As applied to the euro zone, the IMF claims that a 10% levy on households’ positive net worth would bring public debt levels back to pre-financial crisis levels. Such a tax sounds crazy, but recall what happened in euro-zone country Cyprus this year: Holders of bank accounts larger than 100,000 euros had to incur losses of up to 100% on their savings above that threshold, in order to “bail-in” the bankrupt Mediterranean state. Japanese households, sitting on one of the world’s largest pools of savings, have particular reason to worry about their assets: At 240% of GDP, their country’s public debt ratio is more than twice that of Cyprus when it defaulted.
I consider this to be one of the most likely scenarios.
For once in my life I might be in the right place when this policy is implemented.
You know, one of those no blood from a turnip kind of things…
I’ve been predicting a savings tax since shortly after the crisis began. You know, since savings is so bad for the economy anyway…
“…savings are so bad…”
Yes, printing the money would be inconceivable, yet this would hit precisely those objecting to that so would actually be just. Naaah, that will never happen.
G collects this tax when it sees a fiat flow coming from assets. So G usually hits the niddle class the hardest as the the fiat has a high share for them relative to the rich. Pettis keeps ringing to me, the middle class pays the most, he says.
I am kind of perplexed at what this actually solves.
To the extent it moves paper money from people to government, it solves an accounting problem, but not a real economy problem. I don’t see how it grows output so as to allow distribution of more output to the entitled. I suppose it’s a step towards communism, but what does it fix in the real world? How is it different from govenment just repudiating debt? Keep in mind that the French circumstance of poeople unwilling to pay more taxes and others unwilling to accept less support is a way of accounting for (a) people unwilling to give more effort to the comfort of entitled strangers, and (b) entitled people unwilling to accept less of the output of the producers. (Might be the same people.) Fixing the state’s books won’t fix the real output problem. “Eating the rich” works, basically, only once.
To the extent it moves control of physical assets (because the well off say sold stock to raise cash to pay the tax,) why is there any reason to think the new owners will do a better job managing those assets than the old owners?
To the extent it incentivizes being “judgement proof” by causing people to deliberately carry large paper debts so that their net worth looks small while their physical well being is large, it’s just an instrument for creating bubbles.
To the extent it cramps consumption, it moves payment for production from those favored by the well-off to those favored by government. I am mystified by a retired welfare mother is *more* deserving than a hard working young man somebody hired to repair their roof. (I do not assert she is *less* deserving.)
Bringing deficits to zero but creating a kind of collapse or depression, or widespread total hatred and mistrust of government, might be better than, say, refighting WW-II, but I don’t see what other merit it has…
It might work, for, say Cyprus. It’s not clear it (or anything else) will actually work in Greece. I cannot imagine it would actually work in France or Germany.
The point is this is ONLY an accounting problem, albeit one few are willing to face. They insist on a different reality.
Any predictions on when we will execute this plan in the US?
The USA could sell some mineral rights and some land.
Japan’s debt as percentage of GDP is overstated to the extent it doesn’t account for their massive store of foreign bonds, dollars and euros accounting for over 40% of GDP (which only improves with devaluation)