Thursday, November 13, 2008

The Bank of Michael Perelman

I am happy to announce that I have changed my name. As of now, you may address me as The Bank of Michael Perelman.

I am not greedy. If Secretary Paulson would grant me only a couple hundred million, I would not trouble him for one of the billion dollar bailouts.


TheTrucker said...

The true disposition of all money is either government debt instruments, bank vaults, or taxation.

I vote for the taxation. And I vote that way because money is like manure. If you spread it around it makes things grow. But as it all collects it is just a pile of dung. The creation and retention of money as debt is pretty stinky. It totally corrupts the political process.

"The concept of fiat money can be illuminated by a simple model: Assume a world of a parent and several children. One day the parent announces that the children may earn business cards by completing various household chores. At this point the children won't care a bit about accumulating their parent's business cards because the cards are virtually worthless. But when the parent also announces that any child who wants to eat and live in the house must pay the parent, say, 200 business cards each month, the cards are instantly given value and chores begin to get done. Value has been given to the business cards by requiring them to be used to fulfill a tax obligation. Taxes function to create the demand for federal expenditures of fiat money, not to raise revenue per se. In fact, a tax will create a demand for at LEAST that amount of federal spending. A balanced budget is, from inception, the MINIMUM that can be spent, without a continuous deflation. The children will likely desire to earn a few more cards than they need for the immediate tax bill, so the parent can expect to run a deficit as a matter of course."

But "what is taxed" is much more important than simply increasing or decreasing one monolithic tax rate.
True economic rent can be taxed away at rates up to 80 or 90 percent without adverse effect on the real economy.

So go ahead and inject the money (bailouts). But make sure that it is appropriately reclaimed, as you should, with taxation of unearned income (tax breaks for capital gains, however).

Sorry, Michael Perelman, but that income should be taxed away unless you invest it in tax shelters such as algae farms and distilleries for ethanol and biodiesel, or wind or solar farms, or decent hybrid cars or lots of other investments that need to be immediately tax advantaged.

Even then a large percentage should still be taxed away in that we do not need huge piles of savings/political power.

Money should be blown into the bottom of the current economy and sucked out at the top. We've tried it the other way for 30 years and it doesn't work worth spit. An 11 trillion dollar debt and rising is the result.

Michael Perelman said...

How about this?

"Men of business in England do not like the currency question. They are perplexed to define accurately what money is: how to count they know, but what to count they do not know."

Bagehot, Walter. 1857. "The General Aspect of the Banking Question." no. 1 a letter to the editor of The Economist, February 7. In The Collected Works of Walter Bagehot, ed. Norman St. John-Stevas (London: The Economist, 1978, vol. 9, p. 319.