Amongst Thomas Piketty, Elizabeth Warren, Bernie Sanders, Jerry Yang, and Jeremy Corbyn a wealth tax is all the rage as a means to rectify “wealth inequality”. But what does it really do?
The marginal utility of human work does not diminish, as the number of workers increases. As the size of a market grows, the value of firms and workers within it rises.
The rhetoric from the Left is intransigent in its denunciation of wealth. However, Leftists in power behave differently than their rhetoric would lead us to expect. They enact legislation and regulation which actually helps enrich crony businesses, such as big banks. Why?
Most people assume that prices move as a result of changes in the money supply. Instead, let’s look at the effect of changes in interest.
Scott Sumner said he had a “modest” proposal: there should be a highly liquid futures market in Nominal Gross Domestic Product (NGDP). Let’s look at that.
The flip side of falling interest rates is the rising price of bonds. Bonds are in an endless, ferocious bull market. Why do I call it ferocious? Perhaps voracious is a better word, as it is gobbling up capital like the Cookie Monster jamming tollhouses into his maw. There are several mechanisms by which this occurs, let’s look at one here.
Many people agree that it’s important to move to a free market in money (i.e. the gold standard). They also say that it’s just as important to fight bad taxes and regulation. In their view, government interference in the economy is like friction in a car. The more friction you add, the slower the car goes. One source of friction is much the same as any other.
Let me explain why money doesn’t quite work that way, using a few examples.
Something clicked for me as I stared out my hotel window at a train station and seeing other public mass transportation moving on the street.
If you borrow then it’s not income. This is why no one in his right mind borrows to buy consumer goods. Those who try cannot sustain it for long… But what if someone else borrows?