Posts Tagged ‘money’

My friend Jim brings up an excellent point about the redistribution of wealth and communism in his reply to my post about Flat Tax being communism. First, I’ll cover his question of why governments levy taxes. Then I’ll get back onto the topic of the flat tax and communism.

Jim is suggesting that income tax is communism but property tax is possibly justifiable if the purpose of government is the protect and to serve. There are a few problems with this, the most important being that the federal government should have absolutely nothing to do with property taxes. Second, the majority of Americans (and this hold true for most of the world) don’t own real property. Now, perhaps Jim is saying that you should pay taxes on all property you own so that you are paying your fair burden of the police and fire services in your area. Again, does this then mean that people who do not own a house are not deserving of police protection? They may be productive members of society that generate income, purchase cars, gasoline, clothing, rent an apartment from a property owner. They too are deserving of protection under the law.

Now, let’s get back to the purpose of government. There are several levels of government, but the purpose of all governments (at least in America) is the protection of life, liberty, and property. Jim is probably thinking to himself that I just proved his point about the property tax. However, life and liberty still come before property. The protection of these three equalities of all Americans takes place in several different ways via several different government agencies: Military, Police, Fire Departments, Department of Homeland Security, Commerce Department, Transportation Authority, FDA, EPA, FBI, CIA, etc.

All American’s are deserving of the services of all of the above, and all Americans should pay into those services. Now, there may be programs that an individual doesn’t support, but I’m not going to tackle that topic in this blog. Instead, I’m going to ask the next logical questions: Who stands to lose the most if our country in invaded, attacked, or bombed? Who stands to lose the most if there is a fire, earthquake, or other natural disaster? Who stands to lose the most if there is a severe disruption in the availability of natural resources, energy, or foreign services and labor? Not the guy making minimum wage, and not the guy paying 15% taxes (unless you implement a flat tax – communism).

The people who stand to lose the most in any of the above events are the business owners, investors, and wealthy Americans who utilize a great deal more of the protective and political power of or governments. Those who make more money stand to lose more money if something disastrous happens in this country. Therefore, they should pay a greater portion of the taxes. Some (like Jim) might say that wreaks of communism as it is a clear redistribution of wealth. Well, while there are certain programs that do redistribute wealth, most of them do not. Also, one need only look at history to know that a growing and increasingly upset lower-class is the demise of any ruling party.

Take any of the above departments and you will find a disproportionate amount of services being provided to those with greater wealth and income. Sure, there is some money redistributed to lower-income citizens, but again… History.

So this brings us back to the flat tax, which is ultimately the greatest form and supporter of capitalism. Yes, you read that right. A progressive taxation system is capitalism at its finest. How many of our Founding Fathers were in what we’d call the lower class? Was Washington? I think not. Jefferson? HA! Hamilton? Perhaps the closest. Franklin? You’ve got to be kidding me!

How many patent, copyright, and trademark lawsuits are there for the little guy? Barely any, but the giants are in the courtroom all the time. The wealthy utilize our legal system far more than the poor. The law, our government is supported and swayed by the wealthy far more than the the poor. Our governments have been created for the protection of all, but those who are wealthy have far more at stake and are easily responsible for a greater tax burden. In fact, it would be foolish to think otherwise because it would put at risk so much of what business owners and investors have works so hard to gain.

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A couple days ago I posted a blog about a twittersation with my buddy Jim about the Gold Standard. One of the great things about blog debates is that it gives you time to really think about your response and fully absorb the feedback from the other person. Had Jim and I tweetbated (I’m just making up twitterisms here…) about this, we probably would have not realized that we are pretty much on the same page. Well, I don’t know if Jim realizes it, but I realize it…

Jim can correct me if I’m wrong, but he is NOT arguing *for* a gold standard (or any commodity standard for that matter). Rather he is arguing for a standard other the debt security. The argument for a debt backed currency is pretty simple. If you can borrow more money, you should have a stronger currency (because people have more faith in your ability to pay that money back), right? Not quite, and this is where Jim and I agree.

It can be argued that economic cycles have been smoothed out by the current system we have in place. However, one can also just as easily argue that a higher level of public education and access to information at a faster pace are the real causes of smoother economic cycles. I digress.

What could be a better system? Certainly a commodity system is antiquated and a debt system has its fair share of issues. With the technology that is available today, a hybrid system is certainly feasible. A large database could be created to compile the commodity quantities for the most relevant commodities (gold should be on the list amongst many other raw goods). The value of those materials is set on a mostly free market, making the valuation of this portion of the economy pretty simple. The import/export ration would certainly play a role in determining the value of an exchange rate and the over all value of a currency. Then you have your money circulation. How much money your national and local banks are circulating must play a pivotal role in determining the over all value of a currency along with the exchange rate with another nation. This would cover the debt model we have now and then some.

With the technology available today, this type of system would make it much easier to spot potential banking and other economic issues that may surface in the future across multiple countries. I’ll even argue that this database should be a semi-open system, allowing virtually anyone to have access to the data to build models against it. This open system would provide considerable leaps forward in the development of economic and business systems, particularly for third world countries. It could also provide governments with the ability to spot opportunities in their economies and with their trading partners so that they can provide incentives in budding industries.

I’m just brainstorming at this point, and these ideas are very raw inside my head… But now they are down on paper, err, cyber paper?

Today gives me yet another day to gloat about the idiotic college professor I had years ago at Strayer University (yes, avoid this college. It is a waste of time and money). The CEO of Dow Chemical borrowed a page straight out of my economic philosophy and is proving that energy based inflation is a reality, not some idea that deserves a B on my term paper. Dow is going to raise their prices immediately by up to 20%

If you’re asking “Who the hell is Dow? Isn’t that a stock exchange?” Check the back of half the cleaning supplies you have in your house and ask just about every company in America where they receive a good portion of their supplies from! They don’t just make scrubbing bubbles America!

Dow is just the start too. Energy based inflation starts here. Energy prices increase, putting pressure on businesses to either cut profits or slow down. Traditional economist, aka most college professors, will tell you that energy prices will come back down and everyone will be happy. However, in the real world this doesn’t and didn’t happen over the last 10 years. The result is that every company in America (except big energy, and miraculously Walmart) is being squeezed to the brink of no ability to make a profit or even be productive at any level.

There is a solution. It isn’t cheap, but it wouldn’t cost any more than the failed tax rebate of 2008. This solution would provide a long-term solution to the energy crisis in America and heavily stimulate the US economy while building the infrastructure needed.

Where have all those “tax rebates” gone? Hats off to anyone who spends it on anything other than energy.

From an email a friend of my mom…

A well-known speaker started off his seminar by holding up a $20.00 bill.

In the room of 200, he asked, Who would like this $20 bill?”

Hands started going up.

He said, “I am going to give this $20 to one of you but first, let me do this.”

He proceeded to crumple up the $20 dollar bill.  He then asked, “Who still wants it?”

Still the hands were up in the air.

“Well”, he replied, “What if I do this?”

And he dropped it on the ground and started to grind it into the floor with his shoe.

He picked it up, now crumpled and dirty. “Now, who still wants it?”

Still the hands went into the air.

“My friends, we have all learned a very valuable lesson. No matter what I did to the money, you still wanted it because it did not decrease in value. It was still worth $20.”

He continued, “Many times in our lives, *we* are dropped, crumpled, and ground into the dirt by the decisions we make and the circumstances that come our way. We feel as though we are worthless.”

He pauses, “But no matter what has happened or what will happen,  you will never lose your value. Dirty or clean, crumpled or finely creased, you are still priceless to those who DO LOVE you. The worth of our lives comes not in what we do or who we know, but by WHO WE ARE and WHOSE WE ARE.”

You are special – Don’t EVER forget it.

When I was a kid, my grandparents would always send me and the rest of my family members checks for Christmas (as well as some presents like underwear and socks). There are eight kids total in my family, making a $20 check/child a considerable investment on their part. They were grandparents… retired. Their monthly income consisted of a pension plan and social security. But a $160/year investment into their grandchildren’s futures was well worth it. Also, $160 was about equal to $500 in today’s money.

Interestingly enough that is about the same amount of money that the Federal government is going to be sending 130,000,000 people in less than two months. Each check from my grandparents was enclosed in a card that said something along the lines of “Don’t spend it all in one place.” Just a thought for those Federal checks.

What would happen if everyone in America watches The Big Idea with Donny Deutsch on CNBC? First, there would be a run on the cable companies because you can only get CNBC on cable. Second, fellow blogger Tony Iovino would take his $600 check he’ll receive from the Federal government in May and actually cash it to invest it into a new invention (and he would start using the vastly superior WordPress blogging system). Third, the US economy would flourish.

Today, Bush signed his stimulus package, creating checks for millions of people in our economy. Lots of people love to complain about the symantics of the deal. Call it welfare. Call it a rebate. Call it what you want, it is our Federal government giving money to people that live in America.

Using some of the people I’ve seen on The Big Idea as an example, what those $600 checks have the potential to do is generate billions (yes, you read that correctly, BILLIONS) of dollars in revenue/income for Americans. How? Well, you should watch The Big Idea. The show has featured scores of people who have started their business for little more (sometimes even less) than $600. These people has created jobs, used resources that support other businesses, and made people a lot of money.

Sure, if everyone who receives a check goes a spends it on a toy at Walmart, it won’t do much for boosting the economy. However, let’s have a little fun with the math here. 130,000,000 Americans are going to receive a check. If even 0.1% of the people who receive checks become Donny Deutsch success stories, we are talking about generating $130,000,000,000 of revenue for the US economy over the next year! That’s correct, just one-tenth of one percent of the people who receive the checks need to become Donny Deutsch success stories for the checks to pay for themselves in just two year. One-tenth of one percent. That is about the same as a run-of-network banner advertisement on ValueClick!