Reader’s Opinion: Passing the buck

POSTED: 01/21/13 1:05 PM

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle” – Winston Churchill –
The beauty of owning an enterprise or corporation is in the ability to pass on costs to the consumer (passing the “buck”). Both inflation and improper use of taxes is pushing the middle class into poverty. The world’s Central Bankers have made it clear that they won’t allow defaults to allow for a debt reset but will pursue inflationary policies at the cost of the middle class. Now if we consider some of the statistics being mentioned in America concerning wealth concentration and income distribution we can piece together an interesting story. If the stats are reasonably true, I would suggest one start to simplify their life because there is just no way that the middle class and the poor will ever beat inflation by maintaining their status quo behavior.

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries. – Winston Churchill –
One, out of other number variations, of the wealth and income statistics in America goes: “The top 1% own 38.1% of the wealth in the country, the next 4% own 21.3%, and the next 5% own 11.5%. That is to say, the top 10% of the country owns 70.9% of the wealth of this nation. The wealth distribution is more skewed than the income distribution where the top 1% has only 20% of the income.”
Let us dissect what this means in practice. If 10% of persons in America own 70.9% of the wealth but 99% of persons have 80% of the income, it means as the middle class shrinks, the 10% of persons will start to own more of the income. However, it is the middle class who stimulates the economy as they control most of the income which they use to purchase goods and services. Someone who is already wealthy and gets more wealth will not necessarily increase purchasing (as a percentage of income). They won’t necessarily eat more, make more kids, buy more homes, etc.
So it behooves me why would any elite – be it government or those who control government – want the income or purchasing power for the middle class to diminish. Income and thus purchasing ability is attained for most persons through a job or jobs. Fewer jobs mean less income and thus less purchasing power. Less purchasing power means the velocity of money slows and thus the economy as a whole suffers. But if the statement is true that greed has no limits, prepare to either be stressed by overworking to try and survive, or go back to old time principles while simplifying your life and live less stressed.

As mentioned in a prior article, inflation is caused by the “improper “issuance of money/credit in the economy by commercial banks. Some may argue that fiscal policy is more inflationary. I will argue that improper fiscal policies used in the wrong context (e.g. skewed income distribution) compounds inflationary pressures. However, improper issuance of money/credit in the economy is more inflationary than fiscal policies simply because you cannot tax money if there is none or very little to tax in the first place.
Well, what constitutes improper fiscal policies? Let us seek guidance from one of the fore fathers Thomas Edison of America for an answer. Due to space limitations I will only include an extract and I suggest you read the full article from Thomas Edison, America’s great inventor, summed up this information in 1921. He said:
“Now, as to paper money, so called, everyone knows that paper money is the money of civilized people. The higher you go in civilization the less actual money you see. It is all bills and checks. What are bills and checks? Mere promises and orders. What are they based on? Principally on two sources – human energy and the productive earth. Humanity and the soil – these are the only real bases of money.
“Don’t allow [the bankers] to confuse you with the cry of ‘paper money’. The danger of paper money is precisely the danger of gold – if you get too much it is no good. They say we have all the gold in the world now. Well, what good does it do us? When America gets all the chips in a game the game stops. We would be better off if we had less gold. Indeed, we are trying to get rid of our gold to start something going. But the trade machine is at present jammed. Too much paper money operates the same way. There is just one rule for money, and that is, to have enough to carry all the legitimate trade that is waiting to move. Too little or too much are both bad. But enough to move trade, enough to prevent stagnation on the one hand and not enough to permit speculation on the other hand, is the proper ratio.”
As it pertains to taxes an extract from the article states: “When the money supply exceeds the natural resources (excluding products), labor and human services total, a federal tax must automatically be levied to reduce the money supply. The balance is critical. A sales tax is fastest and catches tax dodgers. An income tax catches big, fat cats. Both taxes together will probably be most fair and effective. The tax receipts must be converted back to the nothing from whence they came. Federal politicians must never spend tax receipts. To do so would dangerously threaten the critical balance between real people and imaginary money.” Now you would really need to read the entire article in the link given above to understand why this was stated but one thing has to be considered when the money supply exceeds the natural resources, labor and human services total. That is the concentration of this money supply.

Concentration is measured by the income distribution. If the income distribution shows what is called in statistics a normal bell curve pattern, then applying a tax to help reduce the money supply, if it is too much, makes sense. Unfortunately throughout most of the world the income distribution is not a normal bell shape but it is skewed to the left meaning that there are grave disparities between incomes. Therefore applying a tax or taxes on the wrong group(s) to reduce the money supply can be downright dangerous.
An aviation analogy goes: In general aviation there is a general rule that speed is controlled by the throttle setting (like the gas pedal in a car) and the yoke (like the steering wheel in a car) controls height. That is true only beyond a certain speed (velocity). However, below a certain speed (generally called the mushing range), this rule no longer applies but works in reverse i.e. throttle controls height and the yoke controls speed. Therefore, gauging economic theories through a similar thought process would make clear that different theories apply more appropriately depending on the context and circumstances. Apply the wrong theory or theories in the wrong context and circumstances and the economy will die just like a pilot could if he does not know if he is beyond or below the defining speed/velocity and applies the wrong behavior.

Passing the buck stops by the poor and many of the middle class. The more persons who in turn cannot pass the buck do not stand a chance to even finish the race. Just like in the relay running sport, if the relay stick is not passed on, the other team member cannot start his journey. If one team member is not able to pass on the relay stick, the entire team will lose as they will not even be able to complete the race. Such is the same with our economy.

Emilio Kalmera

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Reader's Opinion: Passing the buck by

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