Gyroscopic Investing

Kurt Vonnegut said "We are here on Earth to fart around. Don't let anybody tell you any different."

Sounds like a suitable philosopher king.

stone wrote: Kurt Vonnegut said "We are here on Earth to fart around. Don't let anybody tell you any different."

Sounds like a suitable philosopher king.

Sounds like a great philosophy...for Kurt. I would rather not have pictures of him in high schools, with the students singing patriotic songs about farting around, and praising their dear leader.

moda0306 wrote:
Where the public is left of where congress is now is their acceptance of tax-hikes as part of the solution.  There is simply no evidence to suggest that we're on the edge of the laffer curve.  If there is a debt crisis (which I don't really think there is (I DO think there's a private-sector balance-sheet crisis)), then tax hikes ARE part of the solution.

No evidence? That is an awfully strong statement, that I believe is refuted when one looks at investment in business today, and to some extent retirement plans of upper income workers. I can assure you that from a personal perspective, I am near the edge of the Laffer curve. Time off becomes worth more than the last and usually hardest hours worked in a week.

This link on taxation from an old West Wing in the 90's has been making the rounds this week. And this was on West Wing, not exactly a bastion of libertarian thought.

http://www.youtube.com/watch?feature=pl ... 16qbOv3a4M

I can't watch youtube now, but I'll look into it.

I have heard plenty on it and actually for about a year I bought the argument that we could lower taxes on the wealthy and increase revenue... though I didn't realize how empty it was until I started looking into it and reading more about where we're at right now.

I have no source right now nor the will to look for one at the moment.

The whole Laffer curve thing wouldn't apply so much if  tax were directed at assets rather than earnings or transactions.

Stone,

I've had this same discussion with others, and agree. 

stone wrote: The whole Laffer curve thing wouldn't apply so much if  tax were directed at assets rather than earnings or transactions.

Punishing saving and investing? The ramifications of that I cannot begin to comprehend. I personally like a  VAT tax on all consumption, with elimination of all other taxes and tax write offs, and a universal refund for expenditures up to an agreed upon poverty level.

6 Iron wrote: Punishing saving and investing? The ramifications of that I cannot begin to comprehend. I personally like a  VAT tax on all consumption, with elimination of all other taxes and tax write offs, and a universal refund for expenditures up to an agreed upon poverty level.

Punishing saving & investing hasn't prevented the top 1% from acquiring (saving & investing) massive wealth.  Throw a .5% wealth tax at Tim Geithner and he'll still go to work tomorrow... & I doubt he'll try to spend all his money in a day.  It's ridiculous to think people "won't save" because their investment income or wealth may be taxed.

6 Iron, I think you're falling into that camp where you decided that you didn't like taxes a while back (nothing wrong with that) so you decided to attach all these negative unintended consequences with taxation.

"Laffer Curve... Nobody will save... Nobody will produce"  It's hogwash.  Call it morally bankrupt, but don't act like it'll make nobody save.  It's just as immoral to tax consumption.  Both saving and consuming are choices... is it up to us to decide which is better?

6 Iron wrote: Punishing saving and investing? The ramifications of that I cannot begin to comprehend.

Unquestionably.  You save resources today so that you are able to make a capital investment which benefits you tomorrow.  It's a good thing.

With so few savers in the United States I see an asset tax as the precise opposite of what we'd need.  The benefit of this policy would accrue to those most adept at concealing their assets.

And the intrusiveness and governmental power required for a policy like that has the IRS and the Patriot Act green with envy.

6 Iron, nice proposal.  The only practical wrench in the gears is that until the 16th Amendment is repealed, you'd always be afraid that the income tax would rise from its grave.  Still, that's a pretty small flaw when we're in the realm of fantasy-league policy proposals.

moda0306 wrote: Throw a .5% wealth tax at Tim Geithner and he'll still go to work tomorrow

Tim Geithner only sporadically bothers to pay his taxes even now so I'm sure he'd be unconcerned. 

Lone Wolf wrote:

6 Iron wrote: Punishing saving and investing? The ramifications of that I cannot begin to comprehend.

Unquestionably.  

If we'd all just clinch our butt-cheeks and save our country would be so wealthy right now...


Taxes only change peoples' behavior so much.  Savers will still save.  They'll just pay a higher tax... and be possibly somewhat more inclined to spend a small amount of their money.  

The investor class and their middle-class minions who think they've saved well (most of us probably fit into this category) sure do a good job of convincing people that taxing wealth or investment income will destroy our collective will to save, prosper, live, multiply, eat, drink & be merry.

The middle class doesn't build wealth through reduced investment taxes triggering some inner saving demon.  They build wealth through wages in excess of expenditures... which are subject to higher and more regressive taxes than investment income.  Their motivation to save has very little to do with the taxes on their interest & dividends.

I mean, we consider taxes with our accounts, but think for a sec, if taxes were all-of-a-sudden doubled, would that affect your will to save much?  Probably not.  In fact, it might increase your will to save, as you foresee expected future income to be lower than it was before.

moda0306 wrote: If we'd all just clinch our butt-cheeks and save our country would be so wealthy right now...

Yes.  It only takes practice.  You bear down on that lump of coal and clench and before long you've got yourself a diamond.

moda0306 wrote: The investor class and their middle-class minions who think they've saved well (most of us probably fit into this category) sure do a good job of convincing people that taxing wealth or investment income will destroy our collective will to save, prosper, live, multiply, eat, drink & be merry.

Minions?  So are savers and investors the flying monkeys from "The Wizard of Oz" or those little things from "Despicable Me"?

moda0306 wrote: The middle class doesn't build wealth through reduced investment taxes triggering some inner saving demon.  They build wealth through wages in excess of expenditures... which are subject to higher and more regressive taxes than investment income.  Their motivation to save has very little to do with the taxes on their interest & dividends.

Now we're talking.  Payroll taxes have been raised more than half a dozen times since they were enacted to keep Ponzi schemes in the black.  Employee and employer pay these, so the effective rates are above 15%.  Ponzi schemes are not sustainable.  Wouldn't it be nice to end these and let people keep their own money instead of fighting these losing battles?  Browne's plan for unwinding these Ponzi schemes is simple and elegant and could be put into practice today.

moda0306 wrote: I mean, we consider taxes with our accounts, but think for a sec, if taxes were all-of-a-sudden doubled, would that affect your will to save much?  Probably not.  In fact, it might increase your will to save, as you foresee expected future income to be lower than it was before.

I assume you are referring to a doubling in income taxes?  It would cause me to want to work less.  Most likely my wife would simply stop working and I would continue as I am doing now.  We would just reduce our expenditures slightly and she would be able to enjoy more time with our kids and at leisure.  To borrow from both Yeats and Ayn Rand, people "go Galt" not with a bang but with a whimper.

I was saying that we're middle-class people who think we've saved well.

Minions would be the ones that try to convince us that taxes on investments are disastrous, thereby keeping the wealth much more quickly and moreso moving upward every day.

Payroll taxes have kept well ahead of "the black" for decades now... this was on purpose, so the boomers would in-part pay for their retirement.  This is a regressive tax paid mostly by the middle class and completely avoided by the investor class.  It currently makes up as much of our revenues (including other se/payroll taxes) as the income tax does.  Since private health insurance has been growing in cost faster than medicare and much faster than more centrally controlled health plans accross the world, and most private annuities are a wall-street scheme, I actually am ok with some level of base-level support for people...as it often proves better than the peddled alternative.

A ponzi scheme and a social insurance program are two completely different things.  One is based on fraud and lies... the other is well known to be a perpetual transfer of wealth.  Let's quit equating the two.

I highly doubt HB's land fire-sale idea would have worked, for a few reasons I'm too tired to go into.  While I love his knowledge of investing, I found many of his views on government to be very simplistic and lacking of complex thought... but like most libertarians, I still admire him in some ways and feel I have more to learn.

moda0306 wrote: Punishing saving & investing hasn't prevented the top 1% from acquiring (saving & investing) massive wealth.  Throw a .5% wealth tax at Tim Geithner and he'll still go to work tomorrow... & I doubt he'll try to spend all his money in a day.  It's ridiculous to think people "won't save" because their investment income or wealth may be taxed.

6 Iron, I think you're falling into that camp where you decided that you didn't like taxes a while back (nothing wrong with that) so you decided to attach all these negative unintended consequences with taxation.

"Laffer Curve... Nobody will save... Nobody will produce"  It's hogwash.  Call it morally bankrupt, but don't act like it'll make nobody save.  It's just as immoral to tax consumption.  Both saving and consuming are choices... is it up to us to decide which is better?

Other than property taxes, at present my assets (in accounts that are not tax advantaged) are only taxed on their interest and dividends. And I have certainly been acquiring wealth, although I am not sure I would call it massive. You are right on one thing. I derive no great pleasure from paying taxes, but acknowledge that it is responsibility I must share in.

Hogwash seems a little excessive with regard to Laffer's theory. It seems imminently logical to me that there is a level of taxation that exists that maximizes government revenue while maintaining the financial rewards necessary for a productive and growing economy, creating and maintaining taxpayers.

I am trying to steer clear of morality questions, but rather utilitarian solutions. I do not believe taxes are morally bankrupt. I believe excessive taxation, and misallocation of resources by a central government is harmful to an economy.

Lone Wolf wrote:
6 Iron, nice proposal.  The only practical wrench in the gears is that until the 16th Amendment is repealed, you'd always be afraid that the income tax would rise from its grave.  Still, that's a pretty small flaw when we're in the realm of fantasy-league policy proposals.

A man can dream.

moda0306 wrote: I highly doubt HB's land fire-sale idea would have worked, for a few reasons I'm too tired to go into.  While I love his knowledge of investing, I found many of his views on government to be very simplistic and lacking of complex thought.

Isn't the fire sale of public property one of the conditions for eligibility for IMF loan guarantees and bailouts?  It seems like this is exactly what has happened in countless emerging market scenarios and this sort of privatization is the conventional wisdom among Chicago school economists.

I'm not saying I think it's a good idea, but Harry Browne was simply describing what has been happening all over the world for decades.

As far as whether it works or not, in practice I think it tends not to work very well simply because the sales are typically rigged and the buyers are insiders who pick up public property VERY cheap and then are free to fire all the public employees, which tends to make underlying economic problems even worse.

This scenario is basically what Naomi Klein's "The Shock Doctrine" was all about.

6 Iron,

I definitely believe the laffer curve exists... at some point.  But not where we're at (overall... obviously some people will be at that point) today.

From 1945 through the 1970's we had tax rates between 50% and 90%, no preferential rates for investors, high savings rates, solid balance sheets, etc.  

How did that go on for so long?

moda0306 wrote: 6 Iron,

I definitely believe the laffer curve exists... at some point.  But not where we're at (overall... obviously some people will be at that point) today.

From 1945 through the 1970's we had tax rates between 50% and 90%, no preferential rates for investors, high savings rates, solid balance sheets, etc.  

How did that go on for so long?

There were more extensive and accessible tax shelters at that time. Also, the fact that Europe and Japan were in ruins, and we were the only major manufacturing force left to provide for the reconstruction helped for many years.

moda0306 wrote: From 1945 through the 1970's we had tax rates between 50% and 90%, no preferential rates for investors, high savings rates, solid balance sheets, etc.  

Yet through all of that, tax revenue as a percentage of GDP never moved much outside of the 18-19% range.  Fairly striking and certainly bolsters bolsters the argument that spending needs to trend back down to that range if we want to stop the debt growth freight train.

When there were 90% tax rates, nobody paid them.  Who would be so foolish?  Instead, people found ways around them.

That's why the government created AMT.  Those confiscatory tax rates are long gone yet AMT is still here, bothering a bunch of people it was never intended to bother (since they forgot or didn't care to index it to inflation.)

These were only on the highest income individuals, LW... during a time of much slower depreciation and much fewer credits.  I'll have to look at what tax shelters were possible then.

We're told today that if we raise taxes on the rich, nobody will want to save or produce or become successful, and we'll all suffer.  I don't see enough compelling evidence that that's the case.

I think if we raised muni, dividend, anc capital gain income.... tax revenues would rise, and rich people would complain... and that's about it.

moda0306 wrote: These were only on the highest income individuals, LW... during a time of much slower depreciation and much fewer credits.  I'll have to look at what tax shelters were possible then.

We're told today that if we raise taxes on the rich, nobody will want to save or produce or become successful, and we'll all suffer.  I don't see enough compelling evidence that that's the case.

I think if we raised muni, dividend, anc capital gain income.... tax revenues would rise, and rich people would complain... and that's about it.

Just remove the cap on the Social Security wage base and maybe drop the rate a little and a lot of problems would go away.

But oh how the high income earners would cry!

MT,

To address the "philosopher kings" issue again. I would like to respond to what you wrote:

I would simply like to be left alone by the government to live my life based upon my own beliefs--in other words, free to act on my own morality.  History, however, tells me that the "experts" of the world understand the concept of "freedom" as the right of each and every member of society to live his life according to the beliefs of the "expert" who is making the rules.  People like me bother these experts because I just won't agree with what they tell me is good for me based solely upon their declaration.

Are you suggesting that a planet holding 7 billion people can function without any form of leadership or regulations? I wonder if the tenets of anarchism are really appropriate for a world of our incredible scope and complexity.

What is the ultimate goal of why humans are on this earth? (which will eventually be consumed by the sun anyways). Are we just here to consume and fornicate and drink beer? If there is a larger more grandiose goal, then it will take leadership and vision to unite our resources and efforts. Do you think it would have been possible to reach the moon and explore the solar system without the leadership of government joining the wealth and resources of a whole nation together? Would it have been possible to create nuclear power or pursue fusion technology without government support? If you believe that global warming is an issue how do we begin to solve this without collective action and leadership?

In America we have been born into a system which promotes individualism, however the reality is that we live in a collectivist world. Like it or not, all of us are interdependent on one another. Societal problems, wars, disease, ecological disasters, don't stop at our property lines. BP's oil spill in the Gulf or the Fukushima Daiichi meltdown show how individual corporations in pursuit of profit can poison the lives and freedoms of millions.

How do the tenets of libertarianism/anarchism begin to address these issues?

With regards to the debt ceiling and taxation in this country I think it is important to think about the fundamental questions of work,  compensation, motivation, and obligation to society.

How are the resources best distributed in a society? In our current system in America about 90% of the wealth is owned by 10% of the people and vice versa. If the trend were to continue you could conceivably reach a point where 99% of the wealth was owned by 1% of the population.

Is this a healthy, happy society? If a society were to reach to point where 1% owned 99% of the wealth, and you were to redistribute, how would this be done? Along what guidelines and to what end?

It seems that before we have any debate on taxation in this country, we have to have a vision for the type of society we want to live in. Then, through dialogue and debate among experts and interested parties we can formulate a plan to get there. This highly politicized debate is doing nothing to solve our long term problems which are in my mind, almost entirely philosophical in nature. We don't have a unified vision of what we want America to look like.

doodle wrote: Are you suggesting that a planet holding 7 billion people can function without any form of leadership or regulations? I wonder if the tenets of anarchism are really appropriate for a world of our incredible scope and complexity.

I never said anything about anarchism.  I am talking more in terms of self-organizing social, political and economic behavior along the lines of Adam Smith's "Invisible Hand."  There is nothing anarchic about simply entering into free exchanges with others in the marketplace.

What is the ultimate goal of why humans are on this earth? (which will eventually be consumed by the sun anyways). Are we just here to consume and fornicate and drink beer? If there is a larger more grandiose goal, then it will take leadership and vision to unite our resources and efforts.

I think that each individual has to answer these questions for himself/herself.  That's the point of being a sentient being, IMHO.  If, however, you are suggesting that it is necessary to roll out the coercive power of the state to effect the "leadership" you are describing, that sounds more like driving than leading.  

Do you think it would have been possible to reach the moon and explore the solar system without the leadership of government joining the wealth and resources of a whole nation together?

I really don't know.  There is a bit of "Economics in One Lesson" built into your question, though, because there is no way of knowing what society would have done with the resources that were used for the manned moon missions if the private sector had been allowed to keep the resources that were confiscated to fund the space program.

Would it have been possible to create nuclear power or pursue fusion technology without government support? If you believe that global warming is an issue how do we begin to solve this without collective action and leadership?

Well, if that means we wouldn't have nuclear weapons either, it might have been a good thing for humanity if the government hadn't gone snooping around the atom.  Until the government can show a better track record in small things like filling potholes and paying its bills, I don't have much faith that it will be able to effectively address something as enormous as global warming.  As Harry Browne said, if a government ever appears to win a war, it is only because it was fighting another government and they couldn't both lose.

In America we have been born into a system which promotes individualism, however the reality is that we live in a collectivist world. Like it or not, all of us are interdependent on one another. Societal problems, wars, disease, ecological disasters, don't stop at our property lines. BP's oil spill in the Gulf or the Fukushima Daiichi meltdown show how individual corporations in pursuit of profit can poison the lives and freedoms of millions.

The point I would make is that this is exactly why individual freedom is so important.  Without individual freedom, people are not able to form their own groups for the purposes of commerce, exchange of ideas, etc.  The belief that any collectivist effort is by definition more efficient that a smaller individual-driven process is, IMHO, not correct.  I do not desire individual freedom so that I can be an anarchist or live in a tree.  I want my personal freedom so that I can have the opportunity to enter into the mutually profitable exchanges that I want to enter into, as opposed to those that I am permitted to enter into by some coercive agency that believes it has a better understanding of my needs and desires than I do.

The federalist system we have in place is a response to deep suspicion among the original colonies of centralized concentrations of power.  The politician always says he is taking a bit of your personal sovereignty to achieve only the highest goals, but this idealism is normally soon forgotten but your sovereignty is rarely returned.

How do the tenets of libertarianism/anarchism begin to address these issues?

The basic problem in most political questions is "who decides?"  Someone must decide and I just think that I am a better decision maker about how my own life is going to unfold than anyone else.  As Lone Wolf noted, many people are eager to turn over responsibility for their decisions and actions to someone else, and the government is normally happy to assume this role.  But there are other people who simply see the government as one more entity in the social/political/economic marketplace vying for attention and legitimacy.  I am happy to legitimize the function of government or any other entity in society that allows me to enter into mutually profitable exchanges, but all of this starts with the individual.

There was no state before the people came along.

I like the way Thomas Jefferson put it in the Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

First comes the individual, then the group, then the government.  The government, however, would normally like you to think it is the reverse.

If you start with the premise that you are a free being, the world often looks like a different place than if you start with the premise that your only rights or freedoms are those granted to you by the government.  It is important to understand, though, that the purpose of freedom is not to live out some kind of mindlessly selfish existence; rather, it is to provide a person with the insight that there are countless things that an individual may do that are mutually profitable to him as well as the rest of society.  The key is that the free person enters into society as a voluntary act, while an unfree person enters into society under threats of force and a cloud of coercion.

Part of what made the Founding Fathers' approach to nation building so powerful is that they weren't afraid to put many barriers in the way of the government's ability to impose tyranny.  Although many of them have since been eroded, many of them do remain.

Always remember that much of the widescale death and destruction in history started out as a well-intentioned effort led by a group of earnest politicians to make the world a better place.

These are just my views, of course, and I would encourage anyone to think these things through for himself/herself.  Since I am only describing my own view of the world I am not offering it as anything except what has worked in one person's life.  Many people much prefer to be a member of the collective and obtain their identity and sense of meaning and purpose from that association, and there is certainly nothing wrong with that.

doodle wrote: With regards to the debt ceiling and taxation in this country I think it is important to think about the fundamental questions of work,  compensation, motivation, and obligation to society.

How are the resources best distributed in a society? In our current system in America about 90% of the wealth is owned by 10% of the people and vice versa. If the trend were to continue you could conceivably reach a point where 99% of the wealth was owned by 1% of the population.

Is this a healthy, happy society? If a society were to reach to point where 1% owned 99% of the wealth, and you were to redistribute, how would this be done? Along what guidelines and to what end?

It seems that before we have any debate on taxation in this country, we have to have a vision for the type of society we want to live in. Then, through dialogue and debate among experts and interested parties we can formulate a plan to get there. This highly politicized debate is doing nothing to solve our long term problems which are in my mind, almost entirely philosophical in nature. We don't have a unified vision of what we want America to look like.

I started a thread a while back entitled (I think): "Are Incresing Concentrations of Wealth a Good or Bad Thing?"

You might take a look at that.  As I recall it was a good discussion.

Mt,

Thank you for the reference to the other thread. I will certainly look through it.

I am curious in your view how the libertarian philosophy address issues such as negative externalities and tragedy of the commons?

To me, these are some of the central flaws of the libertarian mantra elevating the individual above the collective.

At some point individual action spills over into the collective. For example, how does libertarianism address issues of air or water pollution? If you build a factory upstream from the river I drink water out of, who is to stop you from dumping toxic waste into river and poisoning my family if there weren't government regulation?

What if your coal fired power plant pollutes the air I breathe? You are extolling a cost on society that you are not paying for. Society is basically allowing you to pollute the air for free.

In addition libertarianism fails for me on the issue of tragedy of the commons. In other words, each individual pursuing his own best interest can lead everyone being worse off.

Until these issues are addresed by libertarians I don't see how it can be a viable philosophy for the modern world.