> printed a boatload of cash and gave it out as furlough for waiters and nurses and construction workers … US printed 10 trillion dollars
Well, I don’t think 10 trillion was paid to waiters and nurses and construction workers, etc. I’m curious what that actual number was. I’d be surprised if it touched 1 trillion. Something like 250 billion sounds more plausible to me, but if anyone has a source that would be interesting.
10 trillion was added to the money supply, but I believe the vast majority of it went somewhere else and never passed through the sort of people you mention.
The money supply expansion did juice the stock market and avoided a recession on paper, while shifting real value from savers and earners over to asset holders. Working as intended, I suppose.
I think the biggest BS aspect of inflation is that wages are set in USD basically universally and are therefore subject to inflation.
You can choose to move your savings out of USD and into something more stable, but if you are a worker you can’t move your comp into anything else.
The second most BS part is being taxed on inflation whenever you sell assets. Even if the asset doesn’t have any real appreciation, you get to pay tax on whatever the government decided to inflate the currency by. Absolute nonsense.
>>> while shifting real value from savers and earners over to asset holders. Working as intended, I suppose.
No furlough directly did not receive all of that but the “cost of covid” (the amount spent by government without taxing it back) was on that order. I wish I had a better line accounting of it.
But the basic effect is the same - the owners of assets - the wealthiest in society, get a greater proportion of the “tokens that allocate future resource allocation” (dollars) than previously - and this means they put that money somewhere - and we see that as inflation everywhere.
The solution as I see it is taxing the assets (not a “wealth tax” but more same approaches).
On taxing assets, I think money is used for too many different things.
If we are talking about people owning yachts or airplanes or fifth houses or whatever, then yes, tax the heck out of those.
However, assets with a dollar valuation are also how we assign control of economic functions, i.e. businesses. Control of an economic function is really, seriously qualitatively different than owning yachts or airplanes. Economic functions operating well or not so well has an enormous impact on the success or failure of a society.
Changing how we assign economic function control is very risky, since there is no way to simulate the outcome.
What do you think about that? Are you including share ownership in the asset tax? If so, do you think this will somehow not alter economic control?
An alternative might be to have a split currency that is not freely exchangeable, where one is for business control and one is for stuff. You can sell your business, hold the business currency for however long and then buy another business or part of a business. But if you want to convert the business currency to stuff currency, at that point you are taxed heavily.
I would be in favor of a separate currency class for land also, for the record.
(Not sure if this has some obvious fatal flaw, I am but an armchair economist.)
The basics are it is foolish to try and introduce a wealth tax - ie Bezos is worth 400Bn so we want 40bn now please. It becomes impossible to actually say how much a person owns - it fluctuates, even if they are co-operating fully it’s a fools game.
Yet tax rates are different for different categories - equalise those, and tax people at points of liquidation events - so capital gains is the most obvious.
Other liquidation events is borrowing against assets (the buy,borrow,die idea).
One can fairly easily imagine a minimum floor for all these - say 5 million in any fiscal year or whatever so we focus on where the money really is.
It’s also worth remembering that tax is simply a way of destroying the tokens of resource allocation (money). We want to tax the wealth to remove say X trillion globally. But remove it from the wealthiest who society has decided to give trillions to to handle covid but society thinks probably should not be having such a ratio of control over societies assets
And the implication is some other more destructive event can / will occur to rebalance - for example a massive stock market crash. The idea of “billions wiped off the exchange” is the same as a tax event - it’s just way more destructive and uncontrolled - event th wealthiest would rather t have tax planning than recessions and crashes
I’m stuck engaging with your reply because as far as I can tell the statement quoted below is objectively and trivially incorrect. Can you help me understand your way of thinking about this?
“It’s also worth remembering that tax is simply a way of destroying the tokens of resource allocation (money)”
The government does not destroy money collected from taxes. It uses the money to pay for stuff, at which point the money is back in the regular economy and much of it ends up in back in assets, just owned by a different person than the one who was taxed.
Oh man - Modern Monetary Theory is about to blow your mind.
Do do some looking around on YouTube - there is plenty. Try Richard Murphy above but plenty of others
Ok so my laypersons take:
A government can print as much money as it likes - infinite money. (That infinite part is obv a bad idea but roll with it)
This government can then print that money and buy things it wants - like doctors and nurses and teachers and road sweepers and building contractors.
Now for thought purposes - imagine each month the government prints a new colour of dollar bills, or serial or whatever.
But then those nurses pay their landlords and their grocers and the money goes up the wealth tree till it reaches billionaires on yachts. And billionaires on yachts don’t buy nurses or teachers - they buy yacht captains and pay off sexual assault charges.
The government has to keep buying nurses so they print even more money because they want nurses and road construction workers and the money they printed last month is now being used to pay a yacht Captain.
So the government prints more money.
If this goes on then obviously all the money leaves doctors and construction workers and goes to billionaires- but worse the money becomes worthless because so much has been printed
So destroy the money you printed in the first month - you can just take the colour printed in the first month and burn the dollar notes of that color. That is taxation.
It’s not the government that takes “blue” notes from citizens and then spends it on nurses. They print the blue notes first (because where else did the blue notes come from? You and I don’t print notes) spend them and then take it back in tax later.
Honestly it makes sense once you try it out in your head a few times.
Build a simple model of an economy with like one factory and no cash - see what happens.
Just in case it’s not clear - printing too much money means creating inflation - which wrecks economies. But the solution is fairly simple - destroy the money once it has served the purpose of the government by directing actual real resources (people) towards the jobs the government wants done
Of course this all supposed governments are sensibly allocating resources towards positive goals (but as these are usually education, pensions, health, defence etc then yeah mostly most democracies do this cos that’s what makes voters happier)
I’ve so far regarded MMT as Keynesian but “now with even more very-convenient-for-the-government conclusions!”, but honestly I haven’t read up on it in detail. I will check it out, thanks.
EDIT Wait, haven’t we just reversed the order? If you tax a person the same amount as the government printed, and someone ended up with the printed money, then for the purpose of this topic it’s equivalent to taxing first and just spending the money. So it has the same problem.
The only difference is that the taxation is decoupled from the printing, so the government doesn’t need any special permission from congress to spend. But from an asset ownership perspective the effect is the same, no?
Oh MMT is a new wrapper around the very basic old ideas. There is research on some pre-revolutionary US states that print their own money and raise the tax to be paid in the printed money at the same time. Inunderstand Dr Johnson commented on it.
Anyway. Yes I guess the order is reversed - print the money first, give it to people to get them to do whatever the government wants (build walls, roads etc), then find whomever the money has gone to and tax them.
I found this an interesting way of looking at money, when I
Was thinking about the Oppenheimer movie
Take a hundred dollar bill, and think of that not as money,
but as an instruction to the person you give it to, say a builder
To do a job for you, maybe build a hut for a nuclear scientist to live in.
Now write on a plain piece of paper
“We are your government, we are at war and we need a hut built. You are going to build it”
What’s the difference between the two pieces of paper?
Asset ownership is a legal system. My ownership of my house is a legal situation. My mortgage is a (tradeable) obligation between me and my bank manager
Other points: you cannot tax first - imagine a starting situation. No dollar bills have been printed so how do you get tax paid in dollars?
And the government prints more than it taxes so there is “liquidity” - there has to be be extra dollar bills floating around so we can pay hairdressers etc (I mean you could in theory tax the lot but that would mean perfect understanding of the velocity of money through the economy - maybe with fiat crypto?)
But in the main asset ownership is decoupled from money - you own your house and car and stocks but you don’t own money - you owe the bank or the bank owes you but money is zero sum, even if wealth is not
Well, I don’t think 10 trillion was paid to waiters and nurses and construction workers, etc. I’m curious what that actual number was. I’d be surprised if it touched 1 trillion. Something like 250 billion sounds more plausible to me, but if anyone has a source that would be interesting.
10 trillion was added to the money supply, but I believe the vast majority of it went somewhere else and never passed through the sort of people you mention.
The money supply expansion did juice the stock market and avoided a recession on paper, while shifting real value from savers and earners over to asset holders. Working as intended, I suppose.
I think the biggest BS aspect of inflation is that wages are set in USD basically universally and are therefore subject to inflation.
You can choose to move your savings out of USD and into something more stable, but if you are a worker you can’t move your comp into anything else.
The second most BS part is being taxed on inflation whenever you sell assets. Even if the asset doesn’t have any real appreciation, you get to pay tax on whatever the government decided to inflate the currency by. Absolute nonsense.