The fundamental error of the bailouts

Have you ever seen what poor people do when they try to be rich?

They see a rich person drives a Mercedes.

So they buy a Mercedes on credit.

They see a rich person lives in a good zip code.

So they buy a house they cannot afford in a good zip code.

What is wrong with this picture?

The poor person is trying to be rich by copying the outward face they see of a rich person. But what they miss is what they don't see.

A rich person has successful investments. Successful businesses. Successful skills that bring great rewards in the marketplace.

If you are poor and you have a successful business, or successful skills that bring great reward, you will be rich. And whether you choose to buy a Mercedes or stick with your old beat up Honda, you will still be rich.

Today the Powers That Be, in the US Treasury and the Federal Reserve, are desperately trying to stay wealthy and rich.

Consumers are pulling in their horns and not spending so much. In a rich economy, consumers spend. So the Treasury and Fed are trying to get people to spend a lot of money again. So if they spend, things will be right.

Home values are rising when people are well off. So if somehow they can get home values to rise again, all will be well.

This misses the entire point. What we need are home values to fall so houses can be affordable. We need deflation so that debts are destroyed and settled and people can afford to live without debt. We need to reward production, thrift, savings. And penalize debt. Penalize consumption.

My vote would be a stimulus as follows:

Eliminate all taxes on dividends to encourage private investment.

Eliminate all taxes on interest, to reward savings.

Eliminate all income taxes on business, to encourage businesses to grow and produce. Businesses don't pay taxes anyway…their customers do.

The above would go a long way to becoming competitive again and entrepreneurial and rich. We would get ourselves out of debt and move on to a better life that is based upon real productivity and not fake printed money.

 

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