Entries Tagged 'Economics and Investing' ↓

Several years ago I cam across a book by a Harvard Medical School psychologist, Martha Stout, called The Sociopath Next Door. This book really opened my eyes.

I’ve been fascinated by psychopaths (now called “sociopaths”) ever since I met one of them when I was in my twenties. He was the kind you read about and see in the movies.

He was a short, balding guy around thirty who owned a tobacco-store near the University of Pennsylvania in Philadelphia. He lured lonely students into his back room, drugged them, and then dumped chests full of their chopped-up bodies into the Schuylkill River. Continue reading →

The mere suggestion of a tax on the wealthy was one of the factors that caused last week’s dire slump in global markets. But this suggestion wasn’t made in the USA and it had nothing to do with earned income. (“EU Tobin tax” Financial Times Lex column 8/18/11 p10.)

Much as I appreciate Warren Buffet’s offer, as one of the wealthiest Americans, to pay a higher rate of  income tax, I can’t help but suspect that the wealthy are not eager to have us look at the other types of taxes they pay or don’t pay; taxes they could be asked to pay, i.e., the capital gains tax or the Tobin tax.

The capital gains tax rewards long-term (over a year) investors for saving and earning money. Money invested for the long-term earns the investor income (called “portfolio income”). This portfolio income is taxed at a rate that is about equal to the second lowest of the six income tax brackets in the US. The capital gains tax favors those who make their money long-term by buying (and selling) capital over those who earn their money by selling their own labor and those who make money by hiring workers in their small businesses.

The Tobin tax is the opposite of a capital gains tax. It is a transaction tax, i.e., a sales tax, on the financial transactions of investors. Money invested, including money invested repeatedly for the short-term is taxed at a minuscule percentage (such as .005 to .05 of a percent) every time a financial transaction (i.e., the buying and selling of investments) takes place. The Tobin tax obviously promotes the spending of money for hiring labor or buying property rather spending that cash solely on financial investments.

According to Representative Peter DeFazio who sponsored a 2009 bill to implement a Tobin tax in the US, the country previously instituted an even larger Tobin-type tax after the Great Depression, and this tax lasted with no ill-effects until the 1960s. The US Tobin tax was levied in order to dampen the type of financial speculation that led to the Wall Street crash in 1929.

However, it was a mere suggestion of a global Tobin tax in talks between France and Germany last week that sent European financial markets into a panic this week. “Deutsche Börse and the London Stock Exchange were down by 5 and 3 percent respectively.” (“EU Tobin tax,” Financial Times Lex column, 8/18/100 p10) Continue reading →

My last book review for The Library Journal was about the original edition of Bruce R. Barlett’s Reaganomics: Supply Side Economics in Action, with introduction by Jack Kemp, published in 1981. Library Journal reviews are specifically written by librarians for librarians, so they are exceedingly economical –  they run 25 lines or less of a narrow column. Normally the editors of LJ didn’t change my reviews, but this editor did. She took my assessment that Mr. Bartlett was an was “articulate” spokesman for his group’s views. She turned that into a notion that Mr. Bartlett’s presentation about supply-side economics were “accurate”.

As soon as I saw her mistake I contacted her. We debated the issue. “Articulate,” I said meant “well-said”, but not necessarily “correct”. She insisted that “logical” equalled “right.”  With no promise that my meaning wouldn’t be edited again in the future, I resigned as reviewer.

I respected Jack Kemp and Bruce Bartlett, but I sure didn’t agree with their views. And now I’m dismayed to see how their views are being even rendered into something even more “wrong” for the US. Here is why the US Government is at an economic impasse. Continue reading →