This page has been archived and commenting is disabled.
Guest Post: Europe’s Future: Inflation And Wealth Taxes
Submitted by David Howden via the Ludwig von Mises Institute of Canada,
Tax burdens are so high that it might not be possible to pay off the high levels of indebtedness in most of the Western world. At least, that is the conclusion of a new IMF paper from Carmen Reinhart and Kenneth Rogoff.
Reinhart and Rogoff gained recent fame for their book “This Time It’s Different”, in which they argued that high levels of public debt have historically been associated with reduced growth opportunities.
As they now note, “The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point.” Up to this point in the Eurocrisis the primary tools used to rescue profligate countries have included increased taxes, EU and IMF bailouts, and haircuts on government debt.
These bailouts have largely exacerbated the debt problems that existed five short years ago. Indeed, as Reinhart and Rogoff well note, the once fiscally sound North of Europe is now increasingly unable to continue shouldering the debts of its Southern neighbours.
Six European countries currently have a government debt to GDP ratio – a metric popularlised by Reinhart and Rogoff to signal reduced growth prospects – of over 90%. Countries that were relatively debt-free just five short years ago are now encumbered by the debt repayments necessitated by bailouts. Ireland is a case in point – as recently as 2007 its government debt to GDP ratio was below 25%. Six years later that figure stands north of 120%! “Fiscally secure” Scandinavia should keep in mind that fortunes can change quickly, as happened to the luck of the Irish.
The debt crisis to date has been mitigated in large part by tax increases and transfers from the wealthy “core” of Europe to the periphery. The problem with tax increases is that they cannot continue unabated.
Already in Europe there are seven countries where tax revenues are greater than 48% of GDP. There once was a time when only Scandinavia was chided for its high tax regimes and large public sectors. Today both Austria and France have more than half of their economies involved in the public sector and financed through taxes. (Note also that as they both run government budget deficits the actual size of their governments is greater yet.)
With high unemployment in Europe (and especially in its periphery), governments cannot raise much revenue by raising taxes – who would pay it? With already high levels of debt it is questionable how much revenue can be raised by further debt issuances, at least without increasing interest rates and imperiling already fragile government finances with higher interest charges.
Instead, Reinhart and Rogoff see two facts of life for Europe’s future: financial repression through higher inflation rates and taxes levied on savings and wealth. This time is no different than other cases of highly indebted countries in Europe’s history – just look to the post-War examples as similar cases in point. Don’t say you haven’t been warned.
»
- 19614 reads
- Printer-friendly version
- Send to friend
- advertisements -
It must be another day at ZH to help prop up the USD and GBP by jawboning down the EUR.
http://en.wikipedia.org/wiki/U.S._Dollar_Index
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight and
Swiss franc (CHF) 3.6% weight
I just love watching synchronized diving.
but if the EUR is 57% of the dollar, what happens when it's 100%? Sounds like I need to buy some more swiss francs... or something.
Probably won't matter as all paper promises will go to zero.
USA not in top 10 anymore
2014 Index of Economic FreedomBut... but... we're number 1?
You are like youthful Amerikan soldier in Vietnam tempt by young prostitute, "you are number #1 Joe!"
You are just keep tell self that... end of day are still cripple by festering canker and open sore.
Boris, it was sarcasm. I know better. I try to take the lessons of history to heart, discover truth and differentiate between truth and reality. Sometimes I think truth is more scarce than rhodium. It also isn't always pleasant knowledge to get.
And exceptional!
War IS the answer to govt debt problems....don't people do anything the govt says when there is a war
Oppps forgot we've been at war with terorists for over 14 years.....used that chance up federalies
"Crisis is rally cry of tyrant, creed of serf" - William Pitt the Younger
Re: used that chance up federalies
Naaa, just need another "style" of enemy. The dumbasses always love a good war as long as the slow-motion eagles and flags are invited to come along.
Yeah, its now in the top ten regarding debt to GDP, that's an accomplishment aint it. Next time don't go around bombing tiny countries like Serbia which led to further adverturisms in places like Shitcanistan.
It is our moral duty to spread freedom to those unfortunate nations that are unable to spread freedom for themselves. And, with our infinite "Keynesian" debt capacity we can easily afford to do so.
Re: Top ten
Lets see:
Swissyland: Socialist Nanny State
Canada: Pretty socialist, high taxes
Denmark: Socialist Democracy
Mauritius: Who cares, it will be under water shortly
Ireland: Socialist democracy...
ANZAC: Socialist Democracies with single payer universal health care
Singapore: Repressive Nanny State
Which leaves Hong Kong: Place most likely to the breakout of the next Avian flu pandemic and
Chile: Former fascist state with nationalized production of copper (most important export)...
Swiss Franc is also debase by intention. Great fallacy is Swiss is neutral in war without pick side. Swiss is just smart to position for quick switch to winning side. Swiss game is up with AmericKa destruction of secret banking guild.
Start with taking a nice 20% off those 7,000 bazilonares assets. ..not savings...assets
Uh-oh, Boris is offend national Switzerland, is receive down arrow. Boris is apologize. Swiss is bastion of freedom and neutrality, is never collaborate with Nazi, is never expose depositor information to US Government (collection arm of Federal Reserve), is never debase currency or re-hypothecate gold holding.
Re: Swiss is
very clean, too. Don't forget that. That's gotta count for allot.
Appearance of cleanliness, like photoshop of aging glamour model.
Can we please stop calling it "tax revenue"??? Revenue is EARNED, not appropriated.
"Tax confiscations" is the correct terminology.
Sound is about right...
IRS (USA) = Internal Confiscation Services
CRA (Canadia) = Custom and Confiscation Agency
FTS (Russia) = Federal Confiscation Service
At least Italy "Tax Collection Service" is not to lie about confiscatory nature of money is steal from citizenry.
Re: steal from citizenry
Somebody has to pay for all the cool stuff the government makes (plus the management fee of course. You can't expect the big idea people to work for free).
Boris is define "Theft"
- to take not yours and keep or give to other person*
There, you are welcome.
* Give to other person some time is call "Fraudulent disposition of asset", for example, big bank is give bonus to junior bankster, or Bernie Madoff is give diamond tennis bracelet to daughter.
It's not theft. It's robbery at gunpoint. Big difference.
AKA Armed Robbery
So all that debt may need restructuring? WTF does that mean? Does it mean redefining debt as non-debt? The amazing fiscal follies we are now seeing in a desperate effort to just keep on going are stunning!
Are we as individuals allowed to restructure our debt? Maybe if we go bankrupt, but we presume govt's will not go bankrupt but instead 'restructure' their debt.
buy some shiny euros, you win either way. Just like shiny mexican pesos
Inflation is cause by deflation of currency, not economic growth. This is expose great fallacy of bankster class which is profit by inflation (monetization of debt) as skim illegitimate profit from velocity of money. Velocity of money is occur by economic growth and by inflation, so is easy for fancy pant economist to use inflation fallacy to obfuscate theft of citizenry.
... but what is Boris know?
why not just write in Cyrillic?
You and other ZHer is read Cyrillic?
Beside, ZH is not support for Unicode or Windows 1251 (IBM Code Page 866). You are show Boris Cyrillic? Here is Cyrillic
??????? ????? ?? ????????? ?? ?????????.
See, cyrillic is not work.
Yes, I can read Cyrillic, and you are right, ZH will not code it. More is the pity. Cyrillic script unfortunately looks ridiculous when transliterated into Latin letters. Cyrillic has the advantage compared to other Slavic alphabets in that there are no diacritic marks that one has no idea how to pronounce (Croatian, Czech, Slovak, etc).
Croatia, Czech, Slovak, Pole is unduly influence first by Latin (Italy) and then is germanic (Austri - Hapsberg), and is lose Cyrillic writing system. Yes, is pity.
Maybe Tyler is add Unicode support (UTF-8) for ZH! Boris is like Chinese Character (cannot read, but is enjoy for tattoo!).
When learning to read & write Russian, I had to practice 2 Russian alphabets, the printed and the handwritten. I was not told that here is a third - the italic printed alphabet - which is a sort of bastardized mix of the first two and drives me to distraction when trying to read it, for example in newspaper subheadings.
Chinese I am saving for the next incarnation. At least there are no cases and verbal aspects!
Chinese is speak like primitive language, but when is hear, is sound like music, up and down, up and down, like sing.
Cyrillic looks like a lot of work to me.
No, no, is much easy than English (using roman script) because one phonetic character is only to make one sound.
Well spoken, "Boris".
Wouldn't it just be a kick if at some top level, ZH was occasionally used as a propaganda tool and for market influence by some member of TPTB? Just choosing which articles and commentary gets published could have market effects/consequences.
at these readership levels? math is not on your side...
Math may not be on my side on the reader count, but I'm guessing a lot of these readers have serious coinage, a lot more so than average.
Thank God R&R made that math error in their seminal work on debt and growth. Having been thoroughly discredited, we can now ignore everything else they say from here forward and keep going on the current path without fear of every paying any consequences.
You have to ask - who pays their salaries and grant funding?
The uber-rich will be given a choice, either pay wealth taxes for redistribution or have their throats slit by a mob...
After ~250 years, the social contract rooted in the Enlightenment is unraveling as real economic growth is grinding to a halt and the "peasants" will not return to the days of lese majeste with a mere whimper...
Tenth, haven't you noticed the Uber-rich have been preparing for the mob that's slowing finding out they're being had?
Well.... if history is a guide... that will not happen.
History shows us in Europe that the rich will pull all the strings and controle the mobs which they'll use at their discression.
The French revolution wasn't a guide. It was a fluke untill Napoleon took over aver the chaos of the revolution.
Useualy when the fabrics break down... scores are settled.
The Ancien Regime never went away, it just called itself Democracy.
Once again, you smack it out of the park...
Too bad it was a hanging curve that you popped up into section 103 just behind the dugout...
Section 103 is INSIDE the park.
Wrong as usual.
Get rid of the banks and let people determine what can be done. Replace all governments with open source software.
Nice concept, but like any current or past ISM you've still got the problem of the sociopaths manipulating dumbasses with bullshit.
Something tells me if somehow "they" did what you suggested "they" would "be" the open source software.
Now, if you could develop some open-source software to detect sociopaths or bullshit...
So in short the EU is set for a breakup. The moment this crap is underway there will be a revolution.
Reinhart can Rogoff. Study funded by ?
It all comes down to which side of the castle wall you will be on when the fighting occurs. It always has come down to that.
Yes, but when the fighting occurs, the castle is the very last place you will find me.
February 16, 2009 Newsweek cover: "We Are All Socialists Now."
Newsweek:
Newsweek is now…defunct.
http://newsbusters.org/blogs/scott-whitlock/2012/07/25/newsweek-magazine-which-mocked-obamas-dumb-critics-cease-publishing-
Re: Newsweek is now…defunct.
They are still right tho. Everybody loves the socialist scam they are personally living off of.
Belgium wants to nationalize it's private pension funds and do a Polish trick to bring down it's debt to GDP to 60%.
Needles to say... because it all goes as slow as it possibly can, people will massacer their accounts and ship it out of sight.
I'm stopping my pension savings as of this month and will try to liquidate it at a loss if possible.
Damn them.
He that panics first panics best.
Sudden Debt,
Took the hit not so long ago myself. How many other people are slowly coming to the same decision?
An avalance starting with a few snowflakes.
Yea, i'm down to my last 2 million too.
I got some extra spare in the sugar pot just in case:)
Could you give a reference where you found this info ?
However, I was thinking about the effect of spreading this rumor : people stop putting funds in the private pension funds but as this is to some degree tax deductible this mean more tax income.
Also for those that really panic and try and liquidate their fund, they first have to pay back all the tax deductions they have enjoyed, so again more tax income for the state.
But another question comes to mind : where would you put the money you either not put in the fund or get out of it ? You can't leave it in the bank, can you ? And do you thurst the stocks to keep going up ?
As my wife says : you can't win. But then I think I'll hold on to the Olymic though : Participating (in resisting) is more important than winning ...
How are "taxes levied on savings and wealth" not simple governmental confiscation?
Government: "I am become death, the destroyer of savings (and economies)".
Didn't Mao say something about the leaders only being able to lead in the direction the peasants are leaning?
(Maybe that was Jesus... Or Tom Landry.)
Debt repudiation will come. It is the only solution. Bright side : the repudiators will be welcomed back to the lending window within 6 months.
Ever heard of 'Odious Debt'?
That which cant be paid, eventuality wont be paid.
'We', dont owe it, the 'Government' does.
Its about time we started hanging these cunts, and I mean that in the nicest, most fucking vicious brutal way.
Fucking rat bastard, nation destroying, immoral, in it for themselves, care fuck all about us 'Peons', rat bastard cunts.
Its not 'Ours', you hateful fucking shit fucks, its all 'Yours'. Cunts.
;-(
succinctly put !
I always enjoy reading your posts.
A day without you calling TPTB cunts is like a day without sunshine.
" 'We', dont owe it, the 'Government' does. "
Very well put my friend.
Guest Post: Europe’s Future: Inflation And Wealth Taxes
Guest Post: World's Future: Inflation And Wealth Taxes
Guest Post: World's Future & Past: Inflation And Wealth Taxes
Guest Post: Eternal recurrence of the same
Guest Post: Are we there yet?
My Post: America's Future: Inflation and wealth taxes.
I think Spain has turned a deeper shade of green than that chart indicates. The rest of Europe ( sans Scandinavia) is probably dark green too if you consider the off budget liabilities of the EFSF and ESM which are going to be on budget in the very near future.
Looks like the cheap labor national immigration policy blows, debt map immigrant map, same.
A scenario-nightmare for the future of Europe
http://failedevolution.blogspot.gr/2013/04/a-scenario-nightmare-for-futu...
I believe we should look more up into the sky so we realize it is marginal.
I am all for eliminating the income tax and taxing wealth instead. By taxing it you are bringing at least some of that wealth back into the economy. Let it grow tax free and this great wealth becomes a money supply black hole. The money goes in but it doesn't come back out. We cannot continue to survive by printing money to replace that which has been taken out of circulation by the wealthy.
The whole problem with a wealth tax is that it will need to be a world wide endeavor. Too much money has been sucked out of individual countries for it to ever work on a single nation basis. At the very least all banks worldwide would need to make full discosure of the value and identity of each account. If the ultimate individual account owner cannot be determined, then the account is seized until such proof is rendered. If you have been avoiding taxes all along this is where you will get caught. Any attempts to avoid this tax will be punished with forfieture of all the assets unreported.
I could see putting this tax in effect under the following scale:
Under $1 million in assets = no tax
$1 Million to $2.5 Million = 1% Annually
$2.5 Million to $5 Million = 2 % Annually
$5 Million to $10 Million = 2.5% Annually
$10 Million to $25 Million = 3% Annually
$25 Million to $100 Million = 4% Annually
$100 Million to $500 Million =5% Annually
$500 Million and Above = 6% Annually
Set the inheritance tax at levels neccesary to fund the balance of Gov. Ops. if this results in a shortfall.
With no income tax SS Tax can be raised to levels neccesary to improve and fully fund the program.
Medicaire will be rolled into a new national healthcare system. Part of what you paid in income tax would fund a basic premium. For better coverage one would need to buy a supplement. If you wanted private insurance instead that option would be available. I would expect the premiums to fund the program in whole.
Without required constant money printing the financial system would be gutted and replaced. The central bank would be eliminated as would fractional reserve banking. if we needed to fund a war or such then one time tax levies would be approved by national referendum.
The benefits to the economy of the above would be astronomical and no one would be made to suffer because of it.
I'm with you, or we could do as EF Schumacher proposed and abolish corporation tax for these large companies and instead take 50% equity. This way the public have direct access to these profits so they can't be hidden away and society starts to benefit from the fruits of business instead of having private prosperity and public impoverishment.
The "wealthy" do not hoard "the money". The money that's being hoarded is what the Fed, on its own, decide to print and hand over to the banks which in turn park it at the Fed... because the Fed pays them to do so.
Taxing the "wealthy" does not solve this problem.
#AAPL?
This is nothing compared to #M0 and taxing AAPL won't change the fact that government is paying banks to hoard money. (Not that we need any more loans frankly, the currently pinned ZH post shows a bit why)
Who cares. Let the Europeans sort it out. At least they have a fuck of a lot more political diversity than does the US, where the sheep only "think" they are more free or more brave.
When was the last time we saw the kind of marches or strikes in the US, that we've seen in Europe, Turkey, etc? "Home of the Brave and Land of the Free", my ass!
Even with all the Guns & Ammo (G&A), you don't see anyone actually doing something. In fact, I'd go so far as to argue that the more "Gov oppression" the US sees, the more likely you're to see people directing their anger or fear into buying more G&A, rather than using it, or even marching openly.
The US populace is "all Hat, no Cattle". No wonder the 1% don't respect us... we haven't EARNED it. Not lately anyway.
The reasons you see strikes and marches in Europe is because people are A) poorer and/or B) greater entitlement culture. Not because they have more "political diversity".
When you'll see the same in the US, you won't like it and won't welcome the "political diversity".
Ha, no they don't have more political diversity. Europe is full of socialist leaning peoples, hence why their future won't change much from that other than more taxes, and inflation. When you have half of the population working for the government, yeah, when you cut government spending, naturally it's going to be painful, so the most expedient way for politicians will be through inflation, and taxes on wealth, and savings. Savings can always be demonized as evil hoarding of money, and of course wealth is demonized too as it's from too much greed. The writing is on the wall for Europe, and it's future. Free enterprise created the wealth, then comes big government to grow on top of it, sapping away from it. When you lever up to provide government jobs, and services in a large scale, you bet that's a dangerous postition. It's basically a government bubble financed by leverage. That's why I don't have much hope in Europe, because frankly, there isn't much hope in European people as a society.
in which they argued that high levels of public debt have historically been associated with reduced growth opportunities.
I can't believe Reinhart and Rogoff got flak for saying that. Of course, the more the government spends, the more people spend time to get a government contract and don't give a fuck about producing things that people would want absent government spending.
The more a government spends, the more it becomes the only game in town.
That is not even debatable.
When the non peer reviewed piece is found to be based on an "excel error"....
Oh noes so much debt, so bad for business...Reinhart and Rogoff can't use excel but their ideas must be taken as an absolute in how to run a country's finances.
It's not "bad for business" but it's bad for an economy's output on the aggregate as resources are being used for politically aligned uses rather than what consumers would actually want.
Private business is the economic output of the country, at least that's what I'm always being told on this website.
Debt is brilliant, it's inflationary thus keeps the general public on the treadmill, increases asset values of the rich without work and means lots of people are employed in useless jobs to talk about it or administer it e.g. economists, bankers, politicians, civil servants etc, which in itself is of course good for GDP the sine que non of existence.
Debt can be brilliant to the extent that you do something brilliant with it, as a producer, not as a consumer. Obviously, government debt doesn't pass the smell test since the state does not need to come up with a cohesive business plan to acquire capital, like you and I would need to do.
Tyler's and Zerohedge your ads are ruining the website. decreased revenue from fewer visits. You guys sold out!
"Reinhart and Rogoff see two facts of life for Europe’s future: financial repression through higher inflation rates and taxes levied on savings and wealth"
Which high inflation rate?