And, *by education*.
Notwithstanding what all textbooks say about the stock market and the prices
that they provide, the stock market is a speculative market in its roots and
the prices that it provides are speculative prices. That is the nature of
the market. Will the capital raised bear fruit? Will there be such a
technology boom that will revolutionize the way merchandize will be sold? Do
the PE ratios provide good enough returns given what future seems to be
forming? The academic hype of "superior returns in the long term" never
qualified whether "long term" was going to be within the lifetime of all
individuals. In fact, since the long term chart of the market was certainly
available to whoever said it in the first place, the thesis, I dare say,
bordered on being fraudulent. It is, in fact, suspiciously coincidental that
the thesis came hand in hand with effort to privatize of social security.
Yes, markets are speculative. But they also have basis in reality. Procedures/policies
that counter or attenuate the tendency to excess still have value, largely
because of the tendency to speculate. Without speculation, no excess would
ever occur and such policies would be irrelevant.
----- Original Message -----
From: "John O'Donnell" <jackodonnell@xxxxxxx>
To: "Trond Andresen" <trond.andresen@xxxxxxxxxxx>
Cc: "Gary Santos" <evs@xxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, April 30, 2003 10:36 PM
Subject: Re: Economic reform policy: Some views and proposals
Trond Andresen wrote:
<<SNIP>>
I made it explicitly clear that I did not suggest a transaction tax.
Instead
I proposed a tax on stocks held, i.e. a "property tax", based on current
value. I have simulations of my long-wave stock model that shows that such
a
tax very efficiently dampens the long cycle. Imagine a person holding a
stock
portfolio in -- say -- 1996. It has finally sunk in for that (and many
other) person(s) that the market is really taking off -- that stock
appreciation is now in the double digit range and that this seems to be a
robust trend. But in my scenario the "stock market tax committee" meets --
assesses the situation analogously to the board of a CB when they meet to
adjust the overnight rate -- and increases the stock tax to -- say -- 10%.
This will take the momentum out of further increase. The balloon is given a
small puncture before it has gotten very big.
You're getting close. A progressive tax on the total value of
corporation assets [i.e. -- equity defined by market price of common
stock plus mortgage/debt defined by preferred stock plus all outstanding
debt] imposed on the privilege of limited liability granted to
corporations and adjusted to cause the greatest rate of increase in the
underlying tax base [i.e. -- corp. equity plus debt] will also impel
stock prices to avoid irrational exuberance as well as encourage lower
prices [i.e. -- to reduce the per unit tax burden of this fixed cost of
production] particularly when the taxes thusly raised are used to reduce
the transaction taxes that create a distortion by placing a wedge
between the prices paid and the prices received for each transaction.
Stick that in your model and see what happens.
If your model can't handle it, see the model at
http://www.geocities.com/CapitolHill/1067/widgets.html with description
beginning at http://www.geocities.com/CapitolHill/1067/c04r4a.html
--
-- jbod
Tax Privilege, Not People
___________________________________________________
Come visit and see a new economic perspective --
http://www.geocities.com/CapitolHill/1067
Comments/arguments welcome.
.