Tax the people who are creditors and return some of the money to debtors, we could do this for all debts and sure it would be painful but life would go on. The current situation where the wealthy farm out their money to people and make over sized profits with extremely low risk has to be blunted at some point; the debts owed by the US government to the rich is do excessive at this point there has to be a plan to recover some of it. We must find a way to redistribute some of the rent seeking at some point or have society collapse as the rich acquire every last bit of wealth.
Eventually all wealth will end up with fewer and fewer people until the system completely collapses. Debt burden is just another instance of the rich making themselves even richer at the expense of working people - this year tax payers are expected to pay over $660bn to rich people in interest payments.
There needs to be some way of taxing the ultra rich effectively to be able start balancing the books. Every time this is discussed people start talking about high earners and never about the types of people lending the government hundreds of millions of dollars.
For example the average tax rate paid by the top 400 wealthiest people in the US was just 8.2% (2010-2018) and that is on additional income not the billions they already have. Let's not get started with Trusts handed down generationally to avoid inheritance tax completely.
This mindset is backwards to me. Of course we don't tax things people have that have already been taxed. Why should we?
We need to balance the books by not having unsustainable vote-buying policies that cost outsize amounts of money.
> For example the average tax rate paid by the top 400 wealthiest people in the US was just 8.2%
Citation needed. What does "average" mean? What is the denominator on the fraction that generated the percentage?
Thinking if only we could take other people's money forever to pay for things is pointless.
If it's expensive to do things, for whatever reason, then inflation goes up for everyone. If it's pointless to start things, because the government will dip in whenever it likes, then the endless progress-train will stop.
> What is the denominator on the fraction that generated the percentage?
100. That's what "per cent" means, percentages are a way of comparing ratios without needing to worry about scaling both numbers. The % sign is shorthand for /100 .
So in other words it's completely bogus, at the very least due to unrealized capital gains, and probably thru few more fudge factors like what is "reported" wealth?
How many pension funds are private and how many are owned by governments? I ask because I don't know, and it's a global market with foreign funds buying treasuries (or from the other perspective local funds buying foreign treasuries).
I'd say the best solution is to not let power accrue where responsibility is not. Allowing incumbants, be they companies, regulators, legislators, or anything, get too entrenched and the system calcifies around fakeable outcomes.
Keeping productivity and personal choice at the forefront means people have to keep getting value. I can switch away from Netflix at any time. I can't switch away from my local council or choose to stop paying them. And so my local council is allowed to have a terrible track record and keep on existing.
I also don't know the detailed answer, but I think more choice where people individually decide where to spend their money is a big part of building useful things that don't result in crippling expense on an economy.
"normal levels". Interest rates have been declining for almost eight centuries and now that population growth is no longer exponential, it is unreasonable to expect exponential compensation.
In fact, in the face of real physical laws like the constant thermodynamic increases in entropy, it would be foolish to expect to even get a zero nominal yield. Life is the gradient between our endowed energy reserves and the heat death of the universe. Something that violates this is akin to a perpetual motion machine.
You either get inflation, negative interest. Any pretense of permanent zero yield will require political redistribution of income from one part of the economy to another.
It will get stuck at liquidity preference. In other words, no, interest rates won't be determined by available savings, in fact the opposite will happen. People will actively withdraw money from the economy to extort interest beyond what the economy can pay.
Companies will pile up inventories until they realize that they should stop producing and fire their workers and instead just hold this perpetual motion machine money instead of running a productive business. Yields from speculation trump yields from production, see cryptocurrencies.
Then as more and more businesses quit, prices will rise and you get to see inflation. The speculative bubble will collapse and the cycle repeats, just like with cryptocurrencies, except you will lose your job and your income will fall.
In short, the interest rate will get stuck at some above market clearing rate.
If we assume the presence of Oeconomia Augustana banks next to the regular banks and that people will quickly switch to this type of banking, then the absence or presence of central banks or whatever policies they make will be utterly irrelevant because under OA banking, the interest rate is actually market oriented.
I read what you wrote and I believe I understand what you're saying.
Interest rates in the early 1980s in the US went as high as 14% and the economy didn't shut down. Businesses kept right on doing business, despite the high interest rates.
Well I’m not sure, my guess would be not that much because fractional reserve banking. I’m not sure how the original money supply works without central banks though.
I don’t make any returns on that at all. I think a short sharp one off redistribution is better than endless austerity for the poor and socialism for the rich.
I’d love to hear some other proposals about how to pay our debts, I think interest payments for governments are set to surpass GDP or something. Seems like we need to find a way to tax back some of the money the super wealthy are lending to the government.
One approach, which tends to be unpopular around these parts, is to print money and hand it to people in the form of universal programs, UBI, etc. This increases inflation which makes past capital depreciate (effectively what brought down SVB) and so level the playing field for those who are currently not holding much capital, which is most people.
One of the reason it isn't very popular is that the traditional way of injecting money in the economy is by adjusting interest rates which makes it relatively neutral for capital (because they can get more interest) at the cost of the working class. As Piketty points out in his book though [1], the times where inflation was very high because of large scale government programs (like in the post WWII reconstruction era) were booming times for the middle class. The current covid recovery had unemployment rates at all times lows, well up to the point where governments decided tackling inflation was worth killing jobs.
Of course, reducing unemployment to improve returns was never popular so it's being sold to everyone by pushing a scary inflation narrative. Personally, I'd rather pay more for my boxes of cereals than being laid off.
I hope you realize that the majority of federal and state funding works as you describe with the exception that the benefits are not Universal and targeted at the poor. Wealth transfers from the rich to the poor are at an all-time high.
That doesn't make you any less of a creditor; the money in a bank account is a liability for the bank from an accounting standpoint. The bank is indebted to you for the exact amount in your bank account. How much of your money do you think should be taxed to repay debts of the poor?
How much responsibility do the rich have for a functioning society? Ever more of the money is with them after 2008 and COVID, I’m happier just saying let’s go back to say 2008 levels of inequality which would mean transferring trillions to the poor. Did the poor agree to the transfer of around $13tn in the US in printed money which largely filtered through to the rich?
There's no such thing. You're describing an aspect of capitalism (the part where capitalists benefit).
"Socialism" does not mean "benefitting from wealth redistribution". By that logic, someone like Genghis Khan could be considered the ultimate 'socialist' because he pillaged more than anyone and redistributed all that wealth to himself.
Honourable intentions, but you got it all wrong. What you want, or at least the consequence of what you want, is called hyperinflation. It's better to read what it is in Wikipedia than having savings in the country experiencing it. Good though, you're not leading the FED.
Aren’t the creditors that get screwed essentially the citizens of the countries? They pay money into huge pension programs that are pilfered with management fees and poorly structured investment portfolios. These citizens also, more importantly, backstop financial mayhem through funding of depository insurance programs (that apparently insure accounts beyond the insured amount … for arbitrary banks), direct bailouts to failed enterprises, and central banks that provide cheap money for the well-connected fat cats to disburse (or hold onto) as they wish.
The system in the US is essentially corrupt and engineered to support the status quo. It is far from a free market supported by savvy players making decisions based on actual risk/reward principles.
The amount of wealth being sucked from the labour of younger generations is beyond any ridicule. Extremely high taxes on labour - that goes to the old, extremely high real estate prices - to the old, extremely high rents - to the old. Yet it is not enough and they take on huge debts to the government - to be paid by the young. Top that with the forced pension fund contributions of young workers who are to expect to never receive any pension when they turn old.
I know this is a high earner tech forum, and these things don't become most readers, but for people working in other sectors the perspective is different.
Every culture, going back thousands of years has young people taking care of old people. We've just made the system so efficient that you don't have to talk to the old people and wipe their poo.
I'm not against taking care of older people, and you have to make an effort to interpret my post like that.
Every culture has also had older people stepping down at some point to let fresh blood take the charge and carry the burden. In Western societies we don't see that so much anymore. Instead it seems the old prefer to see things rot than to let younger people take over. With land, farms, houses, businesses, etc.
If younger people got an honest chance all would benefit, including the old. Instead young people are mostly seen as people to exploit or ignore.
It is not difficult to look up history. The current old people who hold power in small and in large, when you look up their history, they all got help to start their ventures. Very few of them are self made, so why the act?
I think that is a misunderstanding of life expectancy. Death didn't clear out the old 100 years ago, it was infant and child mortality that pulled the average down.
Young people took care of old people because there was a larger social contract in place: old people's responsibility was to build an environment in which their successors could thrive, so that later everyone could share in that thriving.
>We've just made the system so efficient
It's only efficient at robbing the young.
One half of this social contract, the young-giving-to-old, was formalized (and forced) while the other half, old-building-for-young, was utterly abandoned. There's a great meme about this: "no take, only throw!"[0]
Eating all the seed corn[1] will eventually lead to famine.
> Pensioners comprise the biggest creditor in the world.
Are you sure you want to tax people who've worked all their lives, saving up money, who are now living off the interest payments?
Yeah, and I say that as someone on the wrong side of forty.
The relative growth in wealth from pensioners to working groups in most Western nations is completely unsustainable, and will end very badly eventually. Trying to flatten the curve now is preferable to the alternatives.
