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This is willful blindness masquerading as well thought out analysis. The assertions here would be true if we had a system that said people who lived in the Uni
by TomOfTTB 15y ago
This is willful blindness masquerading as well thought out analysis.
The assertions here would be true if we had a system that said people who lived in the United States when the United States ran up these crazy debts are still responsible for paying those debts even if they move away from the United States (or move their wealth out of the United States which is essentially the same thing). But we don't have that system and people are moving elsewhere.
This isn’t a hypothetical scenario. There was an article posted on HN today where Warren Buffett was essentially moving his wealth elsewhere (or "Betting against the dollar" as the article put it). So this is already happening.
Yes, right now the value of all the wealth U.S. residents have is way more than the debt. But as the Government tries to take more of it from wealthy private citizens and corporations those people will start finding ways to move that wealth elsewhere. Once wealthy private citizens and corporations start to move elsewhere the middle class will start to lose their jobs or get paid less. Which will cause the wealth that can’t be moved to diminish and leave the U.S. with a bunch of debt and citizens who can’t pay it.
The Credit Suisse analysis depends on the U.S. always being the richest and most desirable place to live but that’s not a guarantee.
On a side note it's also relevant that the Rich always find ways to subvert taxes. Look here: http://tinyurl.com/93jbf http://tinyurl.com/93jbf. While the point of the article is the debt pay attention to the revenue. You'll see Tax revenue remains remarkably stable. Even though there was a 90% tax rate at the beginning of the chart.
- espeed 15y agoThere is more to it than that -- read the article it links to about "Understanding the Modern Monetary System" (http://pragcap.com/resources/understanding-modern-monetary-system http://pragcap.com/resources/understanding-modern-monetary-s...). "Government deficit spending and tax collection should be maintained at a rate that does not impose financial hardship on the private sector. Because the Federal government is not a state or household it should not manage its balance sheet for its own benefit. Rather, taxes and government spending should be managed in a way that most benefits the private sector and encourages private sector prosperity." "The key takeaway here is that the government balance sheet is not like a household or a state. It does not finance spending via revenues or debt issuance. The US government, as a monopoly supplier of currency in a floating exchange rate system never really has nor doesn’t have money."
- TomOfTTB 15y agoThat doesn't contradict anything I said. My whole point was the government will have to impose hardships on the private sector once the amount of debt gets too large to otherwise service. At which point people will start leaving.
- pepsi_can 15y agoAren't most European countries more socialist than the United States and thus have higher tax rates, more workers rights and more social programs? Would wealthy citizens and corporations really move to one these countries? Correct me if I'm wrong but my inuition is that their taxes would be higher in Europe. Where could a wealthy entity go?
- lutorm 15y agoTo the free market paradise of Hong Kong (http://www.heritage.org/index/Ranking http://www.heritage.org/index/Ranking), maybe? Of course, who knows when the Chinese government ends that experiment, some risk assessment necessary there...