is increasing.
Very fitting for a market where the median holding time of a stock has been dropping consistently in the last years up to milliseconds. And everything can be tracked to a couple of reasons...
Honestly I don't care about consumption (I like it going down), but I care about welfare, they better share productivity, lower prices and higher purchasing power for your income at least would be welcome, but as the video points, this also has gone downwards.
Is there a third party apart from Democrats or Republicans in the U.S?
Anon
"…high taxes serve to reduce excessive savings…"
This is where I and a lot of MMT'rs part company.
I believe in high taxation (above some reasonable wealth threshold) that limits massive wealth accumulation by the few.
Further, I think businesses above a certain size should be non-profit. I admit I don't know how that would work.
It makes me uncomfortable knowing that the system is based on winner-take-all, unsustainable systems that inflict chronic pain on the many.
"…Is there a third party apart from Democrats or Republicans in the U.S?…"
Yes. You could fit them under your fingernail.
And then TED pulled the video, because it was too politically controversial. It sure is hard to get the truth out there when the rich oppose it.
EVen Marx admitted that capitalism was a step forward historically and it vastly improved the lives of many over what they had been subjected to before. And the Industrial capitalism of Marx's time was much harsher than now.
There has been progress since then, too. Read the Communist Manifesto. Many of the demands articulated there have been met, although of course, the transition to socialism has not yet occurred. But we no longer have purely feudal or pure capitalistic economies but mostly mixed economies, that is, capitalism with socialistic characteristics. If socialism is to be, it will come to be when the conditions are ripe, which means a significant maturing of collective consciousness.
Generally change comes from forward-thinkers who the masses get behind. America was established by the elite of the time, which is what the founding fathers were, even through it was the masses that fought and died in the revolution that made the US possible. But it was the founders that drafted the documents and its has largely been the elite that have run the country since.
Like it or not, "trickle down" has been the reality, not just wrt money but also power. Washington could have been king had he not refused.
So let's not be too hard on the people who actually organize and run things, and innovate. Let's just isolate the sociopaths and morons among them. The selection process is skewed in the favor of sociopathy at present and that needs to be changed. It can be. But it will take leadership and that means an "elite."
I am all for consensus decision-making in community that gives everyone a voice, but having quite a bit of experience with this, I know that "natural leaders" arise and they are the people that others are willing to get behind and back because they have the goods.
We need a better selection process. The present one is not working in either business, finance, or government. Too many sociopaths getting trough the overly porous filters.
@Paul
I agree with your sentiments and I also part company with MMT over that tax issue. I also agree with your further sentiments on ultra large corporations involved in public utiliies type work.
"I also think that the wealthy saving desires are impossible to met (infinite) and high taxes serve to reduce excessive savings. They have excessive savings because as you can see they can buy assets with real negative returns (t-notes) and gamble on asset prices like housing (or commodities becoming an "investment" class instead of being run on supply and demand in the last years).
High progressive taxes are good and taxing rent seeking activities more (from land and financial activities)."
I think many of us, if not most of here, either have wealthy friends or at least know some wealthy people. Those that do will likely testify that they are not 'bad people" but rather people caught up in a culture and institutions that bias their views and activities. I have even had some acquaintances that had to go prison who I do not consider "bad people." They got caught up in a frenzy and did stupid things that they admitted were stupid on reflection.
We not only have a crazy culture that glamorizes fame, fortune, power and pleasure, but also institutions that encourage sociopathic behavior. An economics built around pursuit of self-interest is deeply implicated in this.
The fundamental problem is a "spiritual" one having to do with consciousness, which then gets manifested as a material one through culture and institutions. We are creating the wrong kinds of cognition, volition and affect owing to a wrong notion of the nature of human being. When the response to problems is that people are just greedy, that is an indication that the society is producing greedy people and has a selection and promotion process that favors this behavior.
Of course, this is not to excuse bad behavior. Everyone has a moral compass hardwired in through instrumentation like mirror neurons. There is increasing evidence that morality is an evolutionary trait because it favors survival and progress, individually and at group and species levels. It is even found in a proto-stage in bacteria.
It comes back to what Roger Erickson has been pounding on. We need to organize ourselves in such as way as to coordinate to increase adaptive rate. Otherwise we are shooting ourselves in the head individually (our offspring will not have as good a chance of surviving and progressing), group-wise, e.g., nationally, or at the species level (globally).
As Neil Wilson often reminds us, we need better systems design and that means overhauling major institutions, education being one of the foremost. But it also requires a shift in values and that means moving away from an economics whose philosophical foundation is pursuit of self-interest as the "natural" driving force.
Leverage, I think that the corps are sitting on all that cash for a good reason — to them. They don't want the economy to recover before the election in the hope of electing a GOP government that will "end the socialism" that Democrats have been promoting since FDR.
Is this a vast intentional conspiracy? I don't think that it is organized, except in some pockets. But I think that a lot of people at the top see this as the best chance they have had since FDR to finally drive a stake through the New Deal.
I think that if a GOP government is elected, the coffers will open and confidence will be rediscovered.
I don't think this is just being cynical, either. I have been around along enough to know how minds work. Again, I stress, there are not "bad people." It's the way the institutions are structured. Human beings are social and their thinking and behavior are shaped by prevailing culture and institutions to a great degree.
They really do believe in market capitalism, the invisible hand and meritocracy. They think that they are at the top because they are the best of the best and should be left alone to pursue self-interest to enable the invisible hand to do its thing without government getting in the way. And they have convinced a significant % of the masses to think this way, too, making political victory possible.
This would allow for institutional change that would solidify this postion for generations at least. That's the thinking. The Rehnquist and Roberts courts are good examples of how institutional change can be fixed law through conservative judicial interpretation. This is really the goal.
"Is there a third party apart from Democrats or Republicans in the U.S?"
Not really. The Green Party takes some votes from the left that would go to Democrats and the Libertarian Party takes a corresponding amount from the GOP, but it is minuscule. Sometimes there are "spoiler" candidates that can influence an election through. Ross Perot adversely impacted the GOP under Bush I, who lost his bid for a second term, and Ralph Nader may have cost All Gore the presidency in 2000, too.
Romney will almost certainly be the GOP nominee, and there could be a reaction from the Ron Paul people, perhaps even involving Ron Paul himself. But that is uncertain at the moment and it's not likely to become much clearer before the GOP nominating convention.
I don't think that there is an articulated MMT fiscal policy other than at the macro (aggregate) level, i.er., size of the fiscal balance based on offsetting demand leakage to saving.
Warren personally prefers lower taxes. Bill Mitchell usually emphasizes more expenditure. But I have never seen any MMT budget proposals for the US or other countries specifying the mix of taxation and expenditure and how these would be allocated.
So I think is incorrect to say that MMT has a policy position on this, or that the specific distribution is indicated by the general macro analysis using sectoral balances and functional finance.
MMT holds that economic policy is a matter of political decisions regarding alternative policy options. MMT suggests policy options, showing consequences that may be expected given varying conditions, and also shows which putative alternatives are ruled out by the identities.
Cutting taxes for a small percentage of the population which is not going to spend significantly more neither trickle down the money through investment and job creation is useless policy.
I wonder why people needs to have thousands of millions in 'financial markets' doing nothing... what serves this purpose?
Thinking in aggregates leads you many times to wrong conclusions. 'Cutting taxes' is not a solution, what matters is how you do it. Also think about what is the original purpose of taxation.
I can tell you wealthy people creating inflation by gambling on assets in a redistribution of wealth bottom-up. Taxation can work the other way around diminishing this problem. However I've never heard Warren make this point.
Why accommodating infinite saving desires by wealthy people that lead to excess in financial systems and risk-free income? What's the social purpose of this? I don't buy this aristocratic policy.
Warren often makes the point of taxing transactions that are desirable to limit. These generally involve negative externality, which implies personalizing gain and socializing loss. So we tax unhealthy products like alcohol and tobacco because to limit preferences due to personal gratification that have social cost, like increased level of poor health and medical treatment the cost of which could be avoided.
The basic argument is not to tax behavior that is socially and and economically advantageous and to tax behaviors that are socially and economically disadvantageous.
It may be argued that excessive saving is socially and economically disadvantageous, in that it concentrates political and economic power at the top, which undermines democratic institutions, and it also constitutes demand leakage that requires increased deficits to offset, resulting in income wealth distribution to the top in a self-augmenting cycle.
"…I think many of us, if not most of here, either have wealthy friends or at least know some wealthy people…"
The wealth of people I know (multi-millionaires) is chump change compared to the rich I'm talking about that have many billions or more in wealth.
The $100 Billion or so in cash or cash equivalents Apple is sitting on had to be monetized by previous deficit spending and it is more or less useless to the economy.
Ooops! Just realized that Tom posted this video a few posts back. Sorry!
Paul,
Good point.... dont forget about these zombies for good measure:
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
I'll bet that these people are even more irrationally zealous to hoard USD balances than Steve Jobs ever was!
Resp,
"…Why accommodating infinite saving desires by wealthy people that lead to excess in financial systems and risk-free income? What's the social purpose of this? I don't buy this aristocratic policy…"
The myth that anyone, if they work hard enough, can become a millionaire. Or an NFL star.
In reality 1 out of 100 or less can and that tends to happen at the expense of the 99 that can't.
We may as well play the lottery for our retirement funds too.
The one rich person I know well is a down-to-earth guy (you would never know he's rich) that believes he is special. He has several siblings and none of them are successful. He also thinks that rich people spend more than poor people and it doesn't occur to him that if he spent all the money he's made he wouldn't be rich.
On the other side of the coin is my late employer, an Architect that made about $5 Million dollars over a 10-year period but died penniless with no health insurance because he was a compulsive spend-thrift.
"Ooops! Just realized that Tom posted this video a few posts back. Sorry"
You should probably re-post it weekly. This video is so popular and spot-on it's being posted all over the internet. This is a keeper.
business insider posted his slideshow from the talk. this slide is perhaps the most meaningful for me and probably why his video got pulled:
http://www.businessinsider.com/nick-hanauer-ted-presentation-about-why-rich-people-arent-job-creators-2012-5#household-income-hasnt-come-close-to-matching-the-overall-economy-11
also, i think that's the problem "they" have with the public learning about MMT--"they" are afraid that a well-informed public will force Congress to "vote" everyone a raise.
"EVen Marx admitted that capitalism was a step forward historically and it vastly improved the lives of many over what they had been subjected to before. And the Industrial capitalism of Marx's time was much harsher than now.
There has been progress since then, too. Read the Communist Manifesto. Many of the demands articulated there have been met, although of course, the transition to socialism has not yet occurred. But we no longer have purely feudal or pure capitalistic economies but mostly mixed economies, that is, capitalism with socialistic characteristics. If socialism is to be, it will come to be when the conditions are ripe, which means a significant maturing of collective consciousness. "
a coupla years ago i had an eye-opening experience. i happened to be reading a list of very insightful quotes by the late, great GEORGE ORWELL and it occurred to me that i should go find a collection of his essays to see the quotes in context.
anyhow, i found one such collection and came upon one of his book reviews (he was a literary critic for many english newspapers after WW2) for a book by american author JAMES BURNHAM. i can't remember what book the review was for, but orwell referred to an earlier book by burnham, entitled THE MANAGERIAL REVOLUTION.
he didn't like the book he was reviewing, nor did he like " the managerial...", but he was quick to point out that he felt that burnham's basic thesis was sound.
what was his thesis? that most people believe that, if you don't have capitalism, you have socialism. or, if you don't have socialism, you have capitalism. well, burnham said you can have NEITHER. and he called it "managerialism." you basically have an economy run by managers for THEIR own self-interests.
so, i have come to the belief that we have neither capitalism nor socialism--in fact, we CAN'T have either one or the other. there can only be managerialism (i confess that i'm not an economist, so forgive me if that term is currently used in another way).
and what people assume is socialism or capitalism is just simply the amount of "trickle-down" the "managers" allow at any given time or the degree to which the "managers" allow a consideration of "public purpose" to factor in to their decision-making.
I have an insightful thought also. We aren't living in Socialism or Capitalism, we are living in the MATRIX. Where we work all day long to keep our masters happy without even knowing it.
Both insights are perfectly compatible.
I agree with both, too. Managerialism is an other way of saying that elites rule.
Always been like that but how 'accommodated' elites were made a system more like absolute monarchies or feudalism or more like plutocracies.
Plutocracies tend to get more and more aristocratic, when the plutocrats self-perpetuate the status quo. We the peasants are here to serve the machine, to keep it moving.
Fortunately we have progressed a lot (I think that's the point Tom was making) so life is more 'bearable' for us the peasants. But let's not fool ourself, we are still peasants, the majority of us, and working class. We are not aristocrats or capitalists.
Even small entrepreneurs are not capitalists because they owe their welfare to big capital (financial in this case).
Also the aristocrats are not an homogeneous class, though they are more homogeneous that the peasants.
"so, i have come to the belief that we have neither capitalism nor socialism--in fact, we CAN'T have either one or the other. there can only be managerialism (i confess that i'm not an economist, so forgive me if that term is currently used in another way)."
Randy Wray has written quite a bit on this. He got it from Minsky. Since then it has morphed into money managerialism with the expansion of financialization.
While it is true that elites always rule, the composition of the elite changes over time. There is a new global elite emerging based on financialization as well as emergent technologies. But it is true that old wealth based on extensive land including RE and resources holdings constitutes a feudal aristocracy that persists.
Mike, my original post did not have the video. It was an update that I did not announce in the comments so it would not have come across the RSS feed. That's why you missed my posting it.
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