The Irish government plans to institute a tax on private pensions to drive jobs growth, according to its new jobs program strategy, announced today, reports BI.
Problem 1 with this is that by taxing one group, you eliminate jobs that would have been created by that group. Instead what happens is that the money is put through the government meat grinder and jobs are created in a central planning style that have little to do with what is really required in an economy based on the wishes of consumers.
The tax on private pensions comes about because of the poor way the Irish government has run its finances to date. It has lost its ability to increase revenue in any other way, even by borrowing. It can't sell debt due to soaring interest rates, and the EU-IMF has instituted severe spending rules as part of its bailout, yet, the desperate Irish government has still figured out a way to tax and spend.
The tax on private pensions will be 0.6%, and, supposedly last for only four years. Somehow, I doubt the termination date, think more in terms of a higher "emergency" higher rate.
Bottom line: The nature of modern day governments is to tax and spend. Ireland is a little further down the road than the United States, but not much. Politicians of every stripe will go after every pool of money they see. Unless there is a fundamental change in attitudes about who deserves to be elected (very, very unlikely) what is going on in Ireland now is just a preview of what will eventually go on here in the United Sates.
Be prepared.
Not that it's a good thing, but our government has the Fed to fall back on, so I don't know that they would need to resort to taxing retirement savings. I assume Ireland can't print it's way out.
ReplyDeleteI prefer the Morgan Kelly approach, cut what the Irish government is spending our taxes on, Ireland is currently spending €18bn ($25bn) more then it takes in each year, totally unsustainable. The governments approach is to increase taxes instead of cutting services.
ReplyDeletehttp://www.irishtimes.com/newspaper/opinion/2011/0507/1224296372123.html
Michigan is now considering taxing retirement income for the same reasons as Ireland. In fact, most states already have this; only four do not. In fact, there are 47 separate taxes levied here - hotel room tax, for instance - so the demise of the economy here is understandable: we subsidized one industry to the detriment of all others and so the (Republican) government is seeking the goose that laid the gold eggs.
ReplyDeleteMichael M,
ReplyDeleteThe union pensions in Michigan are not the goose that laid the golden egg, the pensions and health benefits are the hands that strangled the goose. The joke on Michigan is their retirees can move to Florida and pay no income tax.
Michigan's problems can be laid totally at the feet of their longtime Democrat governors and legislatures (as well as Detroit's 50 straight years of Democrat rule).
Once the dollar loses its status as the reserve currency, the Fed will no longer be able to back government spending by printing more money.
ReplyDeleteThis is the consequence of allowing bankers to gamble with an economy. Ireland should renounce its debt obligations & issue its own money, not borrow from money lenders.
ReplyDeleteAs has been stated before, this is what happens when the State (whichever one you live in) decides to assume the massive debts of private banks. The ONLY reason Ireland is doing this is to pay the billions in debt the government assumed from 2 Irish banks (the debt from each bank was approx. the yearly GDP of the entire country).
ReplyDeleteOtherwise, Ireland's economy was not doing bad. It was the government assuming these debts that caused the situation. Irish bonds are now toast. 'Austerity measures' are tightening their grip on the country. They can't print new currency, even if they wanted to. The Irish have no effective control of their government since it is part of the ECB.
I am still shocked that the Irish are allowing this to happen. Is the western world so well off that people accept this economic pillaging with mere protests? If so, I fear for our world (pardon the cliche). How much has to be taken before people react?
There should be no surprises here, the simple truth is that as long as we tolerate a fractional reserve, fiat currency monetary system then we will have un-payable DEBT.
ReplyDeleteThe mathematics are very simple and fundamental, our currency supply is borrowed into existence as DEBT, but only the principal is ever created so it necessarily follows that INTEREST can only be paid IF there are an exponentially increasing number and sizes of loans to keep this Ponzi scheme started by the Federal Reserve in 1913, liquid enough for an economy to function,by replacing the interest siphoned off by the bankster's monopoly with NEW LOANS.
The final nail in the coffin was when Nixon in 1971 closed the window of gold backing, which sealed the fate of the fiat dollar, now just a 3c purchasing power caricature of its original gold backed dollar of 1913.
We are rapidly closing in on the hundredth anniversary of that infamous day when the U.S. Congress betrayed its citizens by creating a private bankers monopoly in the form of a Ponzi scheme that robs the average citizen blind through inflation, and history shows no fiat currency survives much beyond the 100 year marker, the end game is near.
Ireland had the lowest corporate tax - 12 percent. We have been told by Reagan, Bush, Boehner that low taxes create jobs. So, why is it not working?
ReplyDeleteThe direct way for the government to fund its budget would have been to simply print the money debt-free. Wright Patman, chairman of the House Banking and Currency Committee in the 1960s, wrote:
ReplyDeleteThe yin and yang of money
Under our current monetary scheme, debt and deficits not only don't matter but are actually necessary in order to maintain a stable money supply. The reason was explained by Marriner Eccles, governor of the Federal Reserve Board, in hearings before the House Committee on Banking and Currency in 1941. Wright Patman asked Eccles how the Federal Reserve got the money to buy government bonds.
"We created it," Eccles replied.
"Out of what?"
"Out of the right to issue credit money."
"And there is nothing behind it, is there, except our government's credit?"
"That is what our money system is," Eccles replied. "If there were no debts in our money system, there wouldn't be any money."
That could explain why the US debt hasn't been paid off since 1835. It has just continued to grow, and the economy has grown and flourished along with it. A debt that is never paid off isn't really a debt. Financial planner Mark Pash calls it a National Monetization Account. Government bonds (or debt) are "monetized" (or turned into money). Government bonds and dollar bills are the yin and yang of the money supply, the negative and positive sides of the national balance sheet. To have a plus-1 on one side of the balance sheet, a minus-1 needs to be created on the other.
Except for coins, all of the money in the US money supply now gets into circulation as a debt to a bank (including the Federal Reserve, the central bank). But private loans zero out when they are repaid. In order to keep the money supply fairly constant, some major player has to incur debt that never gets paid back; and this role is played by the federal government.
That explains the need for a federal debt, but what about the "deficit" (the amount the debt has to increase to meet the federal budget)? Under the current monetary scheme, deficits are also necessary to avoid recessions.
Here is why. Private banks always lend at interest, so more money is always owed back than was created in the first place. In fact investors of all sorts expect more money back than they paid. That means the debt needs to be not only maintained but expanded to keep the economy functioning. When the Fed "takes away the punch bowl" by tightening credit, there is insufficient money to pay off debts; people and businesses go into default; and the economy spins into a recession or depression.
Maintaining a deficit is particularly important when the private lending market collapses, as it did in 2008 and 2009. Then debt drops off and so does the money supply. Too little money is available to buy the goods on the market, so businesses shut down and workers get laid off, further reducing demand, precipitating a recession. To reverse this deflationary cycle, the government needs to step in with additional public debt to fill the breach.
Debt and productivity
The US federal debt that is setting off alarm bells today is about 60% of gross domestic product (GDP), but it has been much higher than that. It was 120% of GDP during World War II, which turned out to be our most productive period ever. The US built the machinery and infrastructure that set the nation up to lead the world in productivity for the next half century. We, the children and grandchildren of that era, were not saddled with a crippling debt but lived quite well for the next half century. The debt-to-GDP ratio got much lower after the war, not because people sacrificed to pay back the debt, but because the country got so productive that GDP rose to meet it.
That could explain the anomaly of Japan, the global leader today in deficit spending. In a CIA Factbook list of debt to GDP ratios of 132 countries in 2010, Japan topped the list at 226%. So how has it managed to retain its status as the world's third largest economy? Its debt has not crippled its economy because:
ReplyDelete(a) the debt is at very low interest rates; (b) it is owed to the people themselves, not to the International Monetary Fund or other foreign creditors; and
(c) the money created by the debt has been used to produce goods and services, allowing supply and demand to increase together and prices to remain stable.
The Japanese economy has been called "stagnant", but according to a review by Robert Locke, this is because the Japanese aren't aiming for growth. They are aiming for sustainability and a high standard of living. They have replaced quantity of goods with quality of life. Locke wrote in 2004:
Contrary to popular belief, Japan has been doing very well lately, despite the interests that wish to depict her as an economic mess. The illusion of her failure is used by globalists and other neo-liberals to discourage Westerners, particularly Americans, from even caring about Japan's economic policies, let alone learning from them. [And] it has been encouraged by the Japanese government as a way to get foreigners to stop pressing for changes in its neo-mercantilist trade policies.
The Japanese economy was doing very well until 1988, when the Bank for International Settlements raised bank capital requirements. The Japanese banks then tightened credit and lent only to the most creditworthy borrowers. Private debt fell off and so did the money supply, collapsing the stock market and the housing bubble. The Japanese government then started spending, and it got the money by borrowing; but it borrowed mainly from its own government-owned banks.
The largest holder of its federal debt is Japan Post Bank, a 100% government-owned commercial bank that is now the largest depository bank in the world. The Bank of Japan, the nation's government-owned central bank, also funds the government's debt. Interest rates have been lowered to nearly zero, so the debt costs the government almost nothing and can be rolled over indefinitely.
Japan's economy remains viable although its debt-to-GDP ratio is nearly four times that of the United States because the money does not leave the country to pay off foreign creditors. Rather, it is recycled into the Japanese economy. As economist Hazel Henderson points out, Japan's debt is twice its GDP only because of an anomaly in how GDP is calculated: it omits government-provided services. If they were included, Japan's GDP would be much higher and its debt to GDP ratio would be more in line with that of other countries.
Investments in education, healthcare, and social security may not count as "sales", but they improve both the standard of living of the people and national productivity. Businesses that don't have to pay for healthcare can be more profitable and competitive internationally. Families that don't have to save hundreds of thousands of dollars to put their children through college can spend on better housing, more vacations, and other consumer items.
ReplyDeleteTurning the national debt into a public utility
Locke calls the Japanese model "a capitalist economy with socialized capital markets". The national debt has been "monetized" - turned into the national money supply. The credit of the nation has been turned into a public utility.
Thomas Hoenig, president of the Kansas City Federal Reserve, maintains that the largest US banks should be put in that category as well. At the National Association of Attorneys General conference on April 12, he said that the 2008 bank bailouts and other implicit guarantees effectively make the too-big-to-fail banks government-guaranteed enterprises, like mortgage finance companies Fannie Mae and Freddie Mac. He said they should be restricted to commercial banking and barred from investment banking.
"You're a public utility, for crying out loud," he said.
The direct way for the government to fund its budget would have been to simply print the money debt-free. Wright Patman, chairman of the House Banking and Currency Committee in the 1960s, wrote:
When our Federal Government, that has the exclusive power to create money, creates that money and then goes into the open market and borrows it and pays interest for the use of its own money, it occurs to me that that is going too far. ... [I]t is absolutely wrong for the Government to issue interest-bearing obligations. ... It is absolutely unnecessary.
But that is the system that we have. Deficits don't matter in this scheme, but the interest does. If we want to keep the interest tab very low, we need to follow the Japanese and borrow the money from ourselves through our own government-owned banks, essentially interest-free. "The full faith and credit of the United States" needs to be recognized and dispensed as a public utility.
Ellen Brown is an attorney and president of the Public Banking Institute, http://PublicBankingInstitute.org.
To Deft - you need to watch Creature from Jekyll Island by G Edward Griffin.
ReplyDeleteVery interesting point of view. Good to know we are behind Ireland, and not in front of them
ReplyDeleteI think at this point in time that much more people will realize that this worldly corrupt system of man is doomed to fail. Can anyone of us name a politician that can turn things around for us and the world? Even if there was such a person the corrupt powers that really control domestic and foreign policies would kill him or her. At this time we have no hope in man to save us, but there is a God in heaven that will establish His Kingdom here on earth through His son Jesus Christ and His children (believers) will live in eternal paradise here on earth forever!!! Find out how you can become a child of God, then you will not fear death, but have eternal salvation (real hope) God bless you and your families!!!
ReplyDeleteIf I was Ireland, Greece and Spain, I would say "F$(% You I'm not paying it back" to the IMF and force an end to this ridiculous and non sustainable pyramid scheme we call free enterprise, global economy. Whos pocket did the bail out money come from? No one's. It is false money that is causing so much grief. America is getting what it deserves thinking it could spread "democracy" (read free enterprise) but it is taking a lot of friends down with it.
ReplyDeleteNo one has commented on the real problem in all of the "developed industrial countries" which is that there IS no real economy.
ReplyDeleteA real economy is one in which goods are produced and sold, producers (workers) are able to spend the money earned to purchase them, and industrialists make a small but significant profit on each item.
This is no longer the case. Instead, the production is now done in countries where the wages are a tiny fraction of the wages in the developed industrial countries. About $1 per day, actually, in many places. What is left, then, in the developed world? A small infrastructure to make it all work (banks, lawyers, high-rise offices). And millions of people who really are working in the ORIGINAL infrastructure that made the ORIGINAL production/consumption system work. But an infrastructure in decline, because it is really extraneous to the production system.
In the US, there are now offically TWENTY SIX MILLION PEOPLE WHO ARE UNEMPLOYED OR INVOLUNTARILY WORKING PART TIME (The U-6). That does not include people who have been out of work for very long, extended periods, who are either living with relatives or homeless. The real number is probably more like 35 or 40 million.
For some reason, the industrialists thought it would somehow work to move the factories offshore, pay people dirt wages, and sell it back home at high prices, to make an enormous profit. What they didn't think about is that the people back home are now part of an infrastructure in decay. They can't afford to buy the products, because they are not being paid to make them...
And there is no way out. The more money you hand out to business, the faster they outsource the jobs. Or, as Paul Craig Roberts writes, there is no economic recovery because there is no economy left to recover.
If you read the book, "The Creature from Jekyll Island" by Griffin it will give you the full story on the Central Banking system. It is about 600 pages long and very thorough but is fairly easy to read. You won't have any more questions after that about how all this financial mess is perpetuated. For a modern update that explains exactly what has happened over the last 4 years in the US, I suggest "Crisis by Design", by John Truman Wolfe. Before I read these I thought the bailouts might be a good thing.
ReplyDeleteI agree. Everyone should read "The Creature from Jekyll Island" by Griffin!!! Very eye-opening book.
ReplyDeleteAnonymous said... Ireland had the lowest corporate tax - 12 percent.
ReplyDeleteThat is absolutely not true though the US currently has the highest corporate tax in the world though too many loopholes and Macedonia had zero percent corporate tax and I believe now it is 5%, Bulgaria 10% and I am sure there are others I am missing in Europe.
Almost all the Governments in the world are a bunch of Bumbling Idiots that the only qualifications they have at most are winning a popularity contest. Until the people of individual countries start voting with intelligence instead of populism they are all doomed to eventual fascist dictators .... similar to what the EU is now with its unelected commission and president.
By the way, dig deep enough if necessary and you will find most of the politicians are criminals too - exempting themselves from the common laws but we all know the deal - justice is only for those who can afford it or allowed to escape it by the other criminals running the global circus.
anonymous asked if there is a politician that can turn this thing around for us. The answer to that question is yes, However the news media, the democrats, and the republicans will do everything they can to discredit this man, simply because they know he will mess up their playhouse. His name is Ron Paul. I have talked to individuals about Ron Paul, asking them what they think about him. A large group are negative about him, and if I ask why, they really don't know why. "They say" is the first words out of their mouths. If you really really care about saving this country, research Ron Paul. Is he perfect? No, but he is so much better than the others it is not even close. Mitt Romney raised $10,000,000 in ONE DAY. Who do you think is donating this kind of money. You don't think it might be special interest do you?
ReplyDelete