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The Dollar Is Dead

mathmeetsmoney.substack.com

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Re: The Dollar Is Dead

#341

Post by Nevermark »

jrs235 wrote: post #205
NotGMan wrote: post #160

Earlier quoted context omitted.

You think that Bezos and Musk have billions in their own personal bank account? So what do you mean be "extreme wealth"? Companies? Dividend payouts? House? Yachts? I agree that luxury items that are out of reach of the middle class (eg sport cars etc...) should be taxed highly, but a toy that a rich person can buy vs a rich person investing money into his own or other companies is a problem if you want to tax that s…

Paper wealth used as collateral for loans should be taxed as income (or capital gains).

YES.

Significant loans on collateral are liquidity events.

In general, any loan that was taxed up front as income, could be paired with counting loan payments on the principle as an expense against income. (And if the loan was for business, not personal, interest would also be an expense.)

This would make loans tax neutral vs. other ways of getting money out of assets.

It would eliminate the practice of cycles of leverage that lets the rich grow their wealth, use that to grow more wealth, over and over, while pushing taxation into the future indefinitely.

And it would make loans less attractive to take out (the upfront tax), and yet much easier to pay off (symmetric tax break for paying down debt). Which would result in a much less leveraged, more resilient, economy.

Re: The Dollar Is Dead

#342

Post by Nevermark »

Workaccount2 wrote: post #242
jrs235 wrote: post #205

Earlier quoted context omitted.

Paper wealth used as collateral for loans should be taxed as income (or capital gains).

While I'm all for it, the real impact of this would likely be on the order of a few billion dollars, if that. Most regular people could sit down and cut a billion dollars of dumb shit out of the budget in a few hours (every Congress person has their little pet projects they slide in to omni bills). The fixes needed for this are massive, and the pain will be felt by everyone. Even taking the harshed path against the 1…

> While I'm all for it, the real impact of this would likely be on the order of a few billion dollars, if that.

The collateral loan -> invested -> growth, collateral loan -> invested -> growth cycle doesn't just result in tax avoidance on a one-time basis. It's a way to indefinitely grow capital at a higher rate, by pushing taxes further and further into the future.

And when any wealth gains are finally accounted for as taxable income, it's a one time tax that doesn't reflect all the compounding. So a huge time-value of money break.

So there is a compounding of the tax that is avoided over time, despite actual liquidity accessed and deployed all along.

This is one of the primary loopholes that lets wealth gains made from capital get taxed far below wealth created by labor (which gets very reliably taxed, and at higher rates). The percentage of wealth growth that actually gets taxed as a running number keeps growing, despite the ability to make those gains liquid via loans.

Imagine if you could do labor, then instead of taking your income and getting taxed, accept loan proceeds against your "delayed" salary, and invest the net gain from not being taxed. Indefinitely. (With interest on your loan, cancelled out by the "interest" on your delayed salary.)

That would be like being able to choose to pay your own IRA instead of paying taxes.

That's how the unrealized (but real) wealth gains -> leverage (the practical and very real realization) cycle works.

Re: The Dollar Is Dead

#343

Post by soraminazuki »

cosmic_cheese wrote: post #125
hilsdev wrote: post #92

Earlier quoted context omitted.

Why is the default to tax more and not spend less? Is there really no limit to the amount of spending the government should do? You see no possible use of resources that would be wasteful?

Problem is, there’s a lot of needs that private industry will not fill (or cannot be trusted to fill well). We’ve seen this play out repeatedly. If you want a functioning society, a certain degree of government spending is unavoidable. Now there is something to be said for making sure that spending is effective, but this must be engaged with in good faith; that is, changes should be made with a scalpel after gatherin…

It's a neoliberal scam. Claim government programs are ineffective, destroy the institutions behind those programs, and point to the resulting chaos as proof that the initial claims are true. Rinse and repeat.

Re: The Dollar Is Dead

#344

Post by lern_too_spel »

nostromo wrote: post #139
crooked-v wrote: post #115

Earlier quoted context omitted.

The US is a long way away from trying to "soak" anyone. We have a top rate on long-term capital gains of 20%.

That's pretty average (which is a good thing). Japan: 20% China: 20% India: 13% UK: 24% Italy: 26% Germany: 26% France: 30% Then there's Canada of course... 50% with a proposal to make it 66% in 2026. Let's see how that works out!

Not that increasing taxes on capital gains is the way to go, but America's wealthy aren't going to move to China or India.

Re: The Dollar Is Dead

#345

Post by bigbadfeline »

AnthonyMouse wrote: post #339
grafmax wrote: post #293

Earlier quoted context omitted.

> The change isn't that the government is collecting less money. The government is collecting less spending relative to taxes. A deficit is a difference between the two. Logically addressing either side would improve the deficit. However the ruling class prefers hoarding wealth, financing wars, and cutting social programs.

Whether you measure it as nominal dollars, real dollars or real dollars per capita, the US government's tax revenue has only increased over time, so the only explanation for why there are huge deficits now and not before is that its spending has increased by even more. Moreover, a major proportion of that spending increase did go to social programs, and the top 50% of incomes pay 97.7% of the federal taxes. The actua…

> and the top 50% of incomes pay 97.7% of the federal taxes.

The bottom 50% of incomes get 2.5% of GDP. Seems proper to me.

Re: The Dollar Is Dead

#346

Post by hollerith »

bigbadfeline wrote: post #345
AnthonyMouse wrote: post #339

Earlier quoted context omitted.

Whether you measure it as nominal dollars, real dollars or real dollars per capita, the US government's tax revenue has only increased over time, so the only explanation for why there are huge deficits now and not before is that its spending has increased by even more. Moreover, a major proportion of that spending increase did go to social programs, and the top 50% of incomes pay 97.7% of the federal taxes. The actua…

> and the top 50% of incomes pay 97.7% of the federal taxes. The bottom 50% of incomes get 2.5% of GDP. Seems proper to me.

Gemini 2.5 Flash thinks they get 13.9%.

When I asked for its source, it replied, "The Distribution of Household Income, 2019," by the Congressional Budget Office.

Re: The Dollar Is Dead

#347

Post by bigbadfeline »

nullc wrote: post #333
cosmic_cheese wrote: post #125

Earlier quoted context omitted.

Problem is, there’s a lot of needs that private industry will not fill (or cannot be trusted to fill well). We’ve seen this play out repeatedly. If you want a functioning society, a certain degree of government spending is unavoidable. Now there is something to be said for making sure that spending is effective, but this must be engaged with in good faith; that is, changes should be made with a scalpel after gatherin…

FY2024 federal spend 6.75 trillion. FY2019 was 4.4 trillion. FY2009 was 3.1 trillion. Twice the growth in half the time. Was there so much more that private industry "will not fill" in 2024 vs 2009? How about vs 1999? (1.7 trillion budget). We can't attribute the difference to inflation: the US government's inflation calculator says 1.7 trillion in 1999 is 3.3 trillion today. No one is arguing that the federal govern…

> FY2024 federal spend 6.75 trillion.

That's selective apples to oranges

Deficit as % of GDP:

2009 - 10%, 2011 - 8.6%, 2012 - 6.7%, 2013 - 4% ... 2019 - 4.6%, 2020 - 15%, 2021 - 12%, 2022 - 5.4%, 2023 - 6%.

Re: The Dollar Is Dead

#348

Post by dustingetz »

originalvichy wrote: post #282
dustingetz wrote: post #5

i would like to see deeper analysis of similar forces playing out in other countries. A weakening dollar implies a strengthening world, but European policy is even more messed up than American, there is still widespread talent export e.g. european programmers working for american companies, indian asian and russian programmers immigrating to Europe or working remote abroad, and China seems to face financial crises ju…

The dollar is weakening because the US institutions are weakening. The EU might not be wealthy compared to the US, but at this moment in time it is more rational and future-proof than the volatile US business environment. The main reason the US is a hub for well-paid programmers, is that there is a giant pool of VCs that subsidise growth for companies that can potentially find money all over the world thanks to the w…

addressing only paragraph 2: American VC funded startups mostly don’t hire overseas remote programmers for two reasons: 1) they don’t need to, they are overfunded and the culture/communication overhead tradeoff is not worth it; 2) they are california biased which has poor timezone overlap with overseas time zones. The companies that historically lean in on overseas workers are the bootstrappers, because they cannot afford market american salaries. The company I founded is one such company.

Re: The Dollar Is Dead

#349

Post by aglavine »

TheOtherHobbes wrote: post #78
Workaccount2 wrote: post #29

The country is getting forced by markets into realizing pain for overspending, and only congress can manage this pain. Manage the pain, not remove it is key here. Manage it. Conrgess is totally inept and ridiculously politicized, so it's unlikely they will do anything except make the problem worse. That leaves only the natural fall out of refusing to acknowledge a financial injury before going out on the field to pla…

There is no "overspending." There is only undertaxing. The debt is literally just the accumulated difference between spending and taxation. If extreme wealth was taxed, the debt would be zero. The point isn't even to "pay for spending" but to enforce a functional social contract, and to limit the political and democratic distortions created by extreme inequality. "Markets" should not have a veto on policy in a democr…

Math doesn't support your claim.

Re: The Dollar Is Dead

#350

Post by immibis »

frnkng wrote: post #255
chasing0entropy wrote: post #237

Earlier quoted context omitted.

It's which came first the chicken or egg? The fall of the dollar will happen because anyone(everyone) with significant wealth will divest from the dollar CAUSING the de-dollarization. That's the point of the indicators.

Don’t forget that you also can invest in negative dollar by taking loans. Then, the reduction of purchasing power does actually benefit you. So, whoever has significant wealth will do exactly this and take out loans to purchase productive assets and then, later on, pay back much less because the dollar lost value in the mean time. This works out as long as the interest rate is lower then the actual annual loss in pur…

Shorting is a bad idea unless you can accurately predict the timing of the crash. Otherwise it'd likely your gains will go down to -5000% before they suddenly rocket up to 99%. And you'll close your position out of fear, when it's about -1000%.
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