|Last Updated: Jul 3rd, 2017 - 15:54:31
Thought for the Day
Arthur Laffer in a recent (September 2009) Wall Street Journal editorial wrote, “The damage caused by high taxation during the Great Depression is the real lesson we should learn. A government simply cannot tax a country into prosperity. If there were one warning I'd give to all who will listen, it is that U.S. federal and state tax policies are on an economic crash trajectory today just as they were in the 1930s.”
No country can tax itself into prosperity! Wise words indeed. Didn't we see that when our tax was reduced to 33% from 66% (and government regulations reduced) that the country prospered? This happened only 26 years ago. Are our memories so short? Or are we still living under the belief that our government can somehow magically produce money for us and pay for all our needs?
Time to make a break from socialist thinking to capitalist thinking. A bit like the Chinese have done for the last 30 years.
The next article gives us a method for achieving this aim.
Jan 29, 2010, 11:52
Reversing the Trend
On our home page at www.feg.org.nz we have the graph of New Zealand's economic progress from 1800 to the present day.
We believe the graph clearly shows that bold decisions by the Government of the day do influence ‘our place in the world’.
The benefits or otherwise of any such decision may lag its implementation, but the trend line, as depicted in the graph, is subsequently altered. The trend, as a general observation, tracks positively following a decision that decreases the Government’s role in the economy (NZ moves up the relative wealth curve in the OECD ranking graph), and turns negative when Government’s influence is increased (NZ moves down the relative wealth curve).
The members of the Foundation for Economic Growth Incorporated are concerned that unless we heed the words of Alexander Tyler and act decisively to reverse the current trend line our future is predetermined and our future form of Government may well be undemocratic.
"About the time the U.S. became a republic (1787), Alexander Tyler, a Scottish history professor at the University of Edinburgh, wrote the following about the fall of the Athenian Republic:
'A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years.'"
A Bold Decision Needed
Many people have proposed actions to reverse the current downward trend and we agree with all those contained within the concept of maximum freedom of the individual and minimum size of the government. Rather than reiterate these actions already widely discussed, there is one action, in particular, that we believe has merit for serious discussion and public comment.
Our proposal is to take the Government out of the loop between the taxpayer and the ownership of public organisations. That is, rather than the Government owning the shares in State Owned Enterprises on behalf of individual taxpayers, the taxpayers would own the shares directly.
This would be accomplished by the Government transferring shares in the SOEs in equal numbers to each taxpayer. A similar process was applied several years ago to transfer ownership of the local power boards/authorities to the local community and the outcome of that initiative has been generally considered a success.
We understand that the share distribution process may need substantial thought and should be exposed to wide public comment. It would not be possible or desirable to issue all shares at one time. We would recommend a succession of transfers over a period of years. The major organisations that are currently most closely functioning as a normal company would be transferred first and the others would follow as they became ready for transfer to the Stock Exchange.
One of the major advantages of this proposal is to teach people to think like shareholders and to understand the business world. This would encourage citizens to think about investing in productive national enterprises other than alternatives such as property.
As there would be a number of people who would like to sell their shareholding immediately and spend the money, which would negate this advantage, we would recommend that the shares be not transferable for three years and then only in limited amounts for the next three years. During this period, shareholders would experience the benefits of owning the shares and the dividends accruing. Exceptions would be made for people over the age of 65 who may need the money immediately.
The government would lose the dividends from the SOEs but would increase its tax receipts from the wealthier population.
One major downside would be that the government would have to write off the value of the State Owned Enterprises from its assets. This burden would ultimately be borne by the taxpayers, so in a sense the taxpayers are not net beneficiaries but the change would make a considerable difference to how the average taxpayer thought about owning businesses on the share market and would convert ordinary people to thinking like capitalists.
Benefits which should accrue are:
1. Each taxpayer would become around $10,000 wealthier,
2. Each taxpayer would then understand the benefits of owning shares in successful businesses,
3. Taxpayers would be more likely to vote for future governments with wealth producing ideas,
4. These Ex-State Owned Enterprises could then seriously focus their efforts on increasing the wealth of their shareholders and be answerable to their shareholders at AGMs,
5. Ex-State-Owned-Enterprises would not have the conflicts and problems of trying to respond to both political demands and shareholder imperatives as TVNZ has illustrated,
6. The Stock Exchange would receive a boost in numbers,
7. With their new-found understanding of wealth producing enterprises, taxpayers might be interested in voting for other good ideas that the 2025 Task Force and the Tax Task Force are working on.
This is one concrete proposal that should meet acceptance with taxpayers. The country desperately needs a bold action to reverse the trend line. This proposal would certainly generate interest!
We suggest that there is sufficient merit in the ‘share transfer’ concept to go to the next step of a wider review by an independent policy assessor.
Jan 29, 2010, 11:23
"Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem
Now you've seen it all. Economics argued to RAP music. Interestingly they seem to have things correct!!
[ Visit Website ]
Jan 29, 2010, 11:02
Climate Flimflam Flaming Out
Since DDT was invented there has never been any evidence that DDT causes any harm at all to humans. I searched the web and I invite you to do the same. But the Greenies succeeded in getting it banned and over the last 40 years about one million Africans, mostly children, have died from malaria each year. The Greenies are worse than Stalin, Mao or Hitler.
Now their efforts to expend trillions of tax dollars on so called anthropogenic global warming are failing because the evidence they have used is wrong, unscientific or just lies.
The evidence against the IPCC is mounting up.
How much money has Al Gore made for his efforts??
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Jan 28, 2010, 15:49
The Decade's Best National Currency
I have pointed out that people who have been buying property were buying an asset that retained its value over the years as paper money inflated away. Property in New Zealand has been improving against our national currency by around 10% per year compounding since 1971. The period from 2000 till now is no different.
Does anything else match this record?
REAL Money keeps its value just like REAL Estate. Have a look at this table:
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Jan 27, 2010, 17:26
Statement Introducing the Free Competition in Currency Act
Ron Paul explains money to Congress.
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Jan 26, 2010, 13:04
The Growing Clout of Ron Paul
Now that America is experiencing disaster people are not so sure that the Federal Reserve has all the answers. People are seeking out Ron Paul to explain the mess.
Keynes got it wrong.
The problem of too much government issued credit cannot be solved by the government issuing more credit. Obama is digging the hole ever deeper. Maybe Ron can bring a fresh light to bear.
Jan 26, 2010, 12:23
The Essence of Hutt
For the more serious economics student this overview shows how Keynes theories were known to be wrong 70 years ago.
What are our Universities teaching now-a-days?
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Jan 26, 2010, 11:52
Illusions of the Age of Keynes
"There is no means of avoiding the final collapse of a boom brought about by credit expansion," Ludwig von Mises wrote. "The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
Murray Rothbard explained in America's Great Depression that in an economic downturn the positive thing that government can do is "drastically lower its relative role in the economy, slashing its own expenditures and taxes, particularly taxes that interfere with saving and investment." The reduction of the tax-and-spending level will automatically increase saving and investment, "thus greatly lowering the time required for returning to a prosperous economy."
One option that our Tax Investigation Team did not pursue is the very remedy stated by Rothbard above for the government to follow, "drastically lower its relative role in the economy, slashing its own expenditures and taxes".
We are watching the US of A follow the Keynesian methods as prescribed by Dr. Ben Bernanke and we can see how disastrous they will be. With the world's reserve currency under such dire threat we need to be very cautious out here in little old New Zealand.
To understand what will happen - read this article:
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Jan 26, 2010, 10:44
The Fallacy of the Fallacy of Composition
Economists have built up a plethora of mathematical theories that have been translated into computer models. These models produce answers from which economists advise the people who pay them - bankers and politicians.
Unfortunately the basic theories are not properly founded on sound scientific principles and the mathematics used attempts to operate on curves and functions which are not REAL but are an idealised simplification. This then produces results that are only for an idealised situation and when REALITY strikes the models give VERY WRONG answers. (A bit like what is happening with Global Warming theory.)
Then the economists just carry on as if nothing untoward has happened. Didn't anyone notice that their predictions were wildly astray? Our current crop of standard economists are steadily bringing economics into disrepute. Unfortunately this is going to hurt a lot of people.
Bill Bonner points out some more strange ways of thinking in this article. No wonder we appear to be living in Lah-lah land.
Jan 20, 2010, 12:05
World Gold Council to Launch New Paper Gold in India
Do I smell a ponzi scheme brewing?
Jan 19, 2010, 10:15
Don't Like the Numbers? Change 'Em
Some very important people are starting to notice the discrepancy between government official statistics and reality. Professor Boskin from Harvard gives his opinion of the new government's efforts.
Our government wouldn't be guilty of this sort of thing, would they?
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Jan 18, 2010, 13:37
Quote for the Week
A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned – this is the sum of good government.
Jan 15, 2010, 11:46
Creating Wealth and Keeping it
The New book by Phil Scott, President of the Foundation for Economic Growth.
"This book is good, damn good and no statistics!" Lindsay Gordon, MA, MSC, PHD.
Every serious economics student should have a copy and read this ground-breaking foundation of clear economic thinking. Real Economics explains how human actions shape our world and why so much seems to be going wrong for Western economies. This book will bring enlightenment for the general reader who will see why a few very wealthy are becoming exceedingly rich and the middle classes are on the road to serfdom.
See more: www.realeconomics.co.nz