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Liz Truss urges world leaders to follow UK with trickle down economics

theguardian.com

51–60 of 64 posts

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#51

Sigh. Trickle-down doesn't work. Lowering taxes on the wealthy helps the wealthy. It does not help the economy. Consumer spending is not increased, so the lost tax income by lowering taxes is not earned back through a larger economy to tax. The predictable result is more income inequality, which already is higher than it ever has been since the second world war.

The obvious problem is that if wealthy people get more money, they literally can't spend it all, so the just invest it instinctively/based on reflex. But here is the problem, what if they don't invest their money? What if they keep 10% of it liquid? Spending money or investing it puts money in the hands of the rest of the economy. Not spending or not investing it means there is no income opportunity for anyone else, that money is essentially dead to the economy and dead money has to be replaced. This means people need to borrow money at the rate money dies, they need to go in debt to replenish all the dead money.

Here is a problem, at some point the debt load on the economy is so high, people refuse to take on more debt, but the system demands yet more debt. What happens? Since money is leaving the real economy and just doing nothing, deflation will occur, which will increase real returns above zero, even if the interest rate is already zero. We would expect that if people save more money and nobody borrows more money, that the return on money goes down but with deflation the opposite happens! Real returns start going up, which makes all economic activity in the pyhsical economy unprofitable. Imagine if you set a land value tax that is higher than anyone wants to pay, everyone would abandon the land and in the same way a too high return expectation makes people flee the physical economy into the financial economy.

In other words, the completely obvious and reasonable option of paying off your debt doesn't even exist, it simply is not a legal move in this board game we call the financial economy.

The completely obvious answer to this problem is to let yields become negative to counteract deflation, the end result is that the real return is zero, people get to pay off their debt, people who refuse to spend or invest get disincentivized from holding onto dead money and instead make it available to those who need it.

Here is another perspective: In functioning markets we expect that resources are allocated to those who have too few of them, like food being sold to starving people because they are willing to pay higher prices which solves food shortages as it becomes more profitable to become a farmer and produce food.

We should ask ourselves then, if farming works as intended (with some caveats) then why on earth does money not follow the same principle? Why doesn't the economy try to allocate money to those who need money the most? It is rational and efficient to do so, yet in our current economies we come up with tons of post rationalizations to defend the status quo. What we see instead is that money is allocated towards those who need it least, money compounds and allocates more money to those who already have too much. This is clearly inefficient, it means less total economic growth, it means lower wages for everyone, it means centralisation of the economy and increasing dysfunction as a result of valuing a handful of preferences more than everyone else's.

A negative interest rate on cash deallocates money away from those who don't need it and makes it available for those who need it. The wealthy can keep their wealth, they just have to keep it in the real world and not in some abstract "stores of values" that upon further inspection don't change in any shape or form even as their "value" changes. Spending more money on the same shiny rock doesn't make you wealthier, it just gives you the illusion of wealth. Imagine owning a kilogram of gold and doubling the population and thereby doubling the amount of gold buyers and thereby the price of gold, the real wealth doesn't exist inside the gold, it exists in the form of the doubling population, the owner of the gold did nothing to double the population so it doesn't make sense to give him twice the share in the economy just because the population doubled, that would mean someone else would have to give up their share in the economy.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#52

Earlier quoted context omitted.

I don't think wealthy are paying much taxes, percentage-wise (significant in dollar value though). There are simply too many tax minimization instruments that they have at their disposal. It's the middle class that is carrying the brunt of taxation. So when they say "tax the rich", what they really mean is "tax the middle class and small business owners". Eventually, you would run out of "other people's money" and yo…

The ultra-rich certainly have tax minimisation schemes in place, but by saying that middle-class bears the brunt of taxation, I suspect you're falling victim to the fallacy that rich people don't think of themselves as rich[1]. In the UK at least, the tax burden is fairly progressive: https://commonslibrary.parliament.uk/research-briefings/cbp-... The top 1% of earners pay roughly 30% of all income tax. The top 10% p…

While this may all be true, a more sobering perspective comes from considering the impact on the individuals paying the taxes:

"the poorest fifth of people paid 22.9% on indirect taxes such as Value Added Tax (VAT) compared with 9.1% for the richest fifth" [0].

"As it stands, there is set to be both an Income Tax rise and Income Tax cut in 2024-25, and a further tax rise in 2025-26, with a net transfer from lower- to higher-income individuals" [1].

To return to parent comment's point, trickle-down economics have demonstrably failed. Taxes are avoided by the rich while punishing the poor - surely absolutely not what should be happening.

[0] https://www.ons.gov.uk/peoplepopulationandcommunity/personal...

[1] https://www.resolutionfoundation.org/publications/happy-new-...

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#53
post #31

Related discussion from less than a year ago: 20 year study of global wealth demolishes the myth of ‘trickle-down’: https://news.ycombinator.com/item?id=29483131

But Liz Truss wants to be compared to Thatcher, remember.

Would Iron Maiden be kind enough to have Eddie murder her likeness on their next album cover? That should do it.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#54

Earlier quoted context omitted.

The US have become a net energy exporter and the largest exporter of natural gas. This strategy is paying off, especially when you compare with the situation in Europe, which has chosen the opposite strategy (shale gas exploitation is banned).

> This strategy is paying off, especially when you compare with the situation in Europe, which has chosen the opposite strategy (shale gas exploitation is banned). At least our water taps aren't on fucking fire [1]. Fracking is dangerous and unlike the US, Europe doesn't have wide swaths of unsettled land where no one cares about if natural resource exploitation is destroying nature. Texas fits the area of most of Ge…

Europe has plenty of space for fracking and is not really dangerous.

They somehow decided that it was better to import gas from Russia and to be vulnerable rather than to produce it locally and reap the strategic and economic benefits because "but the environment"... Really a myopic approach to strategic issues: If Europe depends on gas, and it does, then supply must be secure and domestic if possible. This does not prevent from moving to renewables at the same time.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#55
post #34
post #24

Earlier quoted context omitted.

> also deciding to escalate hostilities with China, the world second largest economy After what Russia has done to Ukraine, I sincerely hope more democracies put values before trade. UK is doing what everyone else should be doing, but don't have the courage to. Not something to be ashamed of.

As others have pointed out, Liz Truss has no qualms about calling Saudi Arabia an important ally[1]. Statements against China are a way to pander to the Tory base. 1 - https://twitter.com/skynews/status/1541894205274030080

While im no fan of Saudi Arabia, I wouldn’t go calling this pandering. China has long considered the West an enemy, and has been an abusive trading partner. It’s high time the UK stands up for itself.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#56
post #34

Earlier quoted context omitted.

As others have pointed out, Liz Truss has no qualms about calling Saudi Arabia an important ally[1]. Statements against China are a way to pander to the Tory base. 1 - https://twitter.com/skynews/status/1541894205274030080

While im no fan of Saudi Arabia, I wouldn’t go calling this pandering. China has long considered the West an enemy, and has been an abusive trading partner. It’s high time the UK stands up for itself.

this is projection - the hostility is pretty much one way from West to East. You can even see when the mood changed, post GFC, when China stopped buying US T-bills

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#57

Poundland Thatcher.

Compared to 1970s Britain, 1990s Britain was in far better shape economically. I'm not a Tory voter, but if Thatcher hadn't done what she did, someone else would've had to. Luckily for Labour they didn't have to, and so they kept their base, even though they don't seem to have subsequently reversed any of her major policies.

Just like the folk memory of Thatcher is Falklands, miner's strike and neoliberalism, Truss seems to believe that's the substance, not a caricature.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#58

Earlier quoted context omitted.

I don't think wealthy are paying much taxes, percentage-wise (significant in dollar value though). There are simply too many tax minimization instruments that they have at their disposal. It's the middle class that is carrying the brunt of taxation. So when they say "tax the rich", what they really mean is "tax the middle class and small business owners". Eventually, you would run out of "other people's money" and yo…

I was under the impressions that the "tax the rich" mentality actually aims to close these loopholes for the super-rich. The idea is (I think) that increasing taxes on the literal top 1% or 0.1% just a little is much more effective than increasing them across the board.

i mean the low hanging fruit of "close these loopholes" would be reinstatement of a progressive income tax.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#59

Earlier quoted context omitted.

Compared to 1970s Britain, 1990s Britain was in far better shape economically. I'm not a Tory voter, but if Thatcher hadn't done what she did, someone else would've had to. Luckily for Labour they didn't have to, and so they kept their base, even though they don't seem to have subsequently reversed any of her major policies.

Just like the folk memory of Thatcher is Falklands, miner's strike and neoliberalism, Truss seems to believe that's the substance, not a caricature.

Don't forget the end of Apartheid.

Re: Liz Truss urges world leaders to follow UK with trickle down economics

#60

Earlier quoted context omitted.

The US have become a net energy exporter and the largest exporter of natural gas. This strategy is paying off, especially when you compare with the situation in Europe, which has chosen the opposite strategy (shale gas exploitation is banned).

> This strategy is paying off, especially when you compare with the situation in Europe, which has chosen the opposite strategy (shale gas exploitation is banned). At least our water taps aren't on fucking fire [1]. Fracking is dangerous and unlike the US, Europe doesn't have wide swaths of unsettled land where no one cares about if natural resource exploitation is destroying nature. Texas fits the area of most of Ge…

Thanks for setting the record straight
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