The book the 1% don't want you to read

[Samseau]

But I digress. A 5% net worth tax wouldn't scare off business. Most businesses would bite the bullet in order to gain access to the market, provided the market is attractive enough. In additional, such a small tax is probably a lot less than what most other countries offer.

So every company would be required to have 5% of their net worth in a liquid form to pay this tax. That's very different than keeping a % of the yearly profits. So you could lose a ton of money one year and still be hit with an enormous tax bill. Sucks to be employees of that company.

If they lose a ton of money then they probably aren't going to be in the top %. Remember this should be graduated, 5% from the absolute top, maybe not the top 1% but the top .1% or .01%. Then after that the top 1% loses 3%, and then the top 20% lose 1%.

Would this tax be yearly or just when the politicians felt like it? This would be a very tempting tax to implement. Just blame the rich and take a % of their money when you want to. There is a tax like this currently in Colombia (3% a year). Where do you think most rich Colombians keep their money?

Yearly. I understand capital flight but I honestly don't think people will hide their assets anymore than they already do in America.

I expect a tax like this to be used in the US if the dollar loses reserve currency status and the US has to actually try to pay back some of it's debts. I don't think it would go very well.

Of course it won't work if we wait until after the cows leave the barn.

I absolutely agree that income inequality is a real and important problem. The way the board of directors are run in public companies is appalling. Look to Europe for better corporate governance. In the US it's small group of people that are all on each others boards. The compensation committees are rubber stamps and outside consulting companies are a joke. The CxOs can pay themselves almost whatever the cash flow/borrowing power will allow. I would set limits on the amount of pay to executives of public companies as a multiple of average worker salary.

Europe's income inequality is as bad as any other place.

 

[Gringuito]

Samseau,

For a minute let's assume you are able to come up with a way of extracting a % of the net worth of the people that you think are too wealthy. Remember that taxing the net worth of companies simply reduces the net worth of the shareholders of that company. What are you going to do with this money now?

Governments have proven to be very inefficient wealth redistribution agents historically. They have problems with corruption and vested interests. The politicians would be most interested in giving the money to those people most likely to vote for them in the next election. Not many politicians are interested in paying down the national debt because that doesn't bring in votes. In the US there are currently over 92M not in the labor force. The rest of us must work to help support these people. Many of them are supported by family members and others are supported by the government or a mixture.

Don't you agree that just giving the wealth tax money as entitlements to more people would not solve the income inequality problem long-term. By taxing the wealthy at 5% net worth a year they would eventually adapt or become less wealthy. Somehow using the new money to create jobs and opportunities for the non-wealthy would be a better use. But upward mobility in society is not just based on government handouts.

I understand that my life experience is very different than most of the people here. I was born into a lower middle class family and I moved up far financially. To me the solution isn't dragging the wealthy down toward the lower classes. It's helping to raise the lower classes up in wealth. For me it's much more important to remove the power that money gives to the elite class to stop the upward mobility of people below them. In our current system, the wealthy can use their money to buy new laws (Net Neutrality, DMCA) via politicions. They can tie up a small competitor in court using a corrupt legal system that is mostly pay-to-win. They utilize a bizarre patent and copyright system to control new entrants to markets.

A recent study said that the US is neither a democracy or republic but an oligarchy. This would be a good place to start at fixing the problem. In a truly democratic system the wealthy must prove their worth to society. If they do not the people will vote away the wealthy's money. Since we are no longer a democracy the wealthy do not have this fear of the people anymore.

 

[2Birds_1Stone]

This book is written by a french man. They are notoriously socialist. Biased? Maybe.

On another note, there needs to be an incentive to get rich and create wealth. i.e. lower taxes or flat rate tax system

Right now we have a convoluted tax system which allows for umpteen deductions and write-offs which allows the wealthy to pay a lower effective rate. In addition, accountants and CPAs now a have vested interest in that convoluted tax system. You think KPMG wants to reform the tax code? I don't think so. Why don't we have a spreadsheet of budgets/expenses listed and updated on every congressman's' home page?

Nowadays to create wealth you need to have an inside track or have a niche in a protected industry.

I still believe that America is the best country in terms of access to capital for business.

 

[Lufty]

Zelcorpion has been talking a lot about interest free lending. Why would anyone with capital EVER do that? There will always be default risk and the lender should be compensated for that risk. Even Islamic banking which claims to be "Interest free" has a form of interest built in, (mark ups on the value of the item being purchased ie, house worth 1 million is sold for payments adding up to 1.2 million) the only difference being that if you get behind on payments you don't fall into a hole of increased interest accumulation. Even then only a small fraction of wealth on this earth is being managed according to Islamic principles. Why is that? Because there are better alternatives.

 

[Samseau]

Zelcorpion has been talking a lot about interest free lending. Why would anyone with capital EVER do that? There will always be default risk and the lender should be compensated for that risk. Even Islamic banking which claims to be "Interest free" has a form of interest built in, (mark ups on the value of the item being purchased ie, house worth 1 million is sold for payments adding up to 1.2 million) the only difference being that if you get behind on payments you don't fall into a hole of increased interest accumulation. Even then only a small fraction of wealth on this earth is being managed according to Islamic principles. Why is that? Because there are better alternatives.

If interest markets were left to free markets, it wouldn't be a problem.

But when you have government guaranteed loans (subprime, student loans) then it distorts incentives and lenders no longer recognize risk. As a result many bad loans are made and then the government is obligated to do the bailout.

So in theory having interest rates on usury works, but in practice people just fuck with the gov so they can get the megabucks.

 

[marksoc]

The solution I am partial to is the enlargement of democracy to the economic sphere. Retain the free market because of incentives (innovation through competition), and get rid of the rentier class (people that earn money without working for it --> capitalists in Marxist terms). We could well form a society based on competition between cooperative corporations with indirect or direct democratic government. Almost everybody would be better off. Imagine a world where you could get a loan from a cooperative bank, based on a cool idea, and get your buddies to work with you to bring this idea to fruition. Imagine being able to join a large pool of corporations based on cool ideas where you would be valued because of your input, and not treated as a piece of machinery to be thrown at any moment. Imagine being able to identify yourself with a project, being proud of being part of something instead of being an overworked drone that knows that you exist only to produce profit of which you will never see a piece. It could be liberating, invigorating, the path to feel like and alpha male.

 

[Feisbook Control]

The solution I am partial to is the enlargement of democracy to the economic sphere. Retain the free market because of incentives (innovation through competition), and get rid of the rentier class (people that earn money without working for it --> capitalists in Marxist terms). We could well form a society based on competition between cooperative corporations with indirect or direct democratic government. Almost everybody would be better off. Imagine a world where you could get a loan from a cooperative bank, based on a cool idea, and get your buddies to work with you to bring this idea to fruition. Imagine being able to join a large pool of corporations based on cool ideas where you would be valued because of your input, and not treated as a piece of machinery to be thrown at any moment. Imagine being able to identify yourself with a project, being proud of being part of something instead of being an overworked drone that knows that you exist only to produce profit of which you will never see a piece. It could be liberating, invigorating, the path to feel like and alpha male.

I couldn't help notice the irony of you advocating socialism/Marxism and living in Argentina.

 

[marksoc]

I couldn't help notice the irony of you advocating socialism/Marxism and living in Argentina.

Argentina is a capitalist society, with some slight "safety net" procedures in place. It is nowhere near the levels of social benefits of the advanced European nations (Norway, Sweden, Finland, and in some ways France and Germany). In fact is a lot less regulated than the US.

 

[Tail Gunner]

I couldn't help notice the irony of you advocating socialism/Marxism and living in Argentina.

Argentina is a capitalist society, with some slight "safety net" procedures in place. It is nowhere near the levels of social benefits of the advanced European nations (Norway, Sweden, Finland, and in some ways France and Germany). In fact is a lot less regulated than the US.

Socialism and "social benefits" are two different things. In the U.S., a truly successful capitalist system allowed the government to provide an ever-increasing array of social benefits which, unfortunately, created an ever-increasing class of beneficiaries who now vote for increasingly socialist candidates who will continue to provide welfare benefits to the masses. These welfare moochers are the true rentier class (people that obtain money without working for it).

Néstor Kirchner took over Argentina's presidency by lambasting privatization and extending the state's control over the economy. Both the Kirchners are from the left wing of the dominant Peronist movement. Their policies have nothing to do with capitalism. I agree that Argentina is capitalistic in the areas furthest away from the capital, because the central government is so inept that it has little impact there and the regional governments hold sway there. But that is simply a product of the central government's ineptness and the people's disdain for it (outside of the capital).

 

[marksoc]

That "central government ineptness" that you talk of gave us back the train system (which will improve a lot in the next months) and the mighty "Vaca Muerta" oil fields, which could transform Argentina into a 1st world nation in a matter of decades. The privatized oil company (YPF) was a mess, if Crisitna Kirchner had not taken it back from Repsol, all that sweet money from future oil would have been used to fill the bank accounts of the corrupt guys at Repsol. As it is now, it will fill some corrupt coffers, but it will also give us as a country the chance to leap forward.

 

[Simeon_Strangelight]

Zelcorpion has been talking a lot about interest free lending. Why would anyone with capital EVER do that? There will always be default risk and the lender should be compensated for that risk. Even Islamic banking which claims to be "Interest free" has a form of interest built in, (mark ups on the value of the item being purchased ie, house worth 1 million is sold for payments adding up to 1.2 million) the only difference being that if you get behind on payments you don't fall into a hole of increased interest accumulation. Even then only a small fraction of wealth on this earth is being managed according to Islamic principles. Why is that? Because there are better alternatives.

If interest markets were left to free markets, it wouldn't be a problem.

But when you have government guaranteed loans (subprime, student loans) then it distorts incentives and lenders no longer recognize risk. As a result many bad loans are made and then the government is obligated to do the bailout.

So in theory having interest rates on usury works, but in practice people just fuck with the gov so they can get the megabucks.

Interest free money creation can be done by EVERY COUNTRY in the world! In fact any State should just print the money of their budget or issue social credit and tax it from the populace. Check out Canada 1920s to 1960s, Hitler partly, Lincoln partly, JFK 100 mio. $ partly, Woergl 1932 etc. A state does not need to borrow money, so long as the amount is tightly controlled.

Banks operate on a Fractional Reserve System which is fraudulent - it is a scam of biblical proportions. Most do not even have the 9% on the dollar they need as reserves in order to lend out and thus create money. During the bailouts Obama gave them trillions telling the mindless populace that the banks would lend out 10 times that much. What happened? They lent out 0,8% of that!!! Banks control the money supply and thus they can create booms and busts - NOT THE STATE!!!

Real Estate credit should be interest free, since it poses little risk except for bubbles, which are currently created by Banking, Real Estate industry and Immigration (indigenous population is falling rapidly in US).

The economic understaning of people is so brainwashed that they cannot even fathom the extent of the scam they are in.

There is nothing wrong in receiving interest on money you earned and are lending out for example to a business - that business may work out or not and risk should be taken into account. But Fractional Reserve Banking makes this into a farce - in some countries you hardly need reserves and are allowed to create 1000x more credit!!!! It is a licence to print money and, those who lend to countries, are able to control the supply the money in reality rule the world. Andrew Jackson realized part of the problem and fought them.

There is no solving of our entire economic system, when some parties in the grand MONOPOLY GAME of our world ARE THE BANK AND ARE ABLE TO CREATE THE MONEY AT INTEREST! Over time they control the Central Banks, the Politicians, the media, academia, the armies, the secret services down to every branch of the propaganda department. Every power is subservient to the money power in this system! Honest taxation will only mitigate the effects.

In the US they expect unemployed and desperate flash mobs to appear in the next decades. They obviously decided to end the scam in one crash: http://cuttingthroughthematrix.com/articles/strat_trends_23jan07.pdf

 

[Samseau]

Zelcorpion has been talking a lot about interest free lending. Why would anyone with capital EVER do that? There will always be default risk and the lender should be compensated for that risk. Even Islamic banking which claims to be "Interest free" has a form of interest built in, (mark ups on the value of the item being purchased ie, house worth 1 million is sold for payments adding up to 1.2 million) the only difference being that if you get behind on payments you don't fall into a hole of increased interest accumulation. Even then only a small fraction of wealth on this earth is being managed according to Islamic principles. Why is that? Because there are better alternatives.

If interest markets were left to free markets, it wouldn't be a problem.

But when you have government guaranteed loans (subprime, student loans) then it distorts incentives and lenders no longer recognize risk. As a result many bad loans are made and then the government is obligated to do the bailout.

So in theory having interest rates on usury works, but in practice people just fuck with the gov so they can get the megabucks.

Interest free money creation can be done by EVERY COUNTRY in the world! In fact any State should just print the money of their budget or issue social credit and tax it from the populace. Check out Canada 1920s to 1960s, Hitler partly, Lincoln partly, JFK 100 mio. $ partly, Woergl 1932 etc. A state does not need to borrow money, so long as the amount is tightly controlled.

Banks operate on a Fractional Reserve System which is fraudulent - it is a scam of biblical proportions. Most do not even have the 9% on the dollar they need as reserves in order to lend out and thus create money. During the bailouts Obama gave them trillions telling the mindless populace that the banks would lend out 10 times that much. What happened? They lent out 0,8% of that!!! Banks control the money supply and thus they can create booms and busts - NOT THE STATE!!!

Again, you fail to see how it was the state that created the mess we're in, not the banks. See the word "bailout" in your above sentence? Without that bailout those banks would have died, like they did in 1929.

Because they got bailed out, they own the economy.

So again, the free market does correct injustices and get rid of monopolies, even if it takes a crash to make it happen.

But again, the real problem was not individual banks, it was the government backing up the banks. The FED is a scam and so were the bailouts.

Regular, small town banks do not need regulation and although fractional reserve banking is a scam, all scams come to an end on their own. Trying to get the government involved always creates more harm than good, as history repeatedly shows.

 

[Lufty]

I'll chime in again, but without a huge multi-quote to make it easier on the eyes.

I wouldn't say fractional reserve banking is a scam persay. I think that the terminology used by the banks is misleading. Depositing money in the banks isn't a deposit. The bank is not holding your money for you until you get back free of charge. In truth your deposit is actually a loan. You loan your money to the back, in return you get interest (these days only a few basis points) convenience(ATMs) and security(safety from robbers). The loan is kind of unusual because you can add to it, or demand your money back at any time. The reserve the bank keeps is to cover this uncertainty. Other fixed term deposits are matched up with loans of equivalent length. The difference between these interest rates generates the money the bank needs to stay in business. Nothing really insidious about it. As with all loans that money you put into the bank isn't really yours anymore. That number on the screen is what you can ask for but its currently invested, and as with all investments there is risk that comes along with that.

The issue comes along when the governments bail out the banks. This eliminates their need to manage those risks that they take, because if they mess up its not really a big problem. The Fed will come to the rescue and bail them out, thus incentivizing risky plays: if it pays off, great. If not, well the government has their back so they are covered either way. This problem is magnified when their are a few large banks that are all doing the same thing. As Samseau pointed out with his excellent image their are not that many big banks around compared to even 10 years ago. If all of them engage in the same behavior the government can't let them fail, they will crash the economy. Now is very much the time for some trust busting.

The new Basel III requirements are going to help with this quite a bit demanding higher capital reserves and a stress test to ensure that a bank has the cash flow to handle increased customer withdrawals. If you haven't heard of it, check it out, it might put your mind to ease. (At least a little bit)

Also to return to interest free loans on real estate, it just doesn't make sense. Yes they have collateral in terms of the house. But the house still carries risk: it could burn down and you could walk away from the loan refusing to pay, the area that it is located could become less desirable (Detroit after the riots, Flint after the industry left) and they would be left with an issue on their hands. They aren't in the business of owning property, in fact many bank owned homes are sold at a large discount just to get them off of the hands of the banks. On top of that with no interest the borrower has no incentive to keep on time with payments, and the bank is losing out on money they could be making by investing in other loans, or in the stock market, or really anything.

 

[cardguy]

I was explaining Fractional Reserve Banking to some people at work.

They literally wouldn't believe me.

I even showed them articles from wikipedia and they still didn't believe me.

“If you tell a big enough lie and tell it frequently enough, it will be believed.”

― Adolf Hitler

 

[Lufty]

I was explaining Fractional Reserve Banking to some people at work.

They literally wouldn't believe me.

I even showed them articles from wikipedia and they still didn't believe me.

“If you tell a big enough lie and tell it frequently enough, it will be believed.”

― Adolf Hitler

Am I brainwashed if I don't find the system ridiculous? I don't mean that sarcastically. I come from a finance background so that colors my perception quite a bit. To me it seems logical that the bank can't afford to keep everybody's money sitting in a pile waiting for them to return, they have to cover their overhead somehow.

EDIT: Fractional reserve I mean, rather than the Fed's bailing out of the banks which is absolutely ridiculous.

 

[cardguy]

Well - to me Fractional Reserve Banking is the same as a Ponzi scheme.

In a Ponzi scheme - you take in money and give out 50% returns (or some other high number).

As such - it isn't long before too much new money is needed to keep paying off the earlier investors.

And at that point the Ponzi scheme collapses. People go broke and the founders go to prison.

But with banking - they play the long con. Instead of attracting lots of people with 50% rates of return. They attract lots of people because there is literally nowhere else to put their money.

And because they only pay out 3% interest rates - the con can keep going for hundreds of years. But somewhere in the meantime there is usually a banking crash or hyper-inflation which intervenes to ruin the economy and cause a bank run.

But once that is over - the people come back looking for more banks to put their money in. Little realising that they are putting their money in a Ponzi scheme that pays out 3% return instead of 50% return.

That is the crux of the matter for me.

Maybe I am mistaken or dumb or both. But it is the exact parallel with a Ponzi scheme which I find odd. Particularly since nobody else in the mainstream media ever finds that parallel to be of interest.

 

[Lufty]

Well - to me Fractional Reserve Banking is the same as a Ponzi scheme.

In a Ponzi scheme - you take in money and give out 50% returns (or some other high number).

As such - it isn't long before too much new money is needed to keep paying off the earlier investors.

And at that point the Ponzi scheme collapses. People go broke and the founders go to prison.

But with banking - they play the long con. Instead of attracting lots of people with 50% rates of return. They attract lots of people because there is literally nowhere else to put their money.

And because they only pay out 3% interest rates - the con can keep going for hundreds of years. But somewhere in the meantime there is usually a banking crash or hyper-inflation which intervenes to ruin the economy and cause a bank run.

But once that is over - the people come back looking for more banks to put their money in. Little realising that they are putting their money in a Ponzi scheme that pays out 3% return instead of 50% return.

That is the crux of the matter for me.

Maybe I am mistaken or dumb or both. But it is the exact parallel with a Ponzi scheme which I find odd. Particularly since nobody else in the mainstream media ever finds that parallel to be of interest.

It's definitely a parallel that you can draw but I think the core difference is that banks actually make money with your money. Sure there are bad loans and what not but as a whole they make money and cover their costs while still being able to pay people that come asking for their money back. The fractional reserve banking system is dependent on the the ability to get a return high enough to cover costs, if that isn't possible IE the most recent financial crisis. Then you have trouble. In comparison a ponzi scheme needs new people to buy in so that they can shift the money around to provide fake returns to earlier investors. A bank can have the same 1000 customers and do just fine, because they actually make money with their money rather than just providing the illusion of doing so.

 

[cardguy]

But do banks make money?

You give a bank 100 dollars. And they can log into their bank computer and add 1000 dollars to their company accounts. There and then. It is literally four taps on a computer keyboard - and the money is magically sitting in the account of the bank.

It is even weirder than a simple Ponzi scheme.

A Ponzi scheme pretends to have money it doesn't have.

A bank has the right to magicially create the money it doesn't have.

It is fucking weird.

It is not hard to 'make money' when you literally have the right to print money.

Very strange...

 

[Lufty]

But do banks make money?

You give a bank 100 dollars. And they can log into their bank computer and add 1000 dollars to their company accounts. There and then. It is literally four taps on a computer keyboard - and the money is magically sitting in the account of the bank.

It is even weirder than a simple Ponzi scheme.

A Ponzi scheme pretends to have money it doesn't have.

A bank has the right to magicially create the money it doesn't have.

It is fucking weird.

It is not hard to 'make money' when you literally have the right to print money.

Very strange...

It's not creating additional money, they have loaned your money out. When that money goes to Simon it is still nominally your money. However you are reliant on Simon paying you back to get access to it. That number on your bank account and mine is indicative of how much you should expect to get rather than what you already have. It's very deceptive because it is called a deposit and every step of the way the bank makes it seem like they are just holding it for you, when in actuality you are loaning out your money and assuming the risks that come along with it.

 

[cardguy]

No - I don't think that is how it works.

It is so simple that people cannot believe it is this simple.

You give a bank 100 pounds.

They then keep that 100 pounds in the vault.

Your 100 pounds is never touched.

But because you gave the bank 100 pounds. The bank now is allowed (by the government) to go print off another 900 pounds.

They can do what they want with that 900 pounds.

Your 100 pounds is still sitting in the vault and has nothing to do with the extra money which is being magically created.

Think of it this way.

You give me a 10 pound note.

I take your ten pound note - and photocopy it 9 times.

I then go and spend the money I have created (90 pounds = 9 x 10 pound notes).

And after a while you come back and I give you back the 10 pound note you left with me.

The 90 pounds photocopied into existence still exists. And guess what - whether it was spent, invested or saved. It will ultimately end up back in the same place. A bank of some sort.

And when it comes back to the bank - I can take that money and repeat the same trick.

The problem is that it so simple that people refuse to believe it is this simple.

It is not.

This is it.

You have just taken the green pill.