The Wealth Tax And Our Shared Insanity
I'd describe my life as a largely stress-free endeavor.
Attaining serenity wasn't easy. At first, it involved waving goodbye (forever) to dear friends like Laphroaig. Then, it entailed an uncompromising exercise in self-reflection and a wholehearted embrace of personal responsibility. In the final act, I decided to avoid inserting myself into the life arc of other people, given my decidedly poor track record in that regard -- I'm the butterfly, and when I flap my wings around other people, thei
Another gem, H.
Heis for Secretary of the Treasury
first, love inclusion of JS Mill ( utilitarian outcomes) – long time gone from American discourse and time to revisit (or a modern version even better!); second, with accepted myths (e.g., religion and dollar value), breakouts (excursions) are required into a new operational zone (new normal). A catalyst other than war, famine or natural disasters have seldom broken thru cultural spc (mythical belief) hi / lo bands. Worse, we Americans seem to have given up our love and ability for deep, honest intellectual discourse to bring any change. Let the next crisis rage!
… and regardless of how hard people like H try to engage us in discourse … the majority just turns on the TV (metaphorically) and follows along.
And it’s important to remember how faith in a national currency tends to be lost historically because it is not some trivial action. When a country cannot produce the basic goods of necessity nor anything of sufficient value to trade internationally then it cannot by printing any amount of money nor by ceasing to print money manage to restore confidence because no other country is interested in supplying you everything you want for nothing but some paper that they don’t need because they don’t pay taxes to your government.
Germany being the classic example post WWI as it had to export everything it produced just to cover its war debts to the allies. Printing money at that solution does nothing but then neither does not printing money.
Any country that has natural resources capable of becoming goods and services sufficient to sustain its people can print money all day long without hitting hyperinflation. It could easily blow some bubbles depending on HOW that money is distributed but that’s what we’re doing today. It could also address real issues and solve real problems. Wealth taxes in as much as they are needed serve a simple purpose, stop dynastic wealth accumulation and political interference. Wealth above certain level needs to decay at least as fast as typical market returns for that kind of wealth and so the tax above say $50 million needs to be pretty high and realistically asymptotic from there. Democratic society cannot coexist with living gods who hit escape velocity on the rule of law.
The critical part that is really the way to get to a place where you can even discuss wealth taxes is things like debt relief and UBI. I’d start big. Really Big. $10+ trillion annually big. I mean for all the stimulus we added last year what actually happened beyond some saving and retail therapy? After people have some stability there might be appetite and energy for wrangling the wealthy.
Another excellent, educational, thought provoking piece.
Thank you!
While I’m not fond of parasocial relationships, I appreciate when you provide glimpses of the man behind Heisenberg.
Regarding the rest of the content, I won’t get tired of pointing out the flaw in MMT reasoning and econometrics as a whole. Both rely on the premises that we can describe causal relationships, along with the influence of specific variables leading to expected outcomes and the fact we can obtain accurate information regarding prices/the economy.
Even if these previous problems could be solved, bureaucrats would still be in charge of making these decisions using equilibrium models and linear regressions which have failed again and again throughout any major crisis.
seems like we would have learned that this practice is a bust, copy: decisions using equilibrium models and linear regressions which have failed again and again throughout any major crisis.
Gene Roddenberry would agree.
When “money” meant physical gold or physical silver, the supply of “money” had (physical) limits. Napoleon wanted gold for “Louisiana.” Russia wanted gold for Alaska. These constraints no longer exist. Why not follow Roddenberry’s lead?
The trouble with no longer “acting out” a “fiscal constraint” or “justify a trade off”
Is that there will be an exponentially increasing amount of people who start to realize they can vote whoever is willing to print more money to “give out”, and the people who are diligent will stop keeping their price stable for their honest work
It will be a spiral sooner than later.
Hence, leaders must “act” so the masses know that “things are still as before” ( although it is no longer at an increasing rate with each decade ) although u can count on the developing countries leaders to always be “hyper-inflating one step ahead of the USD” … and maintain a relative sense of “things as before” in reverse
Living only in your intellect can lead to madness, which can get you tied to a chestnut tree.
“If we abandon those myths, conversations like that between Kernen and Warren wouldn’t make any sense. They’d just be gibberish.”
You know, i initially signed up here after Kelton endorsed you on twitter, and i’ve stayed for the market analysis, but i really think you’re at your best when you’re wading through the existential murk.
I just discovered Wittgenstein last year (im a late bloomer i guess), and your description of how many of our public discussions are trapped in these linguistic knots, and not reflective of actual problems, really resonates.
Y’know, you’re close to mirroring the themes of the “Superstructure” podcast by a few MMT acolytes in Kelton’s orbit — which is essentially examining public socio-political myths. I won’t go so far as endorsing it, it can be a bit eccentric, but just saying you’re not alone. I hope you’ll keep devoting some time to this more abstract stuff in the future.
Thumbs up and a second for the motion.
Still got me H.
Spiritual experiences are observed by many people and in many cases these observations are probably not tricks conjured up by the central nervous system, like the dollar obviously is. People can be faulted and disparaged for admitting their observation but keep in mind that such observations do not require sharing and can be independent of any learned behavior, unlike the dollar.
I’m not sure how you do it, another great article. Compared to you or most if not all of the commenters around here, I’m a relatively smooth-brained individual. Thank you for adding some wrinkles.
Joe kernen, the dumbest anchor on tv. Laughing all the way to the bank…
H-Man, your note travels with your other classics. Lot to digest, similar to a brunch in New Orleans. Not sure I am all in on the money myth but the religion myth, count me in. Seems that cognitive dissonance could be a good thing for the mind.
Well done sir. I cannot fault Musk or Bezo’s….they aren’t buying their stocks….people with not even a fraction of their wealth buy, even when Musk tells you it’s overpriced. The Pagoda misses you.
As an aside from the economic theory… If you believe in the ‘Big Bang’ ,and I think most scientific thinkers accept that this is for real, then you probably have no problem in realizing that there was not one life form in the universe at the time of the ‘Big Bang’. All life that developed after that explosion exists in the form of a collection of cells. One or many. Where did the first cell come from?? DNA is not life. It is the shape life takes. In all the laboratories in all the Universities around the world there is not a single case of making life out of nothing. Where nothing is anything not alive to begin with. So mankind in all societies came up with ‘fairy tales’ to explain the unexplainable. All they have to do is make a cell that will replicate to make another cell. How hard can that be?? I tend to believe in a grand experiment by a superior being without end. If there is life after death… bonus.
Do a search for “synthetic biology” or “BaSyC.” There is a substantial research community researching the problems you discuss. Depending on what your definition of a synthetic cell is, it might already exist. But creating a synthetic cell doesn’t tell us how the first cells arose. May I suggest that the leap from RNA and ribozymes in a primordial soup to a cell is not so great–the ingredients that humans have trouble comprehending are time (as in hundreds of millions of years) and the inexorable force of natural selection.
But if you want to believe that God packaged nucleic acids and proteins in a lipid membrane, be my guest.
H. can blow my mind with the quality of his writing, how he produces the gems like those found in this article with such regularity really is a little bit shocking to me at times.
I buy his monetary reasoning even as there is no market within my sphere of influence, to sell it into.
Very enjoyable piece.
Leaving the policy argument aside for a moment, and while I am no fan of taxes, seeing the uber wealthy pay more would not much bother me, the Wealth Tax as proposed by Senator Warren is very likely unconstitutional. Chief Justice Roberts wrote in his Obamacare opinion, and cited precedent, that taxes on property are direct taxes. The Constitution requires direct taxes to be apportioned by state population. This has basically killed all direct taxes in USA history. Even the income tax required an amendment.
I’m always interested in other views.
So suppose we start taxing (income tax) unrealized capital gains. That would open a whole new can of worms but is not that much different than a wealth tax.
That might also be a back door way of implementing an inheritance tax.
Bob, thanks. I’ve been thinking about the issue of taxing mark to market as well, or as you note, unrealized cap gains. I’m not sure that is Constitutional either. It’s not income because there is no sale event. It’s not a cap gain either. It’s really just another property tax and therefore a direct tax. Direct taxes are Constitutional as noted above. It’s just the weird way the Constitution says that such taxes must be applied based on a population of a state which essentially prohibits them on a practical basis.
This is a real issue that would tie up any of these taxes for years. And I think that they will not clear the Constitutional hurdle.
Fantastic post
Terrific, fascinating, thank you. Thinking about the differences between the macro (Newtonian) and the Quantum(physics) scales regarding ‘economic rules’ , as we go from individuals to planets. At what point (scale) does a new regime of rules start to apply. There is no grand unified theory in Physics as yet. Less so understanding of the granularity, location and scale (the topology) of MMT in the ‘ecosphere’ (if thats anything more than a contingent prop). If in some future there was pretty decent UBI , free healthcare, green deal and science based governance,so that people were immune from real and unnecessary hardship maybe the ‘market’ could be enjoyed as a giant ludic videodrome (to borrow Cronenberg). [Of course pure Algorithms would have to compete under weight-for-age, handicapped differently to the cyborg athletes, themselves scaled according to the nature of their drug use and so on] . Not sure if we’ll get there… 🙂
While in absolute terms H is right by tautology –money is just a construct and only has value because of our faith in the strength of other people’s faith–, Kelton’s work on finding the limits of money creation is still powerful and worth understanding.
She’s finding and exploring the actions that can be taken within the limits of our faith in money. The consequences of the religious’ stopping believing in a water walking wizard are far tamer than the consequences of your grocer’s stopping believing in the value of your money.
The premises “money has value” and “there exists a water walking wizard” are both false. Asking when people will stop believing them isn’t equally unimportant. Ok, if we were royalty in the middle ages they would be equally important.
At the heart of MMT is: what’s the most that public and monetary policy can do before we have a regime change?
We here on this site (writer and commenters) have the luxury of not needing to actually persuade anyone.
Elizabeth Warren, on the other hand, is actually trying to effect change. To do this, you have to get your hands dirty. She will speak the language that people are used to hearing as part of the effort to effect change. My only problem with this is that Elizabeth Warren of late doesn’t seem as sharp as the Elizabeth Warren of 15 years ago. She was great as an outsider, but the compromises of being a Senator, or maybe just time/age, seem to have taken something away from her abilities.
You took a big risk in the opening. You let yourself be a bit vulnerable. It’s OK. Thanks for organizing your thoughts and analysis and sharing. The little bit of optimism left in me says espousing ideas consistent with the ones you typically provide are the sprinkling of seeds that may someday turn this ugly weed bed in which we live into a beautiful garden.
I’m also an econ and poli sci person. Not at your level but close enough to follow, synthesize and repeat. I also, in early adulthood and since, have had exposure to the very wealthy and the uneven playing field that they typically enjoy. When I was 12 my father, who was a welder by trade, paid more in actual dollars in taxes than Richard Nixon. That was my start of realizing the unfairness of the economic pitch.
Thanks Heis. You lift and depress my days at the same time.
We need to put your writing in every economics department at every learning institution.
Well done. One of the great political divides in our country is beween curious, questioning people and those who fear and hate them. Couple this with the legacy of the civil war, and you get really angry crazy politics. Who coined the phrase Those who know don’t say, and those who say don’t know?
H
Sir, you outdo yourself once again. As Neil Gaiman seems to se it, our gods have always come into exstance because we believe in them and when we stop believing in them they lose their power, fade, and eventually disappear. It will be interesting, albeit scary, to see what happens when more people believe in Bitcoin than dollars. I’m not looking forward to that tipping point, in the models of Rene Thom, the catastrophe that will erase our money, more quickly than we might think.
For this piece you were more expansive in defining your set of myths and no one seemed to register any great disagreement. Outstanding set of comments, btw. For me the irony is that as we think about our main god, money, our cultural upbringing forces us to put limits on what we see as the need to pay back public debt, avoid deficits, etc. We can’t get by those economic myths. The give and take on this is so fun to watch.
AMEN BROTHER!